y^y 


<;'-<n^''>->^>^vV: 


-;VN^- 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


GIFT  OF 
JOinj  Q.  ADAI.:§  V- 


L-^ 


m 


~y   .'iti,iji,iiiiij))H(iimniiiiif 
iililirtiiiiii 


„.,a,„i.u....w.n[u,im.niiiiiiiiiliiiiiiiii(iiiiiiniiiiiiiiiiiin)iimiiimi iiiii„i„m:,i, 


Vw  I  b  ^ 


<k 


urn  BOOKS^ 


Digitized  by  the  Internet  Archive 

in  2008  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/ernestinstrumentsOOhuff 


THE  LAW 


OF 


NEGOTIABLE    INSTRUMENTS 


STATUTES,  CASES  AND  AUTHORITIES 


EDITED  BY 

ERNEST  W.  HUFFCUT 

PROFESSOR     OF      LAW      IN      CORNELL     UNIVERSITY     COLLEGE     OF     LAW 


Second  Edition  Revised  and  Enlarged 
By 

FREDERICK  D.  COLSON 

OK    TlIK    NKW     YORK    BAR 

{Formerly  of  the  r<v.ulty  'f  the  Cornll  Urivirsity  Colle^^t  of  Law) 


NEW  YORK 

BAKER,  VOORHIS  &  COMPANY 

1921 


T 

H9722n 

1921 


copyright,  1898 
By  Ernest  W.   Huffcut 


copyright,   iqio 
By  Lillian  L.   Huffcut 


'\-' 


54* 


,1  PREFACE  TO  FIRST  EDITION. 


<rk 


if:  The  enactment   of  the   Negotiable   Instruments   Law   in   several 

^  American  States  and  its  probable  enactment  in  others,  renders  neces- 

sary a  familiarity  with  that  Code  on  the  part  of  all  law  students. 
Founded  as  it  is  upon  the  Digest  of  Judge  Chalmers,  afterward 
enacted  into  the  English  Bills  of  Exchange  Act,  it  presents  the 
best  statement  available  of  the  results  of  English  and  American 
judicial  decisions.  Even  before  its  adoption  by  the  legislatures  in 
Great  Britain  and  the  United  States,  Judge  Chalmers'  Digest  had 
been  edited  for  use  in  law  schools,  and  had  met  with  much  favor 
for  purposes  of  study  and  instruction. 

A  Digest  or  Code  is,  however,  but  a  set  of  abstract  rules.  The 
student  needs  to  see  the  rules  in  operation  upon  concrete  facts  in 
order  to  appreciate  their  force  and  effect.  It  is  the  purpose  of  this 
book  to  set  over  against  each  important  rule  a  case  or  a  selection 
of  cases  from  which  the  rule  might  be  deduced  did  no  Code  exist 
and  in  which  the  rule,  as  embodied  in  the  Code,  may  be  studied 
in  its  application  to  concrete  facts.  In  this  way  it  is  hoped  to  give 
vitality  and  interest  to  what  are  otherwise  mere  abstract  propositions 
of  law.  As  to  the  relation  of  the  cases  to  the  Code,  the  reader 
is  referred  to  Judge  Chalmers'  remarks,  found  on  page  119  [5]  of 
this  work,  and  to  the  opinion  of  Lord  llerschell  on  page  127  [126], 
and  of  Lord  Russell  of  Killowen  on  page  442  {'A^G]. 

Under  the  sections  of  the  statute  will  be  found  references  to  the 
"  Cases  and  Authorities  "  which  make  up  Part  II  [I]  of  this  work. 
Conversely  there  is  set  opposite  the  title  to  each  case  the  section 
number  of  the  statute  which  is  applicable  to  it.  Under  this  arrange- 
ment the  student  has  constantly  before  him  the  enactment  of  the 
legislatures  and  the  decisions  of  the  courts. 

In  Article  I,  dealing  mainly  with  matters  of  historical  interest, 
the  editor  has  made  free  use  of  the  Introduction  to  Chalmers' 
Digest  and  of  the  first  two  chapters  of  Mr.  Scrutton's  Elements  of 
Mercantile  Law.  Elsewhere  in  the  book,  two  or  three  chapters  of 
Byles'  TroatiPf  on  Bills  of  Exchange  have  boon  reprinted,  where 
a  eelection  of  cases  would   have  occupied  space  out  of  proportion 

[iii] 


734015 


It  preface  to  first  boition. 

to  the  importance  of  the  subject.    The  topics  of  "  Guaranty,"  "  Non- 

nopotiable  Notes,"  and  some  otliers  of  minor  interest,  liave  been 
added  to  tliose  included  within  the  Negotiable  Instruments  Law. 

In  the  preparation  of  the  book  the  editor  has  derived  the  greatest 
assistance  from  the  well-known  works  of  Sir  John  Byies,  Mr.  Daniel, 
and  Professor  Ames,  and  from  the  article  on  Bills  of  Exchange  in  the 
second  edition  of  the  American  and    English   Encyclopedia  of  Law. 

The  book  is  intended  primarily  for  students.  It  constitutes, 
however,  a  somewhat  complete  annotation  of  the  Negotiable 
Instruments  Law,  and  as  such  may  prove  of  value  to  practitioners. 
On  many  points,  editorial  notes  have  been  added,  in  order  to  give 
greater  completeness  to  the  subject  treated,  and  to  indicate  any 
conflict  of  authority  that  may  have  preceded  the  enactment  of  the 

statute. 

E.  W.  H. 
Cornell  University, 
February,  1898. 


PREFACE  TO  THE   SECOND   EDITION. 


At  the  date  of  the  preface  to  the  first  edition  of  this  work  only  four 
states  had  passed  the  Negotiable  Instruments  Law  and  there  had  been 
no  cases  decided  under  it.  Since  that  time  this  act  has  been  adopted 
in  thirty-eight  states  and  territories.  The  main  purpose  of  this  edi- 
tion is  to  bring  the  first  edition  down  to  date  by  incorporating  into  it 
such  cases  decided  under  this  enactment  as  seem  desirable  in  order 
to  present  the  case  law  on  negotiable  instruments  as  it  exists  to-day. 
The  effort,  of  course,  has  been  to  select  those  cases  where  it  is  held  that 
the  Negotiable  Instruments  Act  has  changed  the  pre-existing  law  or 
at  least  has  resolved  a  conflict  existing  among  the  earlier  authorities. 
So  far,  however,  as  the  cases  in  the  first  edition,  no  matter  how  old, 
are  satisfactory  illustrations  of  the  provisions  of  the  statute,  they  have 
not,  in  general,  been  displaced  simply  in  order  to  get  more  recent 
cases  or  even  cases  citing  the  Negotiable  Instruments  Law.  A  few 
cases  not  decided  under  the  statute  have  been  added  where  the  treat- 
ment in  the  first  edition  of  the  subjects  involved  seemed  inadequate. 

Practically  all  of  Mr.  Huffcut's  notes  have  been  retained.  These 
are  followed  by  the  letter  "  H,"  while  the  notes  added  by  the  present 
editor  are  followed  by  the  letter  "  C." 

Permission  was  very  kindly  given  by  Mr.  McKeehan  and  the  Amer- 
ican Law  Register  to  reprint  the  extracts  from  the  article  on  "  The 
Ames-Brewster  Controversy,"  and  by  Professor  Williston  and  the 
Harvard  Law  Keview  Association  to  reprint  the  article  entitled  "  An 
Ambiguity  in  the  Negotiable  Instruments  Law."  It  is  regretted  that 
the  limitations  of  space  forbade  the  reprinting  of  more  of  Mr.  MoKee- 
han's  article,  for  it  remains  to-day,  in  the  opinion  of  the  editor,  the 
best  exposition  and  general  survey  of  most  of  the  troublesome  parts  of 
the  Negotiable  Instruments  Law.  The  list  of  states  and  territories 
which  have  enacted  this  statute  was  compiled  largely,  with  the  kind 
permission  of  the  draftsman  of  the  act  (J.  J.  Crawford,  Es(].),  from 
the  list  given  in  the  third  edition  of  liis  work  on  the  Negotiable 
InBtrumente  Law. 

Albaky,  New  York,  F.  D.  C. 

September,  1910. 

w 


TABLE  OF  CONTENTS. 


PART  I. 
Cases  and  Authorities. 

ARTICLE  I. 
General  Provisions. 

PAGE. 

I.  Codes  governing  bills,  notes  and  checks 3 

1.  The  English    Bills  of  Exchange  Act 3 

2.  The  American  Negotiable  Instruments  Law 9 

3.  Continental   Codes 13 

II.  Construction  of  codifying  statutes 15 

III.  The  law  merchant 15 

1.  The  Law  Merchant  and  its  history 15 

2.  History  of  negotiable  instruments 24 

(a)  Bills,  notes  and  checks 24 

( b )  Other  negotiable  paper 31 

ARTICLE  II. 

Form  and  Interpretation. 
(i)  Form  Required. 

I.  Writing  and  signatire  34 

II.   Inconditional  i'Kdmisk  oh  order  to  tay  a  sum  certain  in  money,  37 

1.  A  note  must  contain  a  promise 37 

2.  A  bill  niiist  fontain  an  order 44 

3.  The  promise  or  order  must  be  unconditional 48 

(o)    Conditional  promises  or  orders  not  negotiable 46 

(6)    An  ordir  or  promise  to  pay  out  of  a  particular  fund  is 

conditional 49 

(c)  .\n    indication    r)f    a    particular    fund    does    not    render 

prf)nii'^e  conditional   50 

id)    Nor    a    statement    of    transaction    which    gives    rise   to 

instrument 55 

4.  The  siiKi  to  be  paid  must  be  certain '>! 

(a)  What  amounts  to  certainty  generally 61 

(b)  Engagement  tf)  pay  interest:  contingency 64 

(o)    Engagement  to  f»ay  by   instalments:   contingency 67 

(</)    Engagiiiieiit  that  on  default  whole  shall  Ix-  due 72 

(c)  Engagement   to  pay  exchange 74 

(/)    Engagement  to  pay  costs  of  collection  or  attorney's  fees,  78 

C.   Must  be  |)avable  in  money 81 

( a  )    Payment   nuist  be  in  money 81 

(6)    What  con«'titutes  current  money 82 

[vil] 


nil  T*RTjg  OF  C\>>ii^uSi4. 

TA&E. 

t.  M«rt  BOt  order  or  proauae  any  act  !■  addition  to  payiMai  of 

(•)  Bfieet  of  additkmal  stipolatioas 90 

(I)   Exeeptioas:      il)   Authoriziaig  sale  ol  collateral 91 

1 2 !    Authorinng  coofessioa  of  jadfeitat,  93 

{ 3  k    WairiBg  exenptioBS   94 

(4)  Electioa  to  re^pdxe  aonetliiiig  in  lien 

of  mamej  94 

UL   PaTa&L£  OS  BCMAXD  OB  AT  A  OEtBmMISABLE  FUnTBE  TIMS 96 

1.  Wt«n  p*Tible  OB  denaad 96 

^     Pir&ble  at  si^ 96 

( k )   No  ti^  for  payment  expresaed 96 

(c)  lasaed.  accepted  ov  iadorsed  vh^  ovimliie 97 

2.  Wkem  payable  at  a  fixed  or  detemiaable  future  tisw 97 

(a)   Afixed  tise  aftar  date  <M- s^t 97 

( h)  On  or  before  a  fixed  detmuBate  tine  specified 97 

(e)  On  or  at  a  fixed  period  after  the  oeenrreaee  of  a  speci- 
fied ereat 102 

3.  Wbea  payable  cm  a  eoatugency 103 

TV.    PaTaBI^  to  OBBEB  OB  BEABEB 106 

1.  Payable  to  mder  of  a  specified  persoa 107 

(«>   Payee  BBist  be  certain 107 

(i)   Payee  niay  be  d)  One  not  maker,  draTear  or  drawee. .  113 

(2)  Drawo^  or  naker 113 

(3)  Drawee 114 

(4)  Tvo  (H-  more  payees  jointtv 115 

(5)  One  or  bkh^  of  sereral  payees. ...  IIS 

(6)  Tbe  hf^er  of  an  office  for  tbe  time 

being 121 

2.  Payal^  to  bearo^ 122 

( •)   Payable  to  poson  named  or  bearer 122 

(t)  Payable  to  order  of  fietitioaa  person 123 

(c)  Parable  to  name  not  porporting  to  be  name  of  any 

peisoB 144 

{i}  Wbea  only  or  last  indorsemart  in  blank 144 

T.  DmavEB  ircsr  ik  cebzaet 14« 

VL  Dsixwtxi  liHSK^Tiftr. 151 

VIL  S<m-aaaBTiAi£ 158 

(ti)   Inierpreiation. 

VnL  Date 161 

n.  Blanks,  acthobitt  to  mx 163 

I.  AimSDOt-S  LAXeiTACE   192 

1.  Dwcrepaiify  btfcui  words  and  fignrea 192 

2.  iBtenst,  ham  eoBipBted 194 

3.  Til  '  -"'  -'  not  dated 195 

4.  Coafiet  beineen  wntten  and  printed  prorisioBS 195 

fi.  Doabi  wbe*ber  bin  or  note 196 

6.  Irrcgalar  agnatnres   196 

7.  Joint  and  aereral  liability 196 

XL  AMK£cor=  siG^Amts  197 

XTI.  Itdobsekttt  bt  ixfaxt  02  cobpobatiow 228 

TTIT    FriBCTTr  ss&XATmss  .  221 


TABLE   OF   C0NTEKT8. 

ABTICLE  III. 

COKSIDEEATIOK   OF   2SEGOTIAJBLE   IkSTEUMEHTB. 

PJ 

I.  PbESUMPTIOS  of  CON6n>E3tAT10!?    234 

II.  What  coNsnrrTES  cossimxatioi? 23f 

III.    HOLDEB    FOB    VALUE **• 

IV.  Effect  of  waxt  of  cossideeatios 253 

V.    LlABILITT    OF    ACCOMMODATION    PABTT 254 

ABTICLE  IV. 
Xegohatios. 

L  What  cossTrrnxs  sx^gotiatios  ob  ibassfui ' 2S§ 

1.  Transfer  by  delivery 2i# 

2.  Transfer  by  indorsement  and  delivery 261 

( a  )    Transfer  by  indorsing  assignment 261 

(  b  I    Transfer  by  indorsing  guaraaty 263 

XL   I XDOESEMEM  :    FORM   BEQUIBED 266 

1.  Mu5t  t*  written  on  instrument  or  allonge 266 

2.  Must  be  of  entire  instrument 267 

III.    IXDOBSEMEXT :    KINDS   OF 2«8 

1 .  Special   indorsement    2»8 

2.  Blank   indorsement    268 

3.  Restrictive  indorsement    271 

4.  Qualified  indorsement   284 

5.  Conditional  indorsement 287 

IV.   IkDOBSEMEST  :    METHODS    AND   EFFECT ^^ 

1.  Indorsement  of  instrument  payable  to  bearer 288 

2.  Indorsement  where  payable  to  two  or  more  peracms 298 

3.  Indorsement  where  payable  to  cashier,  etc 298 

4.  Indorsement  where  name  misspriied,  etc 301 

5.  Presumption  as  to  time  of  ind(»s^Beat. 

6.  Presumption  as  to  place  of  indorsement.. 

7.  Continuation  of  negotiable  character 

8.  Striking  out  indorsonait 

V.    TbaNSFEB   WITHOUT    tNDOBSEMEXT 


397 


VI.    Pa:-TBA>-SFEB   TO  PBIOB   PABTT. 


310 


ARTICLE  V. 
Rights  of  Holder. 

I.    To   SUE  AND  BECEITE  PATMEXT 51* 

II.    HOLDEB    IN    DIF.   COT  BSE    SI* 

1.  Requisit*^  to  constitute  bolder  in  due  course 319 

(a)    Instrument  must  be  complete  and  regular 319 

( b »    Instrument  must  not  be  overdue 329 

<  c )    Must  be  taken  in  pood  faith  and  for  value 337 

(d)    Must  be  taken  without  notice  of  infirmity  or  defect 340 

If)    Notice  before  full    amount   paid 357 

2.  Holder  deriving  title  from  holder  in  due  course 999 

3.  Right  of  holder  in  due  course  to  recover  full  amoHBt 391 

4.  Burden    i'f    pnx.f  998 

m.   DdXHCES  to  KEOOTIABLE  INSTBrMCTTS ST9 


t  TABLE  OV   CONTENTS. 

ARTICLE  VI. 

LiAiuiJTY  OF  Parties. 

PAOB. 

I.    MAKtJt:    ABSOI.ITK,   I'HIMAKY    1,1  Altll.lTV  ;    ADMISSIONS 400 

1.  PreseiitnuMit    for    piiynu'iit    umu'cossary 400 

2.  Liiibility  on  lost  or  dostroytHl  iiistninient 400 

3.  Admission  of  fxistenci'  and  capacity  of  payee 401 

II.    ACCEPTOK:    AMSOIATK,    TKIMAKY    LIAHILITY  ;    ADMISSIONS 40.3 

1.  Presentment  for  payment  unnecessary 40.'i 

2.  Admissions  as  to  drawer  and  payee 403 

ITT.  Drawer;  secondary,  conditional  liahimty 418 

1.  Conditions:    presentment,  notice,  protest 418 

2.  Admissions  as  to  payee 418 

IV,  Seller:  warranties 419 

1.  Instrument  genuine  and  what  it  purports  to  be 419 

2.  Title  of  seller 433 

3.  Capacity  of  prior   parties 434 

4.  Knowledge  of  invalidity  or  valuelessness 435 

5.  Indorser:    instrument  valid  and  subsisting 437 

6.  Liability  of  agent  as  seller 441 

V.  Indorsf:r:  secondary,  conditional  liability 442 

1.  Indorser's  contract  as  seller 442 

2.  Indorser's  contract  as  assurer  of  payment 442 

3.  Irregular  indorser    446 

4.  Order  of  indorsers'  liability    459 

VI.  Acceptor  fob  honor 466 

VII.  Guarantor 466 

1.  (a)    Does  guaranty-indorsement  by  holder  transfer  title?.  .  .    466 
(6)    May  a  guaranty  be  written  above  a  blank  indorsement?  466 

2.  Is  a  transferee  a  holder  in  due  course? 467 

3.  What  is  the  contract  of  the  guarantor? 467 

4.  Is  the  guaranty  transferable? 471 

(a)  Is  it  negotiable? 471 

(b)  Is  it  assignable? 472 

5.  Defences  available   to  guarantor 474 

ARTICLE  VII. 
Duties  of  IIolder:  Presentment  for  Payment. 

I.  Necessity  of  presentment 477 

1.  Not  to  charge  acceptor  or  maker 477 

2.  Presentment  necessary  to  charge  drawer  or  indorser 480 

II.  What  constitites  kifficient  presentment 480 

1.  By  holder  or  authorized  representative 480 

2.  At  the  proper  time 483 

3.  At  the  proper  place 508 

4.  To  the  proper  person 516 

5.  By   exhibiting   the    instrument 518 

III.  When  delay  in  presentment  excused 518 

IV.  When  present.ment  dispensed  with 520 

1.  When  no  right  to  require  or  expect  it 520 

2.  Accommodation    indorsers    523 


TABLE   OF   CONTENTS.  XI 

PAGE. 

3.  When   impossible    624 

4.  Waiver 627 

V.  Payment  in  due  coubse 628 

ARTICLE  VIII. 
Duties  of  Holder  :  Notice  of  Dishonor. 

I.  Notice  necessary  to  charge  drawer  or  indorser 530 

II.  What  constitutes  sufficient  notice 533 

1.  By  whom  notice  must  be  given 533 

2.  Form  of  notice 539 

3.  Mode  of  notice 542 

( a )    Personal  delivery 542 

( 6 )    Mail   delivery    543 

4.  To  whom  notice  may  be  given 546 

5.  Time  within  which  notice  must  be  given 548 

(a)  Where  parties  reside  in  the  same  place 548 

(b)  Where  parties  reside  in  different  places 554 

( c )  Successive  notices    561 

6.  Place  at  which  notice  must  be  given  565 

III.  When  delay  in  giving  notice  excused 573 

IV.  When  notice  may  be  dispensed  with 575 

1.  When  notice  need  not  be  given  to  drawer 5TS 

2.  When  notice  need  not  be  given  to  indorser 577 

3.  When  notice  to  drawer  or  indorser  dispensed  with 580 

( a )  Due  diligence   580 

(  b )  Waiver 580 

(c)  Notice  of  non-payment  where  acceptance  refused 586 

(d)  Effect  of  omission  to  give  notice  of  non-acceptance..  .  .  587 

V.    DUIIES  OF  HOLDER :    PROTEST 589 

ARTICLE  IX. 
Discharge  of  Negotiable  Instruments. 

I.  Discharge  of  the  instrument 591 

1.  Payment  and    re-transfer 591 

2.  ('anecilation  or  renunciation   699 

3.  Alteration 608 

II.  I)lSflIAR(iE  OF   PARTY   SECONDARILY   LIABLE 626 

III.  I'AYMKNT   by    PARTY    SECONDARILY    LIABLE 639 

IV.  Payment  for  honor 641 

AHTK'LE  X. 
Bills  of  Exchange:   Form  and  Interpretation. 

I.    Form 642 

1.  Formal    refjuisites   generally    642 

2.  The  drnwrr-  or  drawees 642 

(a)    Must  Im-  certain 642 

(6)    May  be  joint,  but  not  alternative  or  Buccesaive 642 

3.  Referee  in  ?nse  of  need 643 

II.  Interpretation 644 


Zii  TABLE   Oi'   CONTENTS. 

PAOB. 

1.  Bill  not  an  nssignninnt  of  funds 644 

2.  Inliuui  and  foreign  bills 646 

3.  Bill  treated  as  promissory  note 647 

ARTICLE  XI. 
Acceptance  of  Bills  of  Exchange. 

I.    FOBM    AND    EFFECT 648 

1.  Acceptance  must  be  in  writing  and  signed  by  drawee 648 

(a)  Writing  and  signature   648 

(b)  Only  the  drawee  can  accept 649 

( c )  Delivery    necessary    650 

2.  Acceptance   by   separate   instrument .  .  651 

3.  Promise  to  accept  must  be  in  writing 654 

4.  Acceptance  by  refusal  to  return  the  bill 658 

5.  Acceptance  of  incomplete  or  dishonored  bill 666 

II.  Kinds  of  acceptances 668 

1.  General   acceptance    668 

2.  Qualified   acceptance    673 

( a )  Conditional    acceptance    673 

( b )  Partial   acceptance    675 

(c)  Local   acceptance    675 

(d)  Acceptance  qualified  as  to  time 676 

( e )  Acceptance  by  one  or  more  drawees,  but  not  by  all 676 

3.  Effect  of   qualified   acceptance 677 

(a)    Holder  may  refuse  qualified  acceptance 677 

(6)   Qualified  acceptance  discharges  non-assenting  antecedent 

parties 677 

ARTICLE  XII. 
Presentment  of  Bills  of  Exchange  for  Acceptance. 

I.  In  what  cases  presentment  fob  acceptance  necessaby 679 

II.  What  constitutes  sufficient  presentment 885 

Til.  When  presentment  fob  acceptance  excused 688 

IV.  Duty  of  holder  where  bill  not  accepted 689 

V.  Effect  of  dishonob  of  bill  presented  fob  acceptance 689 

ARTICLE  XIII. 
Protest  of  Bills  of  Exchange. 

I.  What  insteuments  must  he  protested 691 

II.  What  constitutes   sufficient  protest 691 

III.  By  whom  protest  should  be  made 698 

ARTICLE  XIV. 

ACOEPTAKCE  rOB  HONOB 701 

ARTICLE  XV. 

PATXKIfT   FOB   HOKOB 707 


TABLE   OF    CONTENTS.  ZUl 


AETICLE  XVI. 

PAGE. 

Bills  ih  a  set 709 

ARTICLE  XVII. 

Promissory  Notes  and  Checks. 

I.  Pbomissoby  woter    714 

1.  Origin   and   history 714 

2.  Form  and   interpretation 714 

3.  Non-negotiable  notes   715 

n.  Checks 722 

1.  Check  distinguished  from  bill  of  exchange 722 

2.  Presentment  of  check 725 

(o)    Effect  of  delay  upon  drawer's  liability 725 

(5)    Effect  of  delay  upon  indorser's  liability 734 

3.  Certification  of  check 743 

(a)    Effect  upon  drawer's  liability 743 

(  b )    Effect  upon  indorser's  liability 748 

4.  A  check  not  an  assignment  of  funds 762 

5.  Forged  or   raised  checks:    reciprocal  obligations  of  bank  and 

depositor 758 

6.  Liability  of  drawee  to  drawer  for  wrongful  dishonor 772 


PART  II. 

List  or  the  states  and  tebritories  which  have  enacted  the  Negotia- 
ble Instruments   Law 776 

The  New  York  Negotiable  Instruments  Law 773 

The  English  Bills  op  Exchange  Act 845 

Index 875 


TABLE  OF  CASES  REPORTED. 


Where  n  is  prefixed  to  the  page  number,  the  case  is  digested  in  a  note. 


PAOB 

Adams  v.  King n.  113 

Adams  v    Wright 548 

Adrian  v.   McCaskill 310 

Agawam  Nat.  Bank  v.  Downing.  593 

Almich   V.  Downey 161 

American  Express  Co.  v.  Pinck- 

ney 195 

American    Nat.    Bank    v.    Junk 

Bros 579 

American  Nat.  Bank  v.  Sprague.  105 

Anderton    v.    Shoup 197 

Anon  ( 12  Mod.  447 ) 643 

Armstrong  v.  National  Bank..  123 

Arnd  v.  Sjoblom 383 

Arpin  v.  Chvens 250 

Atlantic  Nat.  Bank  v.  Davis.  .  .  772 

Aungst  V.  Creque n.  209 

Aymar  v.  Beers   n.  684 

Bank  of  Commerce  v.  Chambers  571 
Bank    of    England    v.    Vagliano 

Bros 125 

Bank  of  Geneva  v.  Ilowlett.  .  .  .  566 

Bank  of  Houston  v.  Day 165 

Bank   of  Michigan   v.   Ely.....  654 

Bank  of  Orleans  v.  Whittemore.  513 

Bank  of  the  Republic  v.  Millard.  752 

Bank  of  Rochester  v.  Cray.  .  .  .  58;t 

Barnes  v.  Vaughan 512 

Bartlett    v.    Robinson 565 

Beauregard   v.    Knowlton.  .  . :  .  .  520 

Bolden   v.   Ilann 269 

Birsenthall    v.    Williams n.  45 

Birket  v.   Elward 244 

Bissell    V.    Dickerson 361 

Bitzer    v.    Wngar 260 

Blake    v.    Hamilton    Dime   Sav- 
ings   Bank     n.  748 

Blake  v.  McMillen 517 

Blenn  v.  Lyford 640 

Boehm   v.   Garcias 677 

Bolles  v.  Stearns 301 

Borough  of  Montvale  v.  People's 

Bank 352 


Boston    Steel    and    Iron    Co.    v. 

Steuer 174 

Brick  V.  Freehold  Nat.  Bank..  633 

Bristol   V.   Warner 234 

Brooks  V.  Elkins n.  40 

Brook  &  Co.  V.  Vannest 276 

Brooks    V.    Higby 508 

Brown  v.  Butchers,  etc.,  Bank.  37 

Brown  v.  Curtiss 467 

Brown  v.  Jordhal   159 

Brown   v.   Montgomery 435 

Brown  v.  Reed 625 

Brush     v.     Administrators     of 

Reeves 443 

Bull  v.  Bank  of  Kasson.  .....  83 

Burgettstown  Nat.  Bank  v.  Nill  582 

Bussell  V.  Tobin   157 

Campbell    Printing,   etc.,   Co.   v. 

Jones 19-; 

Carlon  v.  Kenealy   72 

Carnwright   v.   Gray 716 

Carroll  v.  Sweet   740 

Carter  v.  ITnion  Bank 698 

Casco  Nat.   Bk.  v.  Clark 205 

Castor  V.   Peterson n.  402 

Cat  hell  V.  Goodwin 576 

Caulkins  v.   Whisler 168 

Cayuga,  dc.  Bank  v.  Hunt.  .  .  .  694 

Central   R.  v.   First  Nat.  Bk...  274 

Challiss  V.  McCrum    427 

CIianf)ino  v.   Fowler    533 

Chapman  v.   Keane    n.  535 

Chapman  v.   Ro.se 391 

Cheever  v.  I'ittsburgh,  etc.,  R.  .  346 
Chemical  Nat.  Bank  of  N.  Y.  v. 

Kellogg 302 

Chester  v.  Dorr 328 

Chestn)it  v.  Chestnut n.  194 

Chicago    Ry.    Co.    v.    Merchants' 

Bank.  .  .' 73 

Chipman  v.  Foster   204 

Choate    V.    Sf ovens 58 

Chrysler  v.  f^enois , , ,  . .  86 


xn 


TABLE   OF   CASES    REPORTED. 


PAOI 

Citi7.en«'  Ntt.  Bk.  v.  PiolIot..n.  lOfi 

Clark  V.  Pease .S70 

rUrke  V.  Patrick    '270 

Cook  V.  Felldws   2()0 

Collins  V.  Driscnll   I(i2 

Columbian  Banking  Company  v. 

Bowen 4!)0 

Commercial  Nat.   Bank   v.   Zim- 
merman   483 

Commonweal  til  v.  Butter  ick.  ...  113 
Continental  Life  In.s.  Co.  v.  Bar- 
ber   631 

Cooke  V.  Horn   67 

Cooper  V.  Dedrick  472 

Coulter    V.    Richmond 446 

Critten  v.  Chemical  Nat.  Bank.  758 

Cromwell  v.  Hewitt   720 

Crouch  V.  Credit  Foncier 259 

Currier    v.    Lockwood 42 

Curtis  V.  Sprague 144 

Cushman  v.  Haynes   n.  63 

Dabney  v.  Stidger    547 

Daniels  v.  Hammond n.  346 

Dart   V.    Sherwood 196 

Davies  v.   Wilkinson 90 

Davis  V.  Garr 121 

Davis    Sewing   Machine    Co.    v. 

Best 319 

De  la  Torre  v.  Barclay 586 

Dennistoun  v.  Stewart 691 

De  Witt  V.  Perkins 337 

Deyo  V.  Thompson n.  720 

Dilley  v.  Van  Wie n.  63 

Dodge  V.  Emerson   60 

Dresser  v.  Missouri,  etc.,  Co..  .  357 

Dunavan  v.   Flynn 650 

Dunn  V.  O'Keefe 587 

Dwight  V.  Pease   298 

Edelman   v.   Rams 715 

Eldred  v.   Malloy 243 

Elgin  City  Banking  Co.  v.  Zelch.  265 
Eng.   &  Scot.   Amer.   Mort.  etc. 

Co.  V.  Globe  Loan  &  Trust  Co.  207 

Erwin  v.  Downs    434 

Evans  v.  Freeman   285 

Evans  v.  Gee 268 

Emerson  v.  Gere 473 

Fall  River  Union  Bank  v.  Wil- 

lard 686 

Farnsworth  v.  Allen 494 

Fields  V.  Fields n,  80 


First  Nat.  Bank.  etc.  v.  Buttery  98 

First  Nat.  Bank  v.  Farnoinan..  566 

First  Nat.  Bank  v.  Forsyth.  .  .  .  335 

First  Nat.  Bank  v.  Lightncr .  .n.  54 

First  Nat  Bank  v.  Millcr..n.  79,  558 

First  Nat.  Bank  v.  Slette 81 

First  Nat.  Bank  of  Atchison  v. 

Commercial  Savings  Bank...  651 
First   Nat.    Bank    of    Detroit   v. 

Currie 748 

First  Nat.  Bank  of  Farmersville 

v.  Greenville  Nat.  Bank. .  .  .n.  82 
First   Nat.    Bank   of   LLsbon    v. 

Bank  of  Wyndmere   403 

First  Nat.  Bank  of  Richmond  v. 

Richmond  Elec.  Co n.  768 

Flanders  v.  Snare n.  35 

Floyd   Acceptances,  The 219 

Folger  v.  Chaae 266 

Ford  V.  Brown n.  355 

Fox  V.  Citizens'  Bank 354 

Frazier  v.  Massey    220 

Freeman  v.  Exchange  Bank.  .  .  .  282 

Freeman's  Nat.  Bk.  v.  Savery..n.  346 

Funk  V.  Babbitt 150 

Gardner  v.  Beacon  Trust  Co.  .  .  324 

Gardner  v.  Maynard 639 

Gay  V.   Rooke    37 

Geary  v.  Physic 34 

George     Alexander     &     Co.     v. 

Hazelrigg 375 

George  v.  Bacon 461 

German-American  Bank,  etc.,  v. 

Milliman 497 

Germania  Nat.  Bk.  v.  Mariner..  210 

Gilpin  v.   Savage    510 

Gordon  v.  Anderson 115 

Gordon  v.  Lansing  State  Bank.  107 

Gove  V.  Vining   580 

Gowan  v.  Jackson 575 

Grange  v.  Reigh   725 

Greene  v.  McAuley 317 

Greenway  v.  Wm.  D.  Orthwein 

Grain    Co 254 

Gregg  V.  Beane  727 

Grey  v.  Cooper   418 

Grocers'  Bank  v.  Penfield 243 

Guerrant  v.  Guerrant n.  182 

Haddock,    Blanchard    ft   Co.    v. 

Haddock 463 

Hall  V.  Toby   263 

Halstea4  v.  Skelton 676 


TABLE  OF   CASES   REPORTED. 


IVll 


rxaz 

Hamilton  v.  Vought 340 

Hammett  v.   Brown 169 

Hannum  v.  Richardson 432 

Harrisburg   Trust    Co.    v.    Shu- 

feldt 477 

Harrison  v.  Nicollet  Nat.  Bank.  722 

Harrison  v.  Ruscoe n.  535 

Hart  V.  Smith 679 

Haslach  v.   Wolf n.  77 

Hastings  v.  Thompson 74 

Hatcher  v.  Stalworth 676 

Havana  Cent.  R.  Co.  v.  Knicker- 
bocker Trust  Co n.  352 

Hays  V.  Hathorn 314 

Head   v.   Hornblower 743 

Herrick  v.  Bennett 96 

Herring  v.  Woodhull 266 

Hibbs  V.  Brown n.  54 

Hickok  V.  Bunting 236 

Hillsdale  College  V.  Thomas 151 

Hobbs  V.  Straine 542 

Hodges  V.  Shuler 94 

Hoffman  v.  Bank 225 

Hogue  V.  Williamson 88 

Holbrook  v.  Payne 644 

Hook  V.  Pratt 277 

Hopps  &  Co.  V.  Savage 666 

Horn  V.  Newton  City  Bank ....  608 

Horowitz   V.   Willowitz 437 

Horstatter  v.  Wilson n.  96 

Hoyt  V.  Lynch 44 

Hughes  V.  Kiddell 267 

Hull  V.  Myers 577 

Hunter  v.  Wilson 249 

Huntington   v.   Shute n.  238 

HuHsoy  v.  Winslow 41 

Hyne  v.  Dewdncy n.  40 

Jackson  v.  Hudson 642 

James  v.  Wade 573 

Jarvis  v.  St.  Croix  Mfg.  Co.  .  .  .  560 

Jarvis  v.   Wilkins n.  58 

Jefferson     Bank     v.     Chapman- 
White  Lyons 362 

Jenkins   v.   Mackenzie 627 

Jennings  v.   Roberts n.  536 

Jerman  v.  Edwards 306 

Johnson  v.  Barrow 287 

Johnson  v.  Buffalo  Center  State 

Bank 299 

Johnson   v.   Conklin 447 

Johnscn  v.  If  night 483 

Johnson  v.  Mitchell 289 

Jones  V.  CJordon 338 

|f BjaOT.  IIVSTRnif KNTB  —  2 


PAS! 

Jordan  v.  Tate 97 

Joseph  v.  Catron n.  106 

Joslyn  V.  Eastman 629 

Josselyn  v.  Lacier n.  50 

Keenan    v.    Blue n.  142 

Keiden  v.  Winegar 201 

Kelley  v.  Hemmingway 103 

Kimball   v.   Costa n.  194 

Kimball  v.  Huntington n.  40 

King  V.  Ellor 45 

King  v.  Hurley 539 

Kinyon  v.   Wohlford 152 

Laird  v.  State 82 

Lancaster  v.  Baltzell 221 

Lancey  v.  Clark 597 

Lane  v.  Stacey 466 

Larkin  v.  Hardenbrook 599 

T^ask  v.   Dew 601 

Leavitt  v.  Putnam 272 

Le  Due  v.   First  Nat.  Bank  of 

Kasson 320 

Lent  V.  Hodgman n.  63 

Leonard   v.   Mason 91 

Lewis  V.  Clay 394 

Light  V.  Kingsbury 97 

liindenberger  v.   Beall 554 

Linn  v.  Horton 561 

Little  V.  Slackford 45 

Lloyd's  Bank,  Ltd.  v.  Cooke...  185 

Lomax   v.    Picot 367 

r.nng  V.  Stephenson 442 

Lyndonville    National    Bank    v. 

Fletcher 605 

Lysaght  v.  Bryant 53»i 

■ » 

MacBeth    v.    North    and    South 

Wales  Bank  131 

McCormick  v.  Shea 628 

McGregory  v.  McCregory 400 

Mcintosh  v.  Lytic n.  107 

McMann  v.  Walker 401 

McNeely  Co.  v.   Bank  of  North 

America 769 

Madden   v.  Caston 191 

Madison  Square  Bank  v.  Pierce.  594 
'Inrket  and  P'ulton  N.  B.  v.  Sar- 
gent   170 

Markey  v.  Corey 261 

Marling  v.  Jones 333 

Ntnrshall  v.  Sonneman 530 

Massachiisetts  Nat.  Bk.  v.  Snow.  184 

.Matteson  v.  Moulton 658 


XVIU 


TABLE  OF  CASES  RErORTED. 


rAOi 

Maynnrd   v.  Mirr ?!• 

Mepowan  v.  I'ptorson n.  2().'{ 

MohIlK>r>;  v.  Tislier 158 

Mt-rrill  v.  Hurlt-y (55 

Morritt   v.    Heiiton 303 

Meyer  v.  Richards 419 

Meyor  A  Co.  v.  Decroix,  Verley 

et  cie   668 

Miller  v.  Austin 43 

Mills  V.  Bank  of  U.  S 539 

Minot  V.  Rusa 743 

Montpomery  v.  Elliott 478 

Moore  v.  Cushing 490 

Moore  v.  First  Nat.  Bank.  .  .  .n.  277 
Moreland's    Adm'rs   v.    Citizens 

Nat.   Bank    696 

Morris  v.  Birmingham  Nat.  Bk..  523 

Morris  to.  Brick  Co.  v.  Austin..  257 

Morris  v.  lliisson 565 

Moskowitz  V.  Dcntsch 726 

Munger  v.   Shannon n.  50 

Musselman  v.   Oakes 118 

Nat.  Bank  of  Commonwealth  v. 

Law 345 

National    Bank   of   Michigan    v. 

Green 363 

National  Bank  of  Rolla  v.  First 

Nat.  Bank  of  Salem n.  410 

National      Exchange     Bank     v. 

Lester 616 

National     Exchange     Bank     v. 

Lubrano 458 

Newark,  etc.,  Mfg.  Co.  v.  Bishop  495 

Nixon  V.  Palmer 220 

Noll  V.  Smith 624 

Northern  State  Bank  of  Grand 

Fork  V.  Bellamy    n.  63 

Noxon  V.  Smith 120 

O'Bannon,  J.  W.  v.  Curran 527 

Ohio  Life  Ins.  etc.,  Co.  v.   Mc- 

Cagne 538 

Oothout   V.   Ballard 443 

Oppenheim     v.     Simon     Reigel 

Cigar  Co 256 

Osborn  v.  Hawley 93 

Osgood  V.  Artt 307 

Page   V.    Cook 239 

Page  V.  Morrel 163 

Palmer  v.   Ward n.  63 

Pardee   v.   Fish 84 

Parker  v.  Kellogg 515 


PAOI 

Parker  v.  Plymeil . .  64 

Parker  v.   Reddick 488 

I'arsons   v.  .Jackson 63 

Parsons  v.  I'tica  Cement  Co.  .  .  365 

Pearce  v.  Langlit 545 

Petit  V.  Ben.son 675 

Peto   V.    Reynolds n.  150 

IMiillips  V.  Mercantile  Nat.  Bk..  134 

Pier  V.  HoinrichshofTen 518 

Plato  V.  Reynolds 680 

Plover  Savings  Bank  v.  Moodie.  735 

i'owt-r  V.   Finnic 27  1 

Putnam  v.  Crymes 122 

Putnam   v.   Schuyler 474 

Railroad  Co.  v.  National  Bank..  239 

Ranger  v.  Cary 302 

Ransom  v.  Mack 580 

l^eamer  v.  Bell 268 

Redman   v.    Adams n.  54 

Rendall  v.  Harriman n.  201 

Reg.  v.  Harper 35 

Rice    v.    Stearns 284 

Rirhardson    v.    Carpenter.  .  .    n.  49 

Richardson   v.   Ellett 195 

Rider  v.  Taintor 288 

Riker  v.  Sprague  Mfg.  Co 68 

Robertson  v.  Kensington n.  287 

Robinson   v.    Ames 681 

Rockfield  v.  First  Nat.  Bank  of 

Springfield 447 

Rockville  Bank  v.  Holt 629 

RufT  v.  Webb 45 

Sackett  v.   Palmer 105 

Salley   v.   Terrill n.  153 

Saloman     v.     Pfeister   &   Vogel 

Leather  Co 541 

Saunders  v.   McCarthy 207 

Schlesinger  v.  Lehmaier 378 

Schmittler  v.  Simon 50 

Schmitz  v.  Hawkeye,  etc.,  Co..  41 

Schofield  V.  Bayard 704 

Scott  V.  Calkin" 270 

Sharpe  v.  Drew 685 

Shaw  V.  Camp 102 

Shaw  V.  McNeill 584 

Shaw  V.  Smith Ill 

Sheldon  v.   Benham 543 

Shipman   v.    P.ank n.  135 

Siegel    V.    Chicago    Trufrt,    etc.. 

Bank 55 

Simon  v.  Merritt 360 

Simpson  v.  Griffin 364 


TABLE   OF    CASES    REPORTED. 


Simpson  v.  Turney 

Slade  V.  Mutrie 

Smith  V.  Allen 

Smith    V.    Bayer 

Smith   V.    Crane 

Smith    V.    Kendall 

Smith   V.    Prosser 

Smith  V.  Poillon 

Souhegan  Nat.  Bank  v.  Board- 
man 

Spear  v.   Pratt 

Sprague  v.  Fletcher n. 

Stacy  V.  Kemp 

Stafford  v.  Yates 

Stagg  V.   Elliott 

Stainback  v.  Bank  of  Virginia.. 

Stapleton  v.  Louisville  Banking 
Co 

State   Bank   v.   Solomon 

State  Bank  of  Chicago  v.  First 
Nat.  Bank  of  Omaha 

Start  V.  Tupper 

Stevens  v.  Androscoggin  Water 
Power   Co 

Stewart  v.  Eden 

Stinson   v.   Lee 

StockweL   V.   Bramble 

Stoddard  v.  Burton 

Stoddard    v.    Kimball 

Sullivan  v.  Rudisill 

Sus.sex  Bank  v.  Baldwin 

Taylor  v.   Dobhin.s 

Taylor   v.   Snyder n. 

Times     Square     Auto.     Co.     v. 

Rutherford   Nat.   Bank 

Toby  V.  Maurian   

Tombeckbfp  Bank  v.  Dumcll... 
Traders  Nat.  Bank  v.  Jones... 
Troy  City  Bank  v.  Lauman.  .  .  . 

True   V.    Fuller 

Trust  C'o.  v.  National  Bank.  .  .  . 
Trust  Co.  of  Amer.  v.  Hamilton 

Bank 

T'nion  Nafinnal  Bank  v.  Marr's 
Adm'r 

United  Stales  v.  Amer.  Exch. 
Nat.  Bank 


563 
600 

40 
280 

66 
715 
171 
556 

214 
648 
586 
253 
537 
219 
559 


544 

409 
734 

673 
546 
516 
667 
591 
252 
611 
480 

36 
515 

746 
516 
687 
536 
672 
471 
263 

137 


United   States   v.   Barber. 


Valley  Nat.  Bk.  v.  Croweil.  .  . . 
Van  Buskirk  v.  State  Bank  of 

Rocky  Ford    

Vander  Ploeg  v.  Van  Zuuk. . . . 

Violet  V.  Rose 

Vogel  V.  Starr 

Walker  v.  Bank 

Walker  v.  Ebert   

Wallace  v.   Agry n. 

Wallace   v.   Tice 

Walsh  V.  Blatchley 

Walton    V.    Williams 

Waring  v.  Betts 

Warren  v.  Smith 

Watrous  v.  Hallbrook 

Watson  V.  Evans 

Wellington  v.  Jackson 

Wells    v.    Brigham 

West    Branch     State     Bank    v. 

Haines 

Western  Wheeled  Scraper  Co.  v. 

McMillen 

Wettlaufcr  v.  Baxter 

Wheeler  v.  Webster 

White  v.  dishing 

Whitwell  V.  Johnson 

Willard  v.  Crook 

Williams     v.    Tishomingo    Sav. 

Inst 

Williamsburgh     Trust     Co.     v. 

Tum  Sudem   

Wilson   V.    Hendee 

Wilson  V.  Peck n. 

Wintermute    v.    Post 

\\'inthrop   v.    Pepoon 

Wisner  v.  Triist  Nat.  Bank.  .  .  . 

Witte  V.  Williams 

Witty  V.  Michigan,  etc.,  Ins.  Co. 

Wolsfcnhnlnii'  v.  Smith 

Worden  flrocer  Co.  v.  Blanding. 

Wordcn  v.  Dodge 

Worth  V.  Case 

Worthington  v.  Cowles 


^'alf  V.   Ward 


439    Zimmerman   v.   Anderson. 


689 

91 

755 
179 
368 
567 

677 
387 
684 
612 
711 
649 
524 
224 
148 
119 
223 
193 

731 

199 
145 
150 
46 
554 
221 

433 

417 
463 
532 
677 
690 
660 
114 
192 
(VM 
60 
4!) 
277 
441 

646 

94 


PART  I. 
CASES    AND    AUTHORITIEvS 


EXPLANATORY  NOTE 

The  section  numbers  opposite  the  titles  of  cases  and  elsewhere  refer 
to  the  sections  of  the  New  York  Negotiable  Instruments  Law.  Where 
cases  ir  other  jurisdictions  cite  the  Negotiable  Instruments  Law,  the 
corresponding  sections  of  the  New  York  Act  are  given  in  the  foot- 
notes, except  where  the  context  renders  this  cross-reference  unnecessary. 


CASES  AND  AUTHORITIES 

ON 

NEGOTIABLE  INSTRUMENTS. 


ARTICLE  I. 
General   Provisions. 
I.  Codes  governing  bills,  notes  and  checks. 

1.  The  English  Bills  of  Exchange  Act. 

A  Digest  of  the  Law  of  Bills  of  Exchange,  Promissory  Notes  and 
Cheques.  By  M.  D.  Chalmers, i  M.  A.,  of  the  Innes  Temple,  Babbis- 
TEB  AT  Law.     London,  1878. 

[From  the  Introduction  to  the  First  Edition.] 

As  far  as  form  goes,  the  present  Digest  is  modeled  on  the  Indian 
Codes.  *  *  *  It  is  almost  needless  to  point  out,  that  the  similarity 
between  the  Indian  Codes  and  a  Digest  like  the  present  is  merely 
reseinhlance  in  form.  There  all  analogy  ends.  In  a  code  the  sub- 
ject in  hand  is  treated  completely  and  finally.  A  code  states  method- 
ically the  law  as  the  legislature  is  of  opinion  that  it  ought  to  be.  This 
Digest  is  an  attempt  to  state  methodically  the  law  as  it  is.  In  a 
code,  propositions  and  illustrations  are  alike  authoritative.  In  this 
Digest,  the  illustrations  taken  from  decided  cases  are  alone  authorita- 
tive. The  general  propositions  are  only  entitled  to  weight  in  so  far 
as  they  are  complete  and  legitimate  inductions  from  decided  cases 
which  are  unquestioned  law.  A  general  proposition,  supported  by 
reference  to  cases,  merely  amounts  to  a  verifiable  hypothesis  as  to 
what  the  law  is.  In  the  theory  of  English  law,  there  exists  in  nuhihus 
a  complete  set  of  princi{)les  ai)])li(able  to  every  conceivable  state  of 
factR  that  can  arise.  Theoretically  the  judges  do  not  make  law. 
They  only  interpret  it.  They  are  merely  the  conductors  by  which 
the  principle  is  brought  down  from  the  clouds  and  made  available  to 

>  Now  his  Honor  Judge   Chalmers. 
[3J 


4  CODES.  [art.    I. 

men.  rractically,  liowpvor,  llioir  functions  are  frequently  and  of 
necessity  K\jxislatiYi>.  If  a  wide  subject  be  investigated  systematically, 
four  state?  of  tlie  law  will  be  found  to  exist.  First,  tlie  law  on  a 
given  point  may  be  reasonably  certain.  All  authofTly7oF't!Tr "great 
weiglit  of  authority,  may  be  in  favor  of  a  given  proposition.  Secondly, 
a  pro{)osition  on  a  given  ])oint  can  only  be  stated  as  probably  holding 
good.  For  instance,  it  nuiy  rest  merely  on  unchallenged  uhiter  dicta, 
or  there  may  be  a  decision  in  favor  of  it,  and  weighty  obiter  dicta 
opposed  to  it.  Thirdly,  the  law  on  a  given  point  may  be  uncertain. 
Decisions  may  be  in  dirctt  conlliit,  or  again  there  may  be  a  decision 
in  point  which  has  never  been  directly  questioned,  but  the  ratio 
decidendi  of  which  seems  entirely  opposed  to  the  princinle  of  later 
cases.  Fourthly,  there  may  be  an  entire  absence  of  aiftlrority  on  a 
given  question.  Such  being  the  state  of  the  materials  available  for 
forming  a  Digest,  it  is  clear  that  if  the  subject  is  to  be  treated  method- 
ically, many  propositions  can  only  be  stated  tentatively.  Many  of 
the  articles,  therefore,  are  qualified  with  a  (probably)  or  a  (perhaps), 
and  the  reason  of  the  qualification  is  then  stated  in  a  note. 

On  doubtful  points  frequent  reference  is  made  to  American  cases 
and  Continental  Codes  and  writers.  In  mercantile  matters  when  the 
law  is  uncertain  or  authority  wanting,  there  is  an  increasing  tendency 
to  refer  to  foreign  codes  and  laws  in  order  to  see  how  other  nations 
have  solved  the  difficulty.  This  is  especially  the  case  as  regards 
negotiable  instruments,  the  most  cosmopolitan  of  all  contracts.  Mr. 
Justice  Story,  in  his  judgment  in  Swift  v.  Tyson  (16  Peters,  1),  gives 
forcible  expression  to  the  principle.  He  says,  "  The  law  respecting 
negotiable  instruments  may  be  truly  declared,  in  the  language  of 
Cicero,  adopted  by  Lord  Mansfield  in  LvJce  v.  Lyde  (2  Burr.  887),  to 
be  in  a  great  measure,  not  the  law  of  a  single  country  only,  but  of  the 
commercial  world.  Non  erit  lex  alia  RomcB,  alia  Athenis,  alia  nunc, 
alia  post  hac,  sed  et  apud  omnes  gentes  et  omni  tempore  una  eademque 
lex  obtinebit." 

An  American  decision,  it  is  needless  to  say,  is  not  a  binding  author- 
ity in  this  country,  but,  if  well  reasoned,  it  is  always  considered  with 
respect  by  our  courts.  Many  of  the  American  judgments  are  very 
valuable  as  expounding  and  testing  the  principles  of  English  decisions. 
An  English  case  there,  like  an  American  case  here,  is  only  an  authority 
in  so  far  as  it  appears  to  be  a  correct  deduction  from  the  general  prin- 
ciples of  the  common  law  and  the  law  merchant  which  prevail  in 
both  countries  alike. 

When  the  subject  matter  of  an  article  of  this  Digest  is  dealt  with 
by  the  French  "  Code  de  Commerce,"  or  the  "  German  General 
Exchange  Law,  1849,"  their  respective  provisions  are  compared. 


I.    1.]  BILLS  OF  EXCHANGE  ACT. 


[From  the  Introduction  to  the  Third  Edition.] 

Soon  after  the  publication  of  the  Second  Edition  of  this  Digest 
the  law  relating  to  bills,  notes,  and  cheques  was  codified  by  the  Bills 
of  Exchange__AcJ;^Jiiii^.      For  the  most  part  the  propositions  of  the  //"^ 
Act  were  taken  word  for  word  from  the  propositions  of  the  Digest.         Yv 
In  the  introduction  to  the  Second  Edition  it  was  pointed  out  that   p 
the  general  propositions  of  the  Digest  could  only  be  considered  as  law,  ^nA^ 
in  so  far  as  they  were  correct  and  logical  inductions  from  the  decided 
cases  which  were  cited  as  illustrations.      Now  the  position  is  reversed. 
The  cases  decided  before  the  Act  are  only  law  in  so  far  as  they  can 
be  shown  to  be  correct  and  logical  deductions  from  the  general  propo- 
sitions of  the  Act.     The  illustrations,  therefore,  must  always  be  tested 
by  the  language  of  the  Act  itself. 

In  the  notes  to  the  Act  I  have  carefully  pointed  out  the  few  pro- 
visions which  were  deliberately  intended  to  alter  the  law.  When  a 
proposition  in  the  Act  appears  to  be  of  wide  scope,  I  have  added 
illustrations  taken  from  decided  cases.  Wlien  a  proposition  appears 
to  be  of  narrow  scope,  I  have  merely  given  a  reference  to  the  cases 
which  were  before  me  when  drafting  it.  It  may  be  said  that  the 
Act  should  be  left  to  speak  for  itself.  I  am  well  aware  that  there  is 
no  necessary  connection  between  the  intention  of  the  draftsman  and 
the  intention  of  the  Legislature  as  deduced  by  the  Courts  from  the 
terms  of  a  statute.  Still,  in  the  present  case,  there  will  be  a  strong 
disposition  on  the  part  of  the  Courts  to  construe  the  Act  as  declara- 
tory ;  and  it  may  be  useful  to  the  profession  to  be  referred  from  the 
abstract  propositions  of  the  Act  to  the  concrete  facts  which  gave  rise 
to  them.  As  Mr.  Justice  Holmes,  in  his  admirable  work  on  the  Com- 
mon Law,  observes  (p.  27),  "However  much  we  may  codify  the  law 
into  a  series  of  seemingly  self-sufficient  propositions,  those  propositions 
will  be  but  a  phase  in  a  continuous  growth.  To  understand  their 
scope  fully,  to  know  how  they  will  bo  dealt  with  by  judges  trained  in 
the  past  which  the  law  embodies,  we  must  ourselves  know  something 
of  that  past.  The  history  of  what  the  law  has  boon  is  necessary  to 
the  knowledge  of  what  the  law  is." 

The  Bills  of  Exchange  Act,  1882,  was  the  first  enactment  codifying 
any  branch  of  the  Common  Law  which  found  its  way  into  the  Statute 
Book.  It  has  now  been  followed  by  the  Partnership  Act,  1890,  which 
was  originally  drafted  by  Sir  Fn-derick   Pollock. =*      But  as  a  Code  is 


2  For   an   account  of   this   Act,  see  the   Introduction  to  the  5th   edition  of 
Pollock  on  Partnership. 


6-  CODES.  [art.    I. 

still  poniewhat  of  a  uovelty  in  tlie  Kn^'lisli  law,  it  may  be  of  interest  to 
refer  to  the  conditions  under  which  tlie  experiment  was  successfully 
carried  out,  and  to  consider  how  far  it  can  or  ought  to  be  repeated  as 
regards  other  {tortious  of  the  law.      Of  late  years  several  attempts  at 
codification  have  been  made  but  from  various  causes  they  have  mostly 
proved   imsuccessful.       The   success   of    the   Bills  of    Exchange   Bill 
depended  on  tlie  wise  lines  laid  down  by  Lord  Herschell.     He  insisted 
that  the  Bill  should  be  introduced  in  a  form  which  did  nothing  more 
than  codify  the  existing  law,  and  that  all  amendments  should  be  left 
to  Parliament.      A  Bill  which  merely  improves  the  form,  without 
altering  the  substance,  of  the  law  creates  no  opposition,  and  gives 
very  little  room  for  controversy.      Of  course  codification   pure  and 
simple   is  an   impossibility.      The  draftsman  comes  across   doubtful 
points  of  law  which  he  must  decide  one  way  or  the  other.      Again, 
voluminous  though  our  case  law  is,  there  are  occasional  gaps  which  a 
codifying  bill  must  bridge  over  if  it  aims  at  anything  like  complete- 
ness.     Still  in  drafting  the  Bills  of  Exchange  Bill  my  aim  was  to 
reproduce  as  exactly  as  possible  the  existing  law,  whether  it  seemed 
good,  bad,  or  indifferent  in  its  effects.      The  idea  of  codifying  the  law 
of   negotiable   instruments   was   first   suggested   to  me   by    Sir   Fitz- 
James  Stephen's  Digest  of  the  Law  of  Evidence,  and  Sir  F.  Pollock's 
Digest  of  the  Law  of  Partnership.      Bills,  notes,  and  cheques  seemed 
to  form  a  well  isolated  subject,  and  I  therefore  set  to  work  to  prepare 
a  digest  of  the  law  relating  to  them.      1  found  that  the  law  was  con- 
tained in  some   2,500  cases,  and  17   statutory  enactments.      I  read 
through  the  whole  of  the  decisions,  beginning  with  the  first  reported 
case  in  1G03.      But  the  cases  on  the  subject  were  comparatively  few 
and  unimportant  until  the  time  of  Lord  Mansfield.     The  general  prin- 
ciples of  the  law  were  then  settled,  and  subsequent  decisions,  though 
very  numerous,  have  been  for  the  most  part  illustrations  of,  or  deduc- 
tions from,  the  general  propositions  then  laid  down.      On  some  points 
there  was  a  curious  dearth  of  authority.     As  regards  such  points  I  had 
recourse  to  American  decisions,  and  to  inquiry  as  to  the  usages  among 
bankers  and  merchants.      As  the  result,  a  good  many  propositions  in 
the  Digest,  even  on  points  of  frequent  occurrence,  had  to  be  stated 
with  a  (probably)  or  a  (perhaps).      Some  two  years  after  the  publica- 
tion of  my  Digest,  I  read  a  paper  on  the  question  of  codifying  the  law 
of  negotiable  instruments  before  the  Institute  of  Bankers.      Mr.  John 
Hollams,  the  well  known  commercial  lawyer,  who  was  present,  pointed 
out  the   advantages   of  a   Code  to   the  mercantile  community;   and. 
mainly  I  think  on  his  advice,  I  received  instructions  from  the  Institute 
of  Bankers  and  the  Associated  Chambers  of  Commerce  to  prepare  a 
bill  on  the  subject.      The  draft  of  the  bill  was  first  submitted  to  a 


I.    1.]  BILLS  OF  EXCHANGE  ACT.  ^ 

Bub-committee  of  the  Council  of  the  Institute  of  Bankers,  who  care- 
fully tested  such  portions  of  it  as  dealt  with  matters  of  usage  uncov- 
ered by  authority.^  The  bill  was  then  introduced  by  Sir  John  Lub- 
bock, the  President  of  the  Institute.  After  it  had  been  read  a  second 
time  in  the  Commons,  it  was  referred  to  a  strong  Select  Committee 
of  merchants,  bankers,  and  lawyers,  with  Sir  Farrer  Herschell  as 
chairman.*  As  the  Scotch  law  of  negotiable  instruments  differed  in 
certain  particulars  from  English  law,  the  bill  was  originally  drafted 
to  apply  to  England  and  Ireland  only.  The  first  work  of  the  Select 
Committee  was  to  take  the  evidence  of  Sheriff  Dove-Wilson  of  Aber- 
deen, a  well-known  authority  on  Scotch  Commercial  Law.  He  pointed 
out  the  particulars  in  which  the  bill,  if  applied  to  Scotland,  would 
alter  the  law  there.  With  three  exceptions  the  points  of  difference 
were  insignificant.  The  Committee  thereupon  resolved  to  apply  the 
bill  to  Scotland,  and  Sheriff  Dove-Wilson  undertook  the  drafting  of 
the  necessary  amendments.  Eventually  the  Scotch  rules  were  in 
three  cases  preserved  as  to  Scotland,  while  on  the  other  points  the 
Scotch  rule  was  either  adopted  for  England,  or  the  English  rule 
applied  to  Scotland.  A  few  amendments  in  the  law  were  made  when 
the  Committee  was  unanimous  in  their  favor,  but  very  wisely  no 
amendments  were  pressed  on  which  there  was  a  difference  of  opinion. 
Sir  Farrer  Herschell  reported  the  bill  to  the  House,  and  it  was  read  a 
third  time  and  sent  up  to  the  Lords  without  alteration.  In  the  House 
of  Lords  it  was  again  referred  to  a  Select  Committee  with  Lord  Bram- 
well  for  Chairman.^  A  few  amendments  were  there  inserted,  mainly 
at  Lord  Bramwell's  suggestion.  These  were  agreed  to  by  the  Com- 
mons, and  the  bill  passed  without  opposition. 

The  Act  has  now  (1801)  been  in  operation  for  more  than  eight 
years,  so  that  some  estimate  can  be  formed  as  to  its  results.  Mer- 
chants and  Bankers  say  that  it  is  a  great  convenience  to  tliem  to  have 
the  whole  of  the  general  y)rinci])les  of  the  law  of  bills,  notes,  and 
cheques  contained  in  a  single  Act  of  100  sections.  As  regards  par- 
ticular cases  which  arist',  it  is  seldom  necessary  to  go  beyond  the  Act 
itself.  It  must  also  be  an  advantage  to  foreigners  who  have  English 
bill  transactions  to  have  an  authoritative  statement  of  the  English  law 

»Mr.  Billinghurst,  of  the  London  and  WpRtminBter  Bank,  and  Mr.  Slater, 
of  th«>  lyindon  and  County  Bank,  iindprt(X)k  the  brunt  of  the  work. 

<  The  committee  inclufh-d  Sir  Farrer  Herschell,  Q.  C;  Sir  John  Lubbock; 
Mr.  A«her.  Q.  ('.;  Mr.  Cohen.  Q.  C.;  Mr.  Reid.  Q.  C;  Mr.  Whitley.  Mr.  T.  C. 
BarinR,  Mr.  R.  H.  Martin.  Mr    DrrKwinR.  Mr.  Jackson,  and  Sir  Charles  Milli. 

•  The  committee  included  the  Lord  Chancellor  (Selborne),  Lord  Bram« 
well,  Lord  Fitzgerald,  Lord  Balfour  of  Burleigh,  and  Lord  Wolverton. 


8  CODES.  [aKT.    I. 

on  the  subject  in  an  aocessiMe  form.  If  I  could  do  the  work  over 
again,  I  certainly  could  do  it  bettor  and  should  profit  by  past  experi- 
ence. But  as  it  is,  the  Act,  as  yet,  luis  given  rise  to  very  little  litiga- 
tion. 1  am  sure  that  further  codifying  measures  can  be  got  through 
Parliament,  if  those  in  charge  of  them  will  not  attempt  too  much, 
but  will  be  content  to  follow  the  lines  laid  down  by  Lord  Ilerschell. 
Let  a  codifying  bill  in  the  first  instance  simply  reproduce  the  existing 
law,  however  defective.  If  the  defects  are  patent  and  glaring,  it  will 
be  easy  to  get  tliom  amended.  If  an  amendment  be  opposed,  it  can 
be  dropped  without  sacrificing  the  bill.  The  form  of  the  law  at  any 
rate  is  improved,  and  its  substance  can  always  be  amended  by  subse- 
quent legislation.  If  a  bill  when  introduced  proposes  to  effect 
changes  in  the  law,  every  clause  is  looked  at  askance,  and  it  is  sure 
to  encounter  opposition. 

Assuming  then  the  possibility  of  further  codification,  the  question 
arises  whether  its  extension  is  expedient.  All  the  continental  nations 
have  codified  their  laws,  and  none  of  them  show  any  signs  of  repenting 
it.  On  the  contrary,  most  of  them  are  now  engaged  in  remodeling 
and  amplifying  their  existing  codes.  In  India  a  good  deal  of  codifica- 
tion has  been  carried  out,  and  public  and  professional  opinion  seems 
almost  unanimous  in  its  favor.  The  Bills  of  Exchange  Act,  1882, 
has  been  adopted  by  New  Zealand,  Victoria,  New  South  Wales,  South 
Australia,  Queensland,  Tasmania,  and  with  slight  modifications  by 
Canada.® 


\Prom    the  Preface  of   the  Seventh   Edition.] 

The  Bills  of  Exchange  (Crossed  Cheques)  Act,  1906,  has  for  the 
first  time  amended  the  Act  of  1882.  It  interprets  section  82  of  the 
principal  Act,  and  overrides  Gordon  v.  London  and  Midland  Bank 
(1903),  A.  C.  242,  H.  L.,  in  so  far  as  that  case  turned  on  the  con- 
struction of  that  section.  The  Bill  was  drafted  by  me  in  1903,  under 
instructions  from  Lord  Halsbury,  but  it  failed  to  pass  the  House  of 
Commons  till  1906. 

«  It  has  now  been  adopted  by  forty  of  the  English  colonies  and  depend- 
encies. See  Art.  by  E.  Dove-Wilson,  on  Codification  of  Commercial  Law,  in  8 
Jurid.  Rev.  (1896),  329.-11. 

[In  the  7th  edition  (1909)  of  Chalmers'  Digest  of  the  Law  of  Bills  of 
Exchange,  etc.,  the  author  gives  on  pages  401-402  a  li.st  of  forty-three  British 
colonies  which  have  enacted  laws  relating  to  bills,  notes,  and  checks,  giving 
also  the  citation  to  these  laws.  He  remarks,  however,  that  "  The  above  lawa 
^re  not  necessarily  frarr'^'i  on  the  same  lines  as  the  Imperial  Act."  —  C.l 


i.  2.]  negotiable  instruments  law.  9 

2.  The  American  Negotiable  Instruments  Law. 
Laws  of  New  York,  1890,  Chapter  205. 

§  1.  Within  thirty  days  after  the  passage  of  this  act,  the  governor 
shall  appoint,  by  and  wiih  the  consent  of  the  senate,  three  commis- 
sioners, who  aie  heicLiy  constituted  a  board  of  commissioners  by  the 
name  and  style  of  "  CommiEsioners  for  the  Promotion  of  Uniformity 
of  Legislation  in  the  United  States."  It  shall  be  the  duty  of  said 
board  to  examine  the  subjects  of  marriage  and  divorce,  insolvency,  the 
form  of  notaiial  ceitificatcs  and  other  subjects;  to  ascertain  the  best 
means  to  cflect  an  assimilation  and  uniformity  in  the  laws  of  the 
States,  and  especially  to  consider  whether  it  would  be  wise  and  prac- 
ticable for  the  State  of  iS'ew  York  to  invite  the  other  States  of  the 
Union  to  send  representatives  to  a  convention  to  draft  uniform  laws 
to  be  submitted  for  the  approval  and  adoption  of  the  several  States, 
and  to  devise  and  recommend  such  other  course  of  action  as  shall  best 
accompUsh  the  purpose  of  this  act.^ 


The  Negotiable  Instruments  Law.  (A  Review  of  the  Ames-Brewster 
Controversy.)  By  Charles  L.  McKeeuan,  of  the  Philadelphia  Bar. 
The  Amkrra.n  Law  Rlgister,  Vol.  41,  N.  S.,  Nos.  8,  9,  10,  Alglst, 
September,  October,  IOOl:. 

[Pages  438-U2.] 

At  the  Annual  rnnferenoe  of  the  Commissioners  on  Uniform  State 
Laws,  held  in  Detroit  in  1^05,  a  resolution  was  passed  requestin?  the 
Committop  on  f'ommorci})]  Law  to  procure,  as  soon  as  practicnblo,  a 
draft  of  a  bill  rolatin'^f  to  oomnieroial  paper  liased  uywn  the  English 
Bills  of  Exchange  Act  and  upon  such  sources  of  information  as  the 
rommittee  niicrht  doom  proper  to  consult.  The  matter  was  referred 
to  a  puh-committoo  consisting  of  .ludge  Lyman  I).  lirowster,  of  Con- 
necticnt;  Henry  C  Willcox,  of  New  York,  and  Frank  Bergen,  of  New 
.Tersoy,  who  serurod  ATr.  .Inlm  .T.  Crawford,  of  the  Now  York  bar,  a 
well-known  export  on  tbo  law  nf  bills  and  notes,  to  draft  the  proposed 
hill. 

The  Knglisb  art  bad  followod  llif  continontal  codes  as  to  form,  t.  r. 
it  dealt  primarily  with  Inll^^  of  cvclianfrc.  and  then  applied  thoso  pro- 
vipions,  Fo  far  as  tboy  wcro  applioablo,  to  proniissorv  notes,  adding 
provision*;  wbirb  woro  poniliar  to  tbo  latter  class  of  instruments. 
DeomincT  this  ''nrm  to  I>p  unsuitofi  tf)  American  conditions  —  the  use 


T  Similnr  nrtn  have  bepn  passed  in  many  of  the  Ai^ierican  States,  and  com- 
missionprH  appointed.  —  H. 


10  COOKS.  [a in'.   I. 

of  hills  of  oxi'lKiiii^c  bt'iiii;  pro])Oiti()ii;itclv  less  oxtcnsivo  hen'  than  in 
10uio|H'  -  Ml.  (  mwloid  lUidjiu'ii  ;i  Idiiii  of  his  own,  which  ^iouixmI 
logoiher  the  fiiousioiis  ;i|)|>luahlt'  to  all  kinds  of  ne^otiahle  insliii- 
uionls,  aM^i  tiit-n  lolii'clril.  iuku'I-  scpaiaU'  articlos,  the  piovisions 
spiniali^   all'i'clinir  lit"  dirn'icnl  clayscs. 

Mr.  (  lawioid  s  ilial'l  \\:i<  laid  lud'orc  Ihc  suh-foinniittoo.  each  section 
being  annotated  wilh  lercieiu'c  to  the  decisions  of  the  Courts,  the 
comments  of  icM-liook  wiilns,  and  the  statute  laws  of  the  seveial 
states.  This  diaft  (sliulitlv  amended  hy  the  8ub-eoniniittee )  and  the 
draftsman's  noies  were  piintcd  along  with  the  English  bill  for  com- 
parison, and  copies  were  sent  to  each  member  of  the  Conference,  to 
many  pioniinent  lawyers  and  law  professors,  and  to  several  English 
judges  aiul  lawyeis.  with  an  invitation  for  suggestions  and  criticisms. 
The  draft  was  then  suhmitted  to  the  (Conference  at  Saratoga  in  181)(i. 
The  twenty-seven  Commissioners  who  were  in  attendance  —  represent- 
ing fouiteeu  diifeient  states  —  went  over  it  section  by  secliion,  and 
made  some  amendments  to  it,  "most  of  which,"  says  Mr.  Crawford, 
"were  such  changes  in  the  existing  law  as  I  had  not  felt  at  liberty 
to  incorjiorate  into  the  original  draft."''  The  draft  as  thus  amended 
was  adopted  by  the  Conference,  and  in  such  form  has  been  submitted 
to  the  various  state  Legislatures. 

The  most  important  contribution  thai  lias  been  made  to  the  act  is 
the  Ames-Brewster  contioversy.  In  the  Fourteenth  Harvard  Law 
Review,  Professor  James  Barr  Ames,  Dean  of  the  Harvard  Law 
Faculty,  for  some  years  lecturer  on  Bills  and  Notes  in  the  Harvard 
Law  .School,  and  the  author  of  the  leading  case  book  on  the  subject, 
published  an  article  criticising  some  twenty-three  sections  of  the  new 
act,  and  expressing  the  opinion  that  notwithstanding  the  act's  many 
merits,  "  its  adoption  by  fifteen  slates  must  be  regarded  as  a  mis- 
fortune, and  its  enactment  in  additional  states,  without  considerable 
amendment,  should  be  an  imj)ossibility.''  I'rofessor  Ames'  criticisms 
were  answered  by  Judge  Lvman  1).  Brewster,  President  of  the  Na- 
tional Conference  on  Uniform  State  Laws,  and  a  member  of,,  the  sub- 
committee which  drafted  the.  act.  The  discussion  consists  of  two 
articles  in  the  Harvard  Law  Revinr.  by  Professor  Ames,"  and  two 
articles  by  Judge  Brewster,  one  published  in  the  Yale  Law  Journal 
and  one  in  the  Harvard  Law  Review}  In  a  pamphlet  recently  pub- 
lished by  the  Harvard  Law  Review  Publishing  Association,  containing 
the  text  of  the  act,  togethor  with   these  articles,  there  are  added-  a 

8  Crawford's  An.  N.  T.  L.     Prpfaro. 

9  14   Earrarti  Lnir  ffnirir,  241:    14    Unrrnrd   hmi-  Rrvirir,  442. 
1  10  Yale  Laic  ■Journal,  84;   15  flnrvard  haw  lirvicv:,  26. 


I.    2.]  NEGOTIABLE  INSTRUMENTS   LAW.  .11 

eupplementary  note  by  Professor  Ames  criticising  two  additional  sec- 
tions of  the  act  —  a  reply  thereto  by  Judge  Brewster,  and  a  letter 
containing  comments  on  some  points  of  the  discussion  by  Mr.  Arthur 
Cohen,  Q.  C,  a  member  of  the  committee  which  framed  the  English 
act,  who  was  recommended  by  Judge  Chalmers  as  one  of  the  three 
best  authorities  in  England  on  the  law  of  bills  and  notes.- 

As  Judge  Brewster  remarks,  "  No  keener  weapon  than  that  wielded 
by  the  accomplished  Dean  of  the  Harvard  Law  School  could  be  turned 
against  the  Negotiable  Instruments  Law."  Professor  Ames  knows 
more  about  the  law  of  bills  and  notes  from  the  student's  standpoint 
than  any  one  else  in  this  country.  Whatever  one's  conclusions  may 
be  as  to  the  soundness  of  his  criticisms,  there  is  little  doubt  that  few, 
if  any,  of  the  vulnerable  points  in  the  act  have  escaped  his  notice,  and 
that  the  sections  he  criticises  are  those  most  likely  to  come  up  for 
construction.  A  familiarity  with  his  criticisms  and  with  Judge 
Brewster's  replies  cannot  but  aid  both  the  bench  and  bar  in  giving 
some  sections  of  the  act  their  proper  meaning.  This  consideration, 
together  with  the  difficulty  of  understanding  the  discussion  in  its 
present  form,  where  the  criticism  of  each  section,  the  answer,  replica- 
tion and  rejoinder  are  spread  out  through  four  separate  articles,  has 
prompted  me  to  write  a  review  of  the  controversy. 

Two  general  observations  may  be  made,  which  should  be  borne  in 

2  The  articles  contained  in  the  pamphlet  referred  to,  together  with  Mr. 
McKeehan's  "  Review  of  the  Ames-Brew ster  Controversy,"  are  reprinted  in 
Professor  .J.  D.  Brannan's  work  on  the  Negotiable  Instruments  Law,  published 
by  the  Harvard  Law  Review  Association  in   190R. 

See  also  "The  Negotiable  Instruments  Law,  a  Reply  to  the  Criticisms  of 
James  Barr  Ames,"  by  John  Lawrence  Farrell,  of  the  New  York  bar,  in  The 
Brief  of  Phi  Delta  Phi,  Vol.  III.,  No.  2,  First  Quarter,  1901;  and  "The 
Negotiable  Instruments  Law:  Its  History  and  Practical  Operation,"  by  Amasa 
M.  Eaton,  in  Tlie  Michigan  Law  Review,  Vol.  II.,  No.  4,  January,  1904. 

See  the  article  by  Professor  .Julian  W.  Mack  in  1  111.  Law  Rev.  592  (April, 
1907),  entitled  "Some  suggestions  on  the  proposal  to  enact  the  '  T'niform 
Negotiable  Instruments  Law  '  in  Illinois,"  advocating  certain  changes  from 
the  Act  as  drafted  by  the  Commissioners  on  Uniformity  of  Laws.  This  article 
should  be  read  in  connection  with  the  articles  on  the  "  Ames-Brewster  Con- 
troverny  "  because  as  Professor  Mack  says  (p.  005),  "Many  of  the  changes 
advocated  in  the  foregoing  suggestions  are  taken  from  Professor  Ames'  articles. 
The  reasons  in  support  f)f  them  will  be  fotirid  therein  and  in  Mr.  McKeehan's 
pamphlet."  Most  of  these  proposod  changes  were  adopted  by  the  Illinois 
legislature  in  enacting  the  Law  in  that  state.  See  the  very  instructive  article 
written  by  Professor  L.  M.  (Jreelcy  shortly  after  the  passage  of  tin-  Illinois 
act  in  2  III.  I^aw  Rev.  145  ( October,  1907),  explaining  the  new  act  and  point- 
ing out  the  changes  it  efTectcd  in  the  prior  law,  and  Professor  Mack's  com- 
ments on  this  article  in  2  III.  Law  Rev.  205.  —  C. 


12  CODES.  [art.   I. 

mind  throughout  the  entire  discussion.  In  the  first  place,  no  one  can 
judge  the  new  act  fairly  who  does  not  realize  that  the  CommisBioners 
were  attompting  to  codifu  \hc  l;i\v.'  Tlieir  aim  was  not  to  reform  the 
law  of  negotiable  paper.  Il  u;is  to  state  accurately  and  concisely  the 
existing  law.  Of  court>e,  liere  and  there  it  was  necessary  to  choose 
between  two  or  more  eonllictiiig  views.  Very  frequently  a  section 
changes  tiie  law  in  a  small  luinorily  of  states  which  had  departed  from 
the  almost  uniform  current  of  authority.  Occasionally,  though  very 
rarely  and  only  when  there  seemed  to  be  no  room  for  a  diirerence  of 
opinion,  tlie  law  was  deliberately  changed.  But  the  main,  and  almost 
the  sole  purpose  of  the  framers  of  the  Negotiable  Instruments  Law 
was  to  reproduce,  as  exactly  as  possible,  that  which  the  great  weight  of 
authority  had  declared  to  be  the  law. 

Second,  in  interpreting  some  sections  of  the  act,  the  language  used 
must  be  given  not  a  hyper-literal  meaning,  but  a  reasonable  legal 
meaning,  derived,  to  some  extent,  from  a  knowledge  of  the  cases  on 
which  the  sections  are  based.  It  would  be  a  great  achievement  for  a 
code  to  state  the  law,  in  every  instance,  in  language  capable  of  mean- 
ing only  one  thing,  even  to  a  man  entirely  without  legal  training  and 
unacquainted  with  what  the  law  was  before  the  code.  But  it  will  be 
a  long  time  before  such  a  code  is  framed.  Of  course,  in  the  great  ma- 
jority of  instances  the  Negotiable  Instruments  Law  does  this.  But 
it  is  not  a  serious  reflection  on  the  act  that  in  some  instances  a 
familiarity  with  the  cases  on  which  the  language  of  the  act  is  based, 
is  —  if  not  necessary  —  at  least  very  helpful  in  deciding  what  the 
language  means.  Indeed,  Judge  Brewster  said  to  the  American  Bar 
Association,  in  discussing  the  new  act  in  1898,  "  Care  has  been  taken 
to  preserve,  as  far  as  possible,  the  use  of  words  which  have  had  repeated 
construction  by  the  courts,  and  have  become  recognized  terms  in  the 
law  merchant." 

"With  these  observations  we  may  proceed  to  consider  the  discussion  of 
particular  sections.* 


3  The  discussion  between  Professor  Ames  and  Judge  Brewster  makes  no 
attempt  to  take  up  the  broad  question  as  to  tlie  propriety  and  utility  of 
codification.  For  a  most  Icnrnod  and  able  argument  against  codification,  the 
reader  may  be  referred  to  n  book  by  R.  F.  rbarke.  Esq.,  of  the  New  York  bar. 
entitlofi  "The  Srience  of  Law,  and  T>aw  Making."  The  arguments  in  favor  of 
at  least  a  partial  codification  of  such  a  branch  of  the  law  as  that  relating  to 
commercial  paper  are  concisely  stated  by  Judge  Brewster  in  a  paper  rc-ad 
before  the  American  Bar  Association  in  1808  on  "Uniform  State  Laws," 
which  is  reprinted  in  the  report  of  the  Ninth  Tonference  of  the  Commissioners 
for  Promoting  T'niformitv  of  TvOcriBlation  in  the  T^nited   States. 

*  A  few  extracts  from  Mr.  McKeehan's  article,  discussing  certain  sections  of 
the  Negotiable  Instruments  Law,  will  be  found  hereinafter  printed,  —  C, 


i-  3.]  continental   codes.  13 

3.  Continental  Codes. 
Chalmers'  Digest  of  the  Law  of  Bills  of  Exchange,  etc. 

[From  the  Introduction  to  the  Third  Edition.] 

The  French  Code  ^  is  of  particular  interest.  Althoue;h  enacted 
more  than  eighty  years  ago,  no  substantial  alteration  has  been  made 
in  it  by  subsequent  legislation.  For  many  years  it  was  the  model  of 
nearly  all  the  Continental  Codes.  For  instance,  the  Belgian  Code 
de  Commerce  of  1872  enacted  for  Belgium  the  provisions  of  the 
French  Code  regarding  bills  and  notes,  with  a  few  slight  modifica- 
tions borrowed  from  Cermany,  and  the  addition  of  three  or  four 
articles  which  embodied  the  result  of  French  judicial  decisions  on 
the  construction  of  the  Code.  Of  late  3'ears,  however,  there  has  been 
a  tendency  to  adopt  the  somewhat  wider  provisions  of  the  German 
Exchange  Law.  Until  1883  the  Italian  Commercial  Code  was  closely 
modeled  on  the  French,  but  the  new  Italian  Code  which  came  into 
force  in  1883  has  departed  from  the  French  model  as  regards  bills 
and  notes,  and  has  substantially  adopted  the  provisions  of  the  German 
Flxrhange  Law\  Again,  the  Portuguese  Code  of  1833  was  mainly 
founded  on  the  French  Code.  But  the  Code  of  1888  in  many  respects 
departs  from  the  French  model,  and  has  in  the  main  followed  the 
German  Exchange  Law,  though  a  few  provisions  seemed  to  be  bor- 
rowed from  the  English  Act.  T  believe  the  Hungarian  Code  of  1875, 
the  Scandinavian  laws  of  1880,  the  Swiss  law  of  1881,  and  the  Span- 
ish Code  of  1885  have  also  departed  from  the  French  idea  and  fol- 
lowed the  German  lead.  French  law  is  worthy  of  attention  in  another 
respect.  In  the  absence  of  English  authority,  our  Courts  have,  in 
some  instances,  consciously  taken  it  as  their  guide.  (See  per  Parke,  B., 
in  F\jster  v.  Dawhrr,  fi  Exch.  852.)  The  "Code  de  Commerce,"  to  a 
great  extent,  embodies  and  enacts  the  opinions  of  Pothier,  whose 
authority,  says  Best,  C.  J.  (in  Cox  v.  Troy,  5  B.  &  Aid.  481),  "  is  as 
high  as  can  be  had  next  to  the  decision  of  a  Court  of  Justice  in  this 
country."  On  doubtful  points  not  dealt  with  by  the  Code,  reference 
is  occasionly  made  to  Pothier,  and  also  to  the  exhaustive  treatise  of 
M.  Nouguier  (Des  Lett  res  de  Change  et  des  Effets  de  Commerce,  4th 
I'd.  1875),  which  gives  the  latest  results  of  French  law. 

The  German  fJeneral  Exchange  Law  of  1810  (slightly  modified, 
1869),  is  important  in  two  respects.  First,  it  is  the  most  elaborate 
and  carefully  worked  out  of  the  foreign  codes,  and  it  appears  to  be 
the  model  to  which  the  other  continental  states  (with  the  exception  of 
France)  are  now  assimilating  their  laws.    Secondly,  it  is  an  interna- 


«  r'oflf  Hr  r'nmmorrp.  1807.  This  \^  availn))|p  in  tranfilntion  in  n  work  by  L. 
Goiraud  on  the  French  Code  of  Cornrriprcc,  London,  1880.  Articles  110-189  deal 
with  bills  and  notes.    Checks  are  dealt  with  in  separate  Acts  (1865  &  1874). —  EL 


14  CODES.  [art.    I. 

tidiial  and  not  merely  a  national  Code.  All  the  uerman  States, 
iiU'huliiiL:  Austria,  have  adopti'd  i(,  and  the  tornis  of  its  adoption  are 
these:  Kiwh  Stato  is  at  lihcrty  to  supplement  it  by  additional  laws 
of  its  own,  hut  siuli  laws  arc  iKtt  in  any  way  to  contradict  or  over- 
ride it.  M.  Nongiiicr.  in  (lie  wurk  al)Ove  referred  to,  gives  in  French 
the  text  of  the  I'^iliamrc  I, aw.  and  also  the 'Various  supplementary 
laws  passed  hy  the  diU'crcnt  States." 

It  would  probably  be  vciy  a(l\aiitageous  to  the  commercial  world 
if  this  principle  (^f  an  Interna (ioiial  Code  could  be  further  extended. 
The  difliculties  of  carrying  it  out  do  not  seem  insuperable,  though, 
doubtless,  they  would  be  great.  The  provisions  of  such  a  Code 
would  have  to  be  settled  by  agreement,  and  then  each  State  would 
enact  it  for  its  own  territory.  In  the  case  of  England  it  would 
probably  be  necessary  to  confine  its  operation  to  foreign  bills,  that 
is  to  say,  to  bills  drawn  or  payable  abroad.  Our  law,  as  regards 
foreign  bills,  does  not  widely  diverge  from  the  law  of  other  com- 
mercial countries,  and  it  diverges  chiefly  by  allowing  greater  latitude 
than  is  adopted  in  practice. 

Occasional  reference  is  also  made  to  the  Indian  Code  (Act  XXVI, 
of  1881,  as  amended  by  Act  II  of  1885)  which  in  sid)stance  reproduces, 
the  English  law  as  it  stood  in  1881.  In  a  work  like  the  present,  it  is 
thought  it  would  be  waste  of  space  to  carry  references  to  foreign 
laws  or  authorities  any  further,  but  it  may  be  worth  while  to  mention 
where  they  can  be  found. 

Borchardt  ( Vollstandige  Sammlung  der  geltenden  Wechsel-und 
Handels  Gesetze  aller  Lander,  1871),  collects  the  statutory  enact- 
ments of  all  countries  relating  to  Bills  of  Exchange.  Part  I  gives  a 
German  translation,  Part  II  the  original  text.  More  than  forty 
countries  have  codified  their  law  on  this  subject;  in  fact,  some  Eng- 
lish colonies  and  the  United  States  seem  to  be  the  only  civilized 
nations  which  have  not  done  so.  Since  Borchardt's  work  was  pub- 
lished, however,  several  continental  states  have  re-cast  their  laws 
relating  to  negotiable  instruments.  A  new  Commercial  Code  has 
been  enacted  for  the  Netherlands,  and  an  official  translation  of  the 
part  relating  to  negotiable  instruments  has  been  published  in  England. 
[See  Commercial,  No.  30,  of  1880,  c.  2609.1  M.  Nouguier,  in  a 
supplementary  chapter  to  his  work  on  Bills  (Des  Lettres  de  Change, 
1875),  compares  the  laws  of  the  chief  commercial  nations  with  the 
French  Code.  The  Comite  de  Legislation  Etrangere,  under  the 
direction  of  the  French  Ministry  of  Justice,  are  preparing  cheap 
French  translations  of  the  various  foreign  laws  relating  to  commercial 
matters.     Several   volumes  have  already  been  published   with  excel- 


«See  Art.  by  E.  Schuster  on  the  German  Civil  Code,  12  Law  Q.  R.  (1896), 
17.  — H. 


III.    l.J  HISTORY    OF   THE    LAW    MERCHANT.  Of 

lent  introductions  and  notes.  Having  regard  to  our  own  insular 
isolation,  1  fear  it  will  be  long  before  any  English  government  de- 
partment undertakes  similar  useful  work.  M.  Masse's  "  Droit  Com- 
mercial et  des  Gens  "  is  a  valuable  work  on  the  conflict  of  laws,  es- 
pecially as  regards  bills. 


II.  Construction  of  codifying  statutes, 

BANK  OF  ENGLAND  v.  VAGLIANO  BROTHERS. 

[Reported  herein  at  p.  125.] 


m.  The  law  merchant. 

I.  The  Law  Merchant  and  its  History. 

The  Elements  of  Mercantile  Law.     By  Thomas  Edwabd  Scbutton. 

London,  1891. 

[From  Chapter  /.] 

(Books  recommended. —  The  best,  and  almost  the  only  satisfactory 
sketch  of  the  history  of  the  Law  Merchant  with  which  I  am  ac- 
quainted, is  the  introduction  prefixed  by  Master  Macdonell  to  the 
tenth  edition  of  Smith's  Mercantile  Law.  See  also  the  Prefaces  to 
Chalmers  on  Bills  of  Exchange,  and  Lowndes  on  Marine  Insurance; 
and  Scrutton  on  the  Influence  of  the  Roman  Law  on  the  Law  of 
England,  chapters  xiii,  xiv.l 

T. 

The  fact  that  so  wide  a  meaning  is  given  *  *  *  to  the  term 
"  Common  Law,"  may  properly  call  your  attenfion  to  the  different 
meanings  that  the  term  "Common  Law,"  itself  has.  In  the  first  place 
"Common  Law"  is  used  in  distinction  to  "Equity."  The  Common 
Law  alone  was  administered  by  the  King's  Courts  in  this  country,  and 
suitors  who  complained  of  the  rules  of  the  law  addressed  petitions 
to  the  King,  as  the  fountain  of  justice,  asking  for  "  Equity."  The 
King,  if  he  had  time  or  inclination,  dealt  with  these  petitions  him- 
self; but  when,  as  generally  happened,  he  hnd  not  time  or  inclina- 
tion, he  referred  them  to  his  Chancellor,  ;ind  the  (^Ihancellor  dealt 
out  "Equity"  to  petitioners  injured  by  the  stringent  rules  of  the 
Common  Law.  The  Equity  administered  at  first  was  variable;  as 
Selden  said,  it  "  varied  with  the  length  of  the  Chancellor's  foot," 
but  by  degrees  Equity  itself  came  to  settle  down  to  rigid  rules,  until 
with  the  same  case  you  might  know  beforehand  that  you  would  be 
successful  on  the  Common  Law  side  of  Westminster  Hall  and  unsuo- 


16  THE    1-AW    MERCHANT.  [aRT.    I. 

co?sful  on  tlic  Equity  side.  At  last  under  the  Judicature  Acf 
tlu"  ruU's  of  Iviuity  provaiUHJ  over  tlie  rules  of  Conuuon  Law,  and 
tlio  (lislinetion  heianic  abolished  execpt  in  as  far  as  certain  sub- 
jects were  assigned  to  the  Court  of  Chancery,  and  that  certain  sub- 
jects were  assicfiied  to  the  Quc(^n's  Bench  Division. 

.\  second  nieaninur  of  the  term  '' Conunon  Law"  is  when  it  is  used 
in  opposition  to  "  Statute  Law."  In  that  sense  Common  Law  is  the 
unwritten  law  of  the  kinf^dom  which  exists  in  grcmio  Icgis,  in  the 
bosom  of  the  judfies,  which  they  brin^  forth  fiom  (hat  mysterious 
recess  when  new  points  have  to  he  dealt  with ;  while  the  Statute 
Law  is  the  written  law  of  the  kinfjdom  as  it  has  been  laid  down  by 
the  Legislature  in  Acts  of  Parliament. 

Another  sense  in  which  the  term  "  Common  Law  "  is  used  is  when 
it  is  distinguished  from  the  "  Civil  Law,"  and  in  that  sense  the 
Common  Law  is  the  law  of  England;  the  Civil  Law  is  the  law  of 
those  countries  who  have  founded  their  system  upon  the  Roman 
Law.  For  instance,  if  you  go  north  of  the  Border  to  Scotland,  you 
find  a  system  administered  dilifering  from  the  Law  of  England,  and 
founded  upon  the  Civil  T^aw.  If  you  cross  the  Atlantic  to  the 
United  States  you  find  the  States  in  the  North,  such  as  Massachu- 
setts, administering  a  system  founded  on  Common  Law;  and  if  you 
go  to  Louisiana,  in  the  South,  you  find  a  system  founded  on  the  old 
Roman  I^aw,  and  known  as  a  Civil  Law  system. 

II. 

There  was  yet  another  distinction  which  leads  me  to  the  subject 
of  this  course  of  lectures.  If  you  read  the  law  reports  of  the  seven- 
.  teenth  century  you  will  be  struck  with  one  very  remarkable  fact; 
either  Englishmen  of  that  day  did  not  engage  in  commerce,  or  they 
appear  not  to  have  been  litigious  people  in  commercial  matters,  each 
of  which  alternatives  appears  improbable.  But  it  is  a  curious  fact 
that  one  finds  in  the  reports  of  that  century,  two  hundred  years  ago, 
hardly  any  commercial  cases.  If  one  looks  up  the  Law  of  Bills  of 
Exchange,  "  the  cases  on  the  subject  are  comparatively  few  and 
unimportant  till  the  time  of  Lord  Mansfield."  ^  If  you  turn  to 
Policies  of  Insurance,  and  to  the  work  of  Mr.  Justice  Park  on  the 
subject  published  at  the  beginning  of  this  century,  you  find  him 
saying:  "I  am  sure  I  rather  go  beyond  bounds  if  I  assert  that  in  all 
our  reports  from  the  reign  of  Queen  Elizabeth  to  the  year  17r)6 
when  Lord  Mansfield  became  Chief  Justice  of  the  King's  Bench, 
there  are  sixty  cases  upon  matters  of  insurance."  ®      If  you  come 

7  3fi  and  37  Vic.  c.  66,  §  5,  ss.  11. 

8  Chalmers.  Rills,  Pref.  p.  36. 
8  Park,  I.  Pref.  43. 


111.    l.J  HISTOKY  OF  THE  LAW   MERCHANT.  17 

to  Charter  Parties  and  Bills  of  Lading,  which  have  always  been 
productive  of  litigation,  you  find  Sir  John  Davies  in  the  seventeenth 
century  saying  that  "  until  he  understood  the  ditference  between 
the  Law  of  ^Jerchants  and  the  Common  Law  of  England,  he  did  not 
a  litth'  marvel  what  should  be  the  cause  that  in  the  books  of  the 
Common  Law  of  England  there  should  be  found  so  few  cases  con- 
cei-ning  merchants  and  ship?,  but  now  the  reason  was  apparent,  for 
that  the  Common  Law  did  leave  these  cases  to  be  ruled  by  another 
l.iw,  the  Law  ^fcrchant,  which  is  a  branch  of  the  Law  of  Nations."  ^ 
The  reason  why  th.ere  were  hardly  any  cases  dealing  with  com- 
mercinl  matters  in  tlie  Reports  of  the  Common  Law  Courts  is  that 
such  cases  were  dealt  with  by  special  Courts  and  under  a  special  law. 
That  hiw  was  an  old  established  law  and  largely  based  on  mercantile 
customs.  Ccrard  ^lalyncs,  who  wrote  the  first  work  on  the  Mer- 
chant Law  in  England,  called  his  book,  published  in  1632,  "  Consue- 
tudo  vcl  Lex  ifrrcnton'a,"  or  the  Ancient  Law  Merchant;  and  he  said 
in  liis  preface:  "I  have  entituled  the  book  according  to  the  ancient 
name  of  Lex  Mercatoria  and  not  Jns  Mercaiomm,  because  it  is  a 
customary  law  approved  by  the  authority  of  all  kingdoms  and  com- 
mon weales,  and  not  a  law  established  by  the  sovereignty  of  any 
prince."  And  Blackstone,  in  the  middle  of  the  last  century,  says: 
*' Tlie  affairs  of  commerce  are  regulated  by  a  law  of  their  own 
calh'd  the  Law  Merchant  or  Lex  Mercntoria,  which  all  nations  agree 
in  and  take  notice  of,  and  it  is  particularly  held  to  be  a  part  of  the 
law  of  England  which  decides  the  causes  of  merchants  by  the  gen- 
eral rules  which  obtain  in  all  commercial  countries,  and  that  often  even 
in  matters  relating  to  domestic  trade,  as  for  instance,  in  the  draw- 
ing, tlie  acceptance,  and  tlic  transfer  of  P)ills  of  Exchange."^ 
Later  tb.an  Blackstone,  I.onl  Manslii'ld  lays  down  thai  ""Mercantile 
I>aw  is  not  the  law  of  a  particular  country,  l)u(  Ibc  law  of  all 
nations:"^  while  so  recently  as  1883  you  find  Lord  Blackburn 
saying  in  the  House  of  Lords  that  "the  general  Law  Merchant  for 
many  years  has  in  all  countries  caused  Bills  of  Exchange  to  be 
negotiable;  tliere  are  in  some  cn«es  ditTerences  and  peculiarities  wbicli 
hv  the  mimicipal  law  of  e;ieh  count ry  are  grafted  on  it,  Iml  the  gen- 
eral rules  of  the  Law   Merchant   are  the  same  in  all  countries."* 


Now   if  we   f(»llow  tlu'  growth  of  Ibis   Law   Merchant  or   Mercanlile 
Law,  which   was  two  hundred  years  ago  so  distinct  from  the  Com- 

1  Zoiich.  .Tiirisdictiori  of  tlic  Admiralty   (lOSf,).  p.  89. 

I  niark^tono.  CnnimpnlMric^.  T.  27.1;  TV.  07. 

»  liihr  V.  Lytic.  2  Hiirr.  nt  p.  K87. 

*  M'Lrun  V.  Clfidrndalr  Hunk,  !l  .\p[i.  ('.,  at  p.  105. 

KKGOT.  INBTROMENT8  —  2 


18  TllK    LAW     MKUCllANT.  [aUT.    1. 

nion  Law.  we  find  it  iu  Englaud  going  through  three  stages  of 
development.''  The  first  stage  may  be  fixed  as  ending  at  the 
appointment  of  Coke  as  Lord  Chief  Justice  iu  the  year  1606,  and 
before  that  lime  you  will  find  the  Law  Merchant  as  a  special  law 
administered  by  special  Courts  for  a  special  cla^^s  of  people. 

In  the  first  place  as  to  the  special  Courts.  The  greater  part  of  the 
foreign  trade  of  England,  and  indeed  of  the  whole  of  Europe  at  that 
time,  was  conducted  in  the  great  fairs,  held  at  fixed  places  and  fixed 
times  in  each  year,  to  which  merchants  of  all  countries  came;  fairs 
very  similar  to  those  which  meet  every  year  at  the  present  time  at 
Novgorod  in  Russia,  and  at  other  places  in  the  East.  In  England, 
also,  there  were  then  the  great  fairs  of  Winchester  and  Stourbridge, 
and  the  fairs  of  Besangon  and  Lyons  in  France,  and  in  each  of  those 
fairs  a  court  sat  to  administer  speedy  justice  by  the  Law^  Merchant 
to  the  merchants  who  congregated  in  the  fairs,  and  in  case  of  doubt 
and  difficulty  to  have  that  law  declared  on  the  basis  of  mercantile 
customs  by  the  merchants  who  were  present.  You  will  find  tins 
Court  mentioned  in  the  old  English  law  books  as  the  Court  Pepoii- 
drous,  so  called  because  justice  was  administered  ''while  the  dusr, 
fell  from  the  feet,"  so  quick  were  the  Courts  supposed  to  be. 
"  This  Court  is  incident  to  every  fair  and  market  because  that  for 
contracts  and  injuries  done  concerning  the  fair  or  market  there  shall 
be  as  speedy  justice  done  for  advancement  of  trade  and  traffic  as 
the  dust  can  fall  from  the  feet,  the  proceeding  there  being  de  hora 
in  horam."  ®  Indeed,  so  far  back  as  Bracton  in  the  thirteenth 
century,  it  had  been  recognised  that  there  were  certain  classes  of 
people  "  who  ought  to  have  swift  justice,  such  as  merchants,  to 
whom  justice  is  given  in  the  Court  Pepoudrous."  "^  The  records 
of  these  Courts  are  few,  for  obviously  in  Courts  for  rapid  business 
law  reporters  were  rather  at  a  discount.  As  a  consequence,  "  there 
is  no  part  of  the  history  of  English  law  more  obscure  than  that  con- 
nected with  the  maxim  that  the  Law  Merchant  is  part  of  the  law  of 
the  land."  ®  We  are,  however,  fortunate  enough  to  have  one  or 
two  records  of  the  Courts  of  the  Fairs.  The  Selden  Society  has 
succeeded  in  unearthing  the  Abbott's  roll  of  the  fair  of  St.  Ives  held 
in  1275  and  1201,^  containing  a  series  of  cases  which  show  how 
the  merchants  administered  the  Law  Merchant  in  the  Courts  of  the 
fair,  and  why  such  cases  did  not  come  into  the  King's  Court.  For 
instance:  —  "Thomas,   of   Wells,   complains    of    Adam    Garsop    that 


sMacdonell,  Preface  to  Smith's  Mercantile  Law,  p.  82. 

« Coke,    Inst.    IV.    272.      ["  Pypovvder  "    courts    appurtenant    to    fairs    were 
authorized  in  New  York  in  1692.  —  1  Col.  Laws  (ed.  1894),  p.  298. —  H.] 
T  Bracton,  f.  3.34. 

■  Blackburn  on  Sale  1st  Ed.  p.  207. 
»  Selden  Society,  Vol.  II.  pp.  130  et  seq. 


III.    1.]  HISTORY   OF  THE  LAW    MERCHANT.  19 

he  unjustly  detains  and  deforces  from  him  a  coffer  which  the  said 
Adam  sold  to  him  on  Wednesday  next  after  Mid  Lent  last  past  for 
sixpence,  whereof  he  paid  to  the  said  Adam  twopence  and  a  drink 
in  advance" — (it  appears  to  have  been  a  very  good  mercantile  cus- 
tom, still  existing,  to  "  wet  a  bargain,"  and  the  drink  was  a  matter 
to  which  great  importance  was  attached  by  the  merchants  present)  ; 
"  and  on  the  Octave  of  Easter  came  and  would  have  paid  the  rest, 
but  the  said  Adam  would  not  receive  it  nor  answer  for  the  said  coffer, 
but  detained  it  unconditionally  to  his  damage  and  dishonour,  25., 
and  he  produces  suit.  The  said  Adam  is  present  and  does  not 
defend.  Therefore  let  him  make  satisfaction  to  the  said  Thomas 
and  be  in  mercy  for  the  unjust  detainer ;  fine  6d. ;  pledge  his  over- 
coat." The  next  defendant  was  not  so  fortunate  so  as  to  have  an  over- 
coat. "  Reginald  Picard  of  Stamford  came  and  confessed  by  his  own 
mouth  that  he  sold  to  Peter  Redhood  of  London  a  ring  of  brass  for 
5y2d.,  saying  that  the  said  ring  was  of  the  purest  gold,  and  that  he 
and  a  one-eyed  man  found  it  on  the  last  Sunday  in  the  churchyard 
of  St.  Ives,  near  the  cross."  (One  fancies  one  has  heard  that  tale 
about  the  brass  ring  before.)  "Therefore  it  is  considered  that  the 
said  Reginald  do  make  satisfaction  to  the  said  Peter  for  the  5i/<c/. 
and  be  in  mercy  for  the  trespass ;  he  is  poor ;  pledge  his  body." 
The  next  case  introduces  the  Law  Merchant.  "  Nicolas  Legge  com- 
plains of  Nicolas  of  Mildenhall  for  that  unjustly  he  impedes  him 
from  having,  according  to  the  usage  of  merchants,  part  in  a  certain 
ox  which  Nicolas  of  Mildenhall  bought  in  his  presence  in  the  village 
of  St.  Ives  on  Monday  last  past  to  his  damage  2s.,  whereas  he  was 
ready  to  pay  half  the  price,  which  price  was  2s.  C^d.  And  Nicolas  of 
Mildenhall  defends,  and  says  that  the  Law  IMerchant  does  well  allow 
that  every  merchant  may  participate  in  a  bargain  in  the  butcher's 
trade  if  he  claim  a  part  thereof  at  the  time  of  the  sale;  but  to  prove 
that  the  said  Nicolas  Legge  was  not  present  at  the  time  of  the  pur- 
chase nor  claimed  a  part  thereof  he  is  ready  to  make  law."  Then 
they  went  to  the  proof.  The  custom  of  the  Law  Merchant  relied 
on  admitted  any  merchant  standing  by  to  claim  a  share  in  any  bargain 
on  paying  a  share  of  the  price.  The  defence  is,  "  You  were  not 
there,  «jo  yon  cannot  claim."  The  next  and  last  ca.se  is  one  which 
puzzled  the  Court,  and  therefore  I  omit  the  details,  l)ut  it  is  recited 
in  the  Abbott's  roll :  "And  the  case  is  respited  till  it  shall  be  more 
thoroughly  discussed  by  the  merchants.  And  the  merchants  of  the 
various  commonalities  and  others  being  convoked  in  full  Court  it  is 
considered" — and  then  they  go  on  to  discuss  it.  TIktc  you  see 
the  Merchants'  f!ourt  at  work,  giving  f|uick  justice  in  all  mercantile 
disputes,  and  in  ca-ses  of  doubt  calling  upon  the  merchants  present 
to  declare  what  the  Law  Merchant  is.     So  much  for  the  fairs. 

In  most  seaport  towns  also  you  will   find  a  similar  Court  dealing 


20  THE    LAW     AlKiallAM'.  [AUT.    1. 

with  cases  arising  out  of  ships.  In  the  Doniosilay  Book  of  Ipswich  ' 
it  is  stated,  "  The  pleas  hetween  strange  folk  that  men  call  '  pypou- 
drous  '  sliould  be  pleaded  from  day  to  day.  The  pleas  in  time  of 
fair  between  stranger  and  passer  should  be  pleaded  from  hour  to 
hour,  as  well  in  the  forenoon  as  in  the  afternoon,  and  that  is  to  wit 
of  plaints  begun  in  the  same  time  of  fair,  and  the  pleas  given  to  the 
law  marine  for  strange  mariners  passing,  and  for  them  that  abide 
not  but  their  tide,  should  be  j)leaded  from  tide  to  tide."  Any  ship 
coming  into  the  port  of  Ipswich  with  a  dispute  about  its  Charter 
Party  or  Bill  of  Lading  may  get  summary  justice  at  once  from  this 
Court  at  Ipswich  between  tide  and  tide.  Stress  may  be  laid  on  the 
fact  that  the  Courts  sat  in  the  afternoon,  because  at  that  time  the 
King's  Courts  only  sat  from  eight  in  tiie  morning  till  eleven  and 
then  adjourned  for  the  rest  of  the  day.  "  For  in  the  afternoons 
these  Courts  are  not  holden.  But  the  suitors  then  resort  to  the  perus- 
ing of  their  writings,  and  elsewhere  consulting  with  the  sergeants- 
at-law  and  other  their  counsellors,"  -  so  that  the  time  taken  up  in 
consultation  by  the  Courts  in  London  was  taken  up  by  the  Courts 
at  Ipswich  in  dealing  summarily  with  cases,  and  letting  the  strange 
mariners  go  who  were  only  waiting  for  their  tide. 

There  were  special  Courts  by  statute,  of  which  a  number  of  "  grave 
and  discreet  merchants  "  were  necessary  members,  in  order  that  the 
Mercantile  Law  founded  on  the  custom  of  merchants  might  be  duly 
applied  to  the  case  before  them.^  The  law  which  these  Courts 
administered  was  wluit  was  called  by  mercluints  the  Law  Merchant 
and  Law  of  the  Sea,  and  it  was  common  to  nearly  every  European 
country.  Much  of  it  was  to  be  found  in  a  series  of  codes  of  Sea 
Laws,  such  as  the  Laws  of  Oleron  and  Wisbury,  and  the  Consolato 
del  Mare,  embodying  the  customs  and  practices  of  merchants  of 
different  countries,  and  it  was  not  the  Common  Law  of  England. 
Further,  it  was  only  for  a  particular  class.  You  had  to  show  your- 
self to  be  a  merchant  before  you  got  into  the  IMercantile  Court;  and 
until  about  two  hundred  years  ago  it  was  still  necessary  to  show 
yourself  to  be  a  merchant  in  the  Common  Law  Courts  before  you 
could  get  the  benefit  of  the  Law  Merchant.* 

IV. 

Now  the  second  stage  of  development  of  the  Law  Merchant  may 
be  dated  from  Lord  Coke's  taking  office  in  1G06,  and  lasts  until  the 

1  Black  Book  of  Admiralty,  Rolls  Series,  IT.  23. 

2  Sir  .J.  Fortescue. 

3  E.  g.  the  Court  established  by  43  Eliz.  c.  12,  of  which  eight  "grave  and 
discreet  merchants  "  were  to  be  members,  who  were  to  determine  all  insurance 
cases  in  a  brief  and  summary  course,  without  formalities  of  pleadings  or 
proceedings. 

*  Vide  post,  pp.  29,  30.     [Herein  at  p.  27.  — H.] 


III.    1.]  HISTORY  OF  THE  LAW  MERCHANT.  21 

time  when  Lord  Mansfield  became  Chief  Justice  in  1756,  and  during 
that  time  the  peculiarity  of  its  development  is  this:  That  the  special 
Courts  die  out,  and  the  Law  Merchant  is  administered  by  the  King's 
Courts  of  Common  Law,  but  it  is  administered  as  a  custom  and  not 
as  law,  and  at  first  the  custom  only  applies  if  the  plaintiff  or  defend- 
ant is  proved  to  be  a  merchant.  In  every  action  on  a  Bill  of 
Exchange  it  was  necessary  formally  to  plead  "secundum  usum  et 
consuetudim-m  ^fercatorum  " — according  to  the  use  and  custom  of 
merchants ; ''  and  it  was  sometimes  pleaded  that  the  plaintiff  was 
not  a  merchant  but  a  gentleman."  And  as  the  Law  Merchant  was 
considered' as  custom,  it  was  the  habit  to  leave  the  custom  and  the 
facts  to  the  jury  without  any  directions  in  point  of  law,  with  a  result 
that  cases  were  rarely  reported  as  laying  down  any  particular  rule, 
because  it  was  almost  impossible  to  separate  the  custom  from  the 
facts :  as  a  result  little  was  done  towards  building  up  any  system  of 
Mercantile  Law  in  England. 

V. 

The  construction  of  that  system  began  with  the  accession  of 
Lord  Mansfield  to  the  Chief  Justiceship  of  the  King's  Bench  in 
1756,  and  the  result  of  his  administration  of  the  law  in  the  Court 
for  thirty  years  was  to  build  up  a  system  of  law  as  part  of  the 
Common  Law,  embodying  and  giving  form  to  the  existing  cus- 
toms of  merchants.  When  he  retired  after  his  thirty  years  of 
office,  Mr.  Justice  Buller  paid  a  great  tribute  to  the  service  that 
he  had  done.  In  giving  judgment  in  Lickharrow  v.  Mason,''  he 
said:  "Thus  the  matter  stood  till  within  these  thirty  years.  Since 
that  time  the  Commercial  Law  of  this  country  has  taken  a  very 
different  turn  from  what  it  did  before.  Lord  Ilardwicke  himself 
was  proceeding  with  great  caution,  not  establishing  any  general 
principli',  but  decreeing  on  all  the  circumstances  put  together. 
Before  that  period  we  find  in  Courts  of  Law  all  the  evidence  in  mer- 
cantile cases  was  thrown  together;  they  were  left  generally  to  the 
jury,  and  they  produced  no  established  principle.  From  that  time 
we  all  know  the  great  study  has  been  to  find  some  certain  general 
principle,  not  only  to  rule  tlic!  particular  case  under  consideration, 
but  to  serve  as  a  guide  for  the  future.  Most  of  us  have  heard  those 
principles  stated,  reasoned  upon,  enlarged,  and  explained  till  we 
have  been  lost  in  admiration  at  the  strength  and  stretch  of  the  human 
understanding,  and  I  should  bf  sorry  to  find  myself  under  the 
necessity  of  differing  from  Lord  Mansfield,  who  may  truly  be  said  to 


•Chalmers.   Rillfl,   Pn-f.  44. 

•Cf.  Harsfield  v.   Withcrby   (1692),  Carthew,  82. 

T  2  T.  R.  73. 


22  THK    LAW     MKRCHANT.  [aRT.    I. 

1)0  the  foumlor  of  the  (-'oiuiuercial  Law  of  this  country. "  Lord 
Maustield,  with  a  Scotch  training,  was  not  too  favourable  to  the 
CVtnunon  Law  of  England,  and  he  derived  many  of  the  principles  of 
Mercantile  Law,  that  he  laid  down,  from  the  writings  of  foreign 
jurists,  as  embodying  the  custom  of  merchants  all  over  Europe.  For 
instance,  in  his  great  judgment  in  Luke  v.  Lyde,^  which  raised  a 
i]uestion  of  the  freight  due  for  goods  lost  at  sea,  he  cited  the  Koman 
Pandects,  the  Consolato  del  i\Iare,  laws  of  Wisbury  and  Oleron,  two 
English  and  two  foreign  mercantile  writers,  and  the  French  Ordon- 
nances,  and  deduced  from  them  the  principle  which  has  since  been 
part  of  the  Law  of  England.^  While  he  obtained  his  legal  princi- 
ples from  those  sources,  he  took  his  customs  of  trade  and  his  facts 
from  Mercantile  Special  Juries,  w^hom  he  very  carefully  directed  on 
the  law ;  and  Lord  Campbell,  in  his  life  of  Lord  Mansfield,  has  left 
an  account  of  Lord  Mansfield's  procedure.  He  says :  ^  "  Lord 
Mansfield  reared  a  body  of  special  jurymen  at  Cluildhall,  who  were 
generally  returned  on  all  commercial  cases  to  be  tried  there.  He 
was  on  terms  of  the  most  familiar  intercourse  with  them,  not  only 
conversing  freely  wnth  them  in  Court,  but  inviting  them  to  dine  with 
him.  From  them  he  learned  the  usages  of  trade,  and  in  return  he 
took  great  pains  in  explaining  to  them  the  principles  of  jurispru- 
dence by  which  they  were  to  be  guided.  Several  of  these  gentle- 
men survived  when  I  began  to  attend  Guildhall  as  a  student,  and 
were  designated  and  honoured  as  '  Lord  Mansfield's  jurymen.'  One 
in  particular  I  remember,  Mr.  Edward  Vaux,  who  always  wore  a 
cocked  hat,  and  had  almost  as  much  authority  as  the  Lord  Chief 
Justice  himself." 

Since  the  time  of  Lord  Mansfield  other  judges  have  carried  on  the 
work  that  he  began,  notably  Abbott,  Lord  Chief  Justice,  afterwards 
Lord  Tenterden,  the  author  of  "  Abbott  on  Shipping,"  Mr.  Justice 
Lawrence,  and  the  late  Mr.  Justice  Willes ;  and  as  the  result  of 
their  labours  the  English  Law  is  now  provided  with  a  fairly  complete 
code  of  mercantile  rules,  and  is  consequently  inclined  to  disregard 
the  practice  of  other  countries.  Tn  Lord  Mansfield's  time  it  would 
have  been  a  strong  argument  to  urge  that  all  other  countries  had 
adopted  a  particular  rule;  at  the  present  time  English  Courts  are 
not  alarmed  by  the  fact  that  the  law  they  administer  differs  from 
the  law  of  other  countries.  Tn  a  recent  case  before  the  Court  of 
Appeal,    Lord    Esher    says:'      "It    was    urged    that    even    if    the 

8  2  Burr.  88.3. 

9  CI.  the  judgment  of  Willes,  J.,  in  Dakin  v.  Oxlcy,  1.5  C.  B.  N.  S.  646,  for 
similar   authorities. 

1  Campbell's   Lives   of   the   Lord    Chief   .Justices,    II.    407,    note. 

2  Svendsen  v.  Wallace,  1.3  Q.  B.  D.  73,  cf.  per  Willes,  .1.  in  Lloyd  v.  Guibert, 
L.  R.  1  Q.  B.  119,  123. 


III.    1.]  HISTORY  OP  THE   LAW   MERCHANT.  23 

proposition  is  stated  in  terms  larger  than  have  hitherto  been  recog- 
nised in  English  Law,  yet  it  ought  now  to  be  adopted  in  order  to 
bring  the  principle  of  English  Law  on  the  subject  into  consonance 
with  the  laws  -of  all  other  countries.  But  to  this  I  cannot  agree. 
It  is  useless  to  inquire  whether  the  law  is,  as  stated,  the  same  in  all 
European  countries.  For  if  it  is,  yet  no  English  Court  has  any 
mission  to  adapt  the  Law  of  England  to  the  laws  of  other  countries; 
it  has  authority  only  to  declare  what  the  Law  of  England  is."  Lord 
Mansfield  would  have  found  out  what  the  Law  of  England  in  mer- 
cantile matters  was  by  considering  what  was  the  law  of  other 
countries,  if  there  was  no  English  decision  laying  down  any  clear 
rule.  The  Courts  of  the  present  day  in  the  wealth  of  English  com- 
mercial law,  feel  entitled  to  disregard  the  law  of  other  countries. 

VI. 

Further  than  this,  the  Law  Merchant,  which  was  originally  based 
upon  the  usage  of  merchants,  can  now  be  extended  by  new  usages 
which  have  sprung  up,  may  be  constantly  added  to  by  proof  of  fresh 
usages  of  the  mercantile  world.  That  is  very  clearly  and  strongly 
laid  down  in  the  case  of  Goodtvin  v.  Roharts.^  It  was  a  case 
involving  the  question  whether  a  particular  form  of  debenture  scrip 
was  negotiable,  and  it  was  alleged  that  by  the  custom  of  merchants 
it  had  been  so  for  the  last  twenty  years.  It  was  answered  to  that, 
relying  upon  the  judgment  of  Mr.  Justice  Blackburn,*  that  no 
addition  could  be  made  to  the  Law  Merchant  by  so  recent  a  usage 
as  twenty  years,  but  that  it  must  be  shown  to  be  part  of  the  ancient 
Law  Merchant;  but  Chief  Justice  Cockburn,  in  delivering  the  judg- 
ment of  the  Court  of  Exchequer  Cliamber  in  Goodwin  v.  Rohnrls,  said: 
"  Having  given  the  fullest  consideration  to  this  argument,  we  are  of 
opinion  that  it  cannot  prevail.  It  is  founded  on  the  view  that  the  Law 
Merchant  is  fixed  and  stereotyped,  and  incapable  of  being  enlarged 
80  as  to  meet  the  wants  and  requirements  of  trade  in  the  varying 
circumstances  of  commerce.  It  is  true  that  I^aw  Merchant  is  sotno- 
times  spoken  of  as  a  fixed  body  of  law  forming  part  of  the  law,  and, 
as  it  were,  coeval  wiOi  il.  \)u\  as  a  niallcr  of  legal  hislory  Ibis  view 
is  altogether  incorrect.  *  *  *  q^l,,.  i^.,\v  Merchant  is  of  com- 
paratively recent  origin:  it  is  neither  more  or  less  than  the  usages 
of  merchants  and  traders  in  the  different  departments  of  trade  rati- 
fied by  the  derisions  of  the  Courts  of  Law,  which,  upon  suc\\  usages 
being  proven  before  tbcni.  havr'  ailo|)tef]  tliem  as  settled  law  with 
a  view  to  the  interests  of  trade  aiui  public  convenience,  the  Court 
proceeding    herein    on    the    well-known    principle    of    law    that,    with 


«L.   R.    10   Ex.  .340.  3.52. 

♦  Crouch  V.  Credit  Fonder,  L.  H.  8  Q.  Ji.  386. 


24  THE    LAW    MEUCUANT.  [aUT.    I. 

rcspirt  to  transactions  in  the  diireieut  departments  of  trade,  Courts 
of  l^aw,  in  giving  ell'eet  to  the  eontraets  and  dealings  of  the  parties, 
will  assume  that  the  latter  liave  dealt  with  one  another  on  the  foot- 
ing of  any  custom  or  usage  prevailing  in  that  particular  department." 
Thus  it  is  that  Courts  of  Law  continually  take  notice  of  customs  of 
trade,  only  to  the  word  "  customs  "  they  give  a  much  wider  meaning 
than  it  bears  in  the  Common  Law.  A  well-known  lawyer  said  rather 
cynically  once  that  he  had  heard  a  good  many  customs  found  by 
juries,  but  he  had  never  heard  one  proved  yet;  and  it  is  so  that  the 
evidence  on  which  a  mercantile  jury,  who  know  a  great  deal  more 
about  the  matter  than  the  lawyers  or  witnesses,  very  often  will  find 
that  a  custom  exists,  is  such  as  would  not  suffice  to  establish  any 
custom  under  the  strict  rules  of  the  Common  Law. 

For  according  to  the  Common  TjHw  a  custom  must  have  six  attri- 
butes. In  the  first  place  it  must  date  from  time  immemorial,  which 
has  been  conveniently  fixed  by  the  Common  Law  as  when  our  Lord 
Richard  returned  from  Palestine,  in  1189.  Now,  obviously,  when 
our  Lord  Richard  returned  from  Palestine,  the  amount  of  mercantile 
custom  existing  in  England  was  of  the  very  slightest  description, 
and  if  one  is  to  trace  all  one's  mercantile  customs  back  to  his  return 
from  Palestine,  or  if  a  custom  is  liable  to  be  defeated  by  proof  of  a 
later  origin,  very  few  mercantile  customs  can  possibly  be  proved. 
The  custom  must  be  continuous  from  that  date  in  the  second  place. 
In  the  third  place  it  must  be  universally  acquiesced  in.  In  the  fourth 
place  it  must  be  reasonable.  In  the  fifth  place  it  must  be  certain ; 
and  in  the  last  place  it  must  be  binding.  Now  in  proving  a  mercan- 
tile custom  you  can  dispense  with  our  Lord  Richard  at  once;  it  is 
sufficient  for  you  to  prove  that  the  custom  is  certain,  so  that  people 
know  what  it  is;  that  it  is  reasonable;  that  it  is  fairly  universal  (of 
course  it  is  not  quite  universal,  because  somebody  is  disputing  it  in 
the  action  in  question)  ;  that  it  has  existed  for  some  time  (five  years 
may  suffice)  ;  and  that  merchants  in  the  trade  consider  it  binding; 
and  on  those  lines  the  law  is  continually  being  added  to  by  the  find- 
ing of  customs  by  special  juries. 


2.  HisTOKY  OF  Nkgotiable  Instruments. 

(a)    Bills,  notes  and  checks. 

ScBUTTON.    Elements  of  Mercantile  Law.    1891. 
[From   Chapter  II.] 

(For  authorities,  see  the  Preface  to  Mr.  Chalmers'  work  on  Bills  of 
Exchange;  the  notes  to  Miller  v.  Race  in   1  Smith's  Leading  Cases, 


III.    2.]  HISTORY   or   NEGOTIABLE   INSTRUMENTS.  25 

9th  ed.  p.  491 ;  and  the  judgment  of  Cockburn,  C.  J.,  in  Goodwin 
V.  Eoharts,  L.  E.  10  Ex.  346.] 

Many  of  the  rules  of  Mercantile  Law,  the  Law  Merchant,  are 
directed  to  evade  inconvenient  rules  of  the  Common  Law^ 

Another  rule  of  the  Common  Law  which  is  found  inconvenient  by 
merchants  is  the  old  rule  that  a  "  chose  in  action  "  is  not  transfer- 
able. A  "  chose  in  action  "'  is  a  right  to  recover  a  thing,  as  dis- 
tinguished from  the  thing  itself.  A  bill  of  lading,  as  distinguished 
from  the  goods  it  represents,  is  such  a  "  chose  in  action."  If  you  [X.] 
had  a  right  to  recover  property  from  A.,  and  wanted  to  assign  that 
right  to  B.,  so  that  B.  could  recover  such  property  from  A.,  you 
could  not  do  it  by  the_old  common  law.  Equity  would  have  recog- 
nised that  you  had  transferred  the  right  to  B.,  but  even  then  B.  must 
bring  his  action  in  the  name  of  X.,  who  had  given  him  the  right; 
he  could  not  sue  in  his  own  name.  And  further,  when  the  "  chose 
in  action^'  was~Transf erred,  such  a  transfer  passed  no  better  title 
than  the  transferor  had.  Xow  the  Law  Merchant  dealt  with  many 
"  choses  in  action."  and  it  would  have  been  very  inconvenient,  for 
instance,  that  the  man  who  took  a  bill  of  exchange  should  not  be 
able  to  sue  on  it  in  his  own  name,  but  should  have  to  sue  in  the 
name  of  the  man  whose  name  was  mentioned  as  payee  in  the  bill  of 
exchange.  It  would  have  been  slightly  inconvenient  that  the 
indorsee  of  a  bill  of  exchange  should  have  to  inrpiire  into  the  title 
of  all  previous  indorsers,  to  see  that  there  was  no  defect  in  any  of 
their  titles.  As  a  result  the  Law  Merchant  establishes  certain 
instruments  or  "  choses  in  action,"  which  were  transferable  by 
delivery  or  indorsement,  so  that  the  holder  could  sue  in  his  own 
name,  and  which  passed  a  good  title  to  a  transferee  who  took  them 
in  good  faith,  notwithstanding  that  the  transferor  or  his  predecessors 
had  no  title.  These  documents  had  thus  two  distinguishing  features: 
They  could  be  sued  on  by  the  holder  in  his  own  name ;  and  they 
were  not  afTected  by  previous  lack  of  title;  and  instruments  of  this 
class  are  railed  Xegotiable  Instruments."'  To  illustrate  the  general 
doctrine  I  have  been  explaining  to  you,  a  bill  of  exchange  is  by  the 
custom  of  merchants  transferable  either  by  delivery,  if  it  is  to  bearer, 
or  by  indorsement,  if  it  is  to  order,  and  the  indorseo  or  person  who 
takes  it  can  sue  in  his  own  name,  and  is  not  afTected  by  the  fact  of 
previous  want  of  title  in  nn  indorsor  if  he  was  not  a  party  to  that 
defect. 

The  indorpemrnt  of  a  bill  of  lading  by  the  custom  of  merchants 
pnnses  such  property  in  the  goods  represented  by  it  as  it  was  intended 

ft  See  the  leading;  cane  of  Miller  v.  Parr.,  ]  Smith  L.  C.  9th  ed.  491,  and  par 
Bowcn,  L.  J.,  in   Picker  v.   Ijomlnn  and  Cnunty  Bank,   18  Q.   B.   O.  519. 


?ti  TIIK    1,A\V     MEKCHANT.  [ART.    I. 

to  pass;'  but  it  neodoil  a  stalutc,  the  Bills  of  Lading  Act/  to  get 
a  further  elToet  and  allow  a  lidKlcr  <>f  a  hill  of  lading  to  sue  in  his 
own  name  on  the  eonliact  eontained  in  the  bill  of  lading.  Thus  the 
bill  of  lading  obtained  a  similar  position  to  that  of  a  negotiable 
instrument  by  the  dmiblf  etfeet  of  the  custom  of  merchants  and  of 
the  statute.  A  [)oliey  of  insurance  does  not  by  assignment  pass 
goods  insured  under  it,  although  the  assignee  may  by  statute  sue  in 
his  own  name,  and  therefore  it  is  not  a  complete  negotiable  instru- 
ment. For  to  make  a  negotiab.le  instrument  you  must  have  two 
marks;  that  the  holder  gets  a  title,  though  his  transferor  had  no 
title,  and  that  the  holder  can  sue  in  his  own  name  —  each  of  these 
marks  nu^eting  one  of  the  rules  of  the  Common  Law  already 
referred   to. 

The  law  of  negotiable  instruments  is,  with  some  few  exceptions 
depending  on  statutes,  entirely  built  upon  the  custom  of  merchants, 
and  the  history  of  that  law  as  applied  to  particular  classes  of  instru- 
ments you  will  find  best  stated  in  the  judgment  of  Lord  Chief  Justice 
Cockburn  in  Goodwin  v.  Eoharts,^  which  I  recommend  to  your  care- 
ful reading.  The  earliest  form  of  negotiable  instrument  was  the  bill 
of  exchange."  Originally  bills  of  exchange  were  used  solely  for  the 
purpose  of  foreign  trade.  It  was  an  instrument  by  which  an  Eng- 
lish merchant  contrived  to  avoid  sending  money  out  of  the  country 
or  bringing  mone}'  into  the  country  by  giving  an  order  on  his  foreign 
debtor  to  pay  a  third  person,  or  by  accepting  an  order  to  pay  a 
third  person  from  his  foreign  creditor.^  It  was  purely  a  trade 
transaction  for  the  purpose  of  avoiding  sending  money  out  of  the 
country,  and  the  French  Law  has  adhered  to  that  idea  of  a  bill  of 
exchange  to  this  day,  and  treats  it  merely  as  a  trade  transaction. 
The  English  Law  has  treated  it  as  an  instrument  of  credit.  Bills  of 
exchange  seem  to  have  been  introduced  into  England  by  the  A^ene- 
tians  or  Florentines,  and  there  were  bills  of  exchange  for  foreign 
trade  known  to  England  as  early  as  the  reign  of  Richard  II.  The 
first  reported  case  in  the  English  Courts  is  in  the  year  1603,^  and 
the  Courts,  in  developing  what  was  originally  simply  a  bill  in  a 
transaction  of  foreign  trade,  have  followed  the  custom  of  merchants. 
Chief  Justice  Treby,  in  the  case  of  Bromiinch  v.  lAoyd,^  explained 
the  stages  by  which  a  bill  of  exchange  was  developed.  "  Bills  of 
Exchange,"  he  said,  "  at  first  extended  only  to  merchant  strangers 

9  Vide  post.  p.   153. 

7  18   &   19   Vic.   c.    111. 

8L.  H.    10  Ex.  34fi. 

'Defined  in  Rills  of  Exchange  Act,  1882,  §  3,  and  post,  pp.  40,  41, 

1  See   Chnlmers,   Bills.   Pref.   p.   46. 

2  Martin  v.   lioure,  fro.  .lac.  6. 
8(1698)    2  Lutwyche's   Reports,   p.    1585. 


III.    2.]  HISTORY   OF    NEGOTIABLE   INSTRUMENTS.  27 

trafficking  with  English  merchants;  and  afterwards  to  inland  bills 
between  merchants  trafficking  the  one  with  the  other  in  England; 
and  afterwards  to  all  traders,  and  then  to  all  persons  whether 
traders  or  not;  and  there  was  then  no  need  to  allege  any  custom  of 
merchants."  So  beginning  with  the  necessity  to  allege  an  English 
merchant  and  a  foreign  merchant,  you  dispense  with  the  foreign 
merchant  and  allege  two  English  merchants  trading;  then  you  dis- 
pense with  the  particular  transaction  of  trade;  then  you  drop  the 
trader,  or  the  allegation  that  there  is  any  merchant  at  all,  and  simply 
produce  the  bill.  But  in  a  case  in  1613  *  there  was  a  plea  that  an 
acceptor  of  a  bill  of  exchange  was  not  a  merchant,  and  it  was  held  a 
good  answer.  A  bill  of  exchange  could  not  be  made  at  that  time  by 
people  who  were  not  merchants.  In  1G92,  however,  the  Courts  had 
got  a  little  further.'*  There  was  a  plea  then  that  the  acceptor  of  a 
bill  of  exchange  was  a  gentleman  and  not  a  merchant,  and  the  Court 
of  Queen's  Bench,  following  the  earlier  case,  held  that  a  good  defense; 
but  the  Court  of  Appeal,  the  Exchequer  Chamber,  reversed  the 
decision,  "  having  consideration  to  the  inconvenience  that  might 
ensue  and  the  suspicion  which  might  increase  among  foreign  mer- 
chants," and  they  laid  down  very  sensibly  that  if  "  gentlemen  "  took 
upon  themselves  to  accept  bills  they  ought  to  pay  them.  The  custom 
of  merchants  has  gone  on  developing  bills  of  exchange  until  the  law 
with  regard  to  them  is  now  all  but  settled;  they  pass  by  indorsement 
or  delivery  the  right  to  the  indorsee  to  sue  in  his  own  name;  they 
pass  title  to  a  bon^  fide  holder  for  value  though  the  indorsor's  title  is 
bad  ;  and  it  is  not  necessary  to  allege  any  consideration  for  the  bill, 
for  consideration  is  presumed  until  the  contrary  is  proved.  The  only 
trace  of  the  former  history  of  bills  of  exchange  is  the  difference 
between  inland  and  foreign  bills  of  exchange,  which  is,  in  the  words 
of  T>ord  Holt,  "  All  the  difference  between  foreign  and  inland  bills 
is  that  foreign  bills  must  be  protested  before  a  notary  l)efore  the 
drawer  ran  be  charged;  l)ut  inland  bills  need  no  protest,""  notice  of 
dishonor  being  sufficient.  '/V/'/'~\ 

The   next  document  which   obtained    tlie   features   of   negotialtility 
was  a  promissory  note.     In  a  bill  of  exchange  there  are,  after  accept- 
ance, two  pfople  who  offer  security  to  the  liolder,  the  drawer  and  the 
acceptor;  in  a  promissory  note  there  is  at  first  only  the  single  security,  /      - 
that  of  the  person  who  promises  in  the  note  to  pay.    The  first  case  in  ^"^►^^ 

which  promissory  notes  were  recognized  by  (he  Courts  as  negotiable  t-c<^^^__^ 
instruments  was  the  case  of  Shrldrn  v.  Ilrvllry^  in   IHRO,  where  the 
Court  held  a  promissory  note  to  be  a  negotiable  instrument,  expressly 

«  Ofi/ttr  V.  Taylor,  1   Pro    .Tac.  306. 
»  RnrRfxrU  v.   Withrrhy.  f'arthow,  82. 
•  RuUrr  V.    Cripps,   0   Mori.   29. 
T  2  Khowern,  p.   IfiO. 


28  THE    LAW    MERCHANT.  [ABT.    I. 

saying  that  "  it  was  the  custom  of  merchants  tliat  made  that  good.'* 
That  decision  for  some  years  afterwards  was  followed  in  other  cases 
till  Holt  became  (^hief  Justice.  Lord  Tlolt  set  his  face  against  the 
ciist<Mn  of  merchants  and  against  promissory  notes  as  negotiable 
instruments.  In  the  case  of  Clark  v.  Martin^  the  reporter  says: 
"  But  Holt,  C.  J.,  was  with  all  his  strength  against  this  action,  (on  a 
promissory  note),  and  said  that  this  note  could  not  be  a  bill  of 
excliange;  that  the  maintaining  of  these  actions  upon  such  notes  were 
innovations  \ipon  the  rules  of  Common  l^aw,  and  that  it  amounted 
to  setting  up  a  new  sort  of  specialty  unknown  to  the  Common  Law, 
and  invented  in  Lombard  Street,  which  attempted  in  these  matters 
of  hills  of  exchange  to  give  laws  to  Westminster  Hall;  that  the  con- 
tinuing to  declare  upon  these  notes  upon  the  custom  of  merchants 
proceeded  from  obstinacy  and  opinionativeness,  since  he  had  always 
expressed  his  opinion  against  them."  It  appears  that  Lombard  street 
and  the  merchants  therein  thought  that  the  "  obstinacy  and  opiniona- 
tiveness "  was  upon  the  side  of  Lord  Holt,  for  they  continued  to  use 
these  documents  and  to  sue  upon  them ;  and  in  the  next  year,  in 
another  case  of  Buller  v.  Crisped  Lord  Holt  again  expressed  his 
opinion  in  strong  terms,  and  said  that  these  notes  were  not  in  the 
nature  of  bills  of  exchange,  but  were  only  an  invention  of  the  gold- 
smiths in  Loml)ard  Street,  who  had  a  mind  to  make  a  law  to  bind  all 
that  did  deal  with  them.  "  At  another  day  Holt,  C.  J.,  declared  that 
he  had  desired  to  speak  with  two  of  the  most  famous  merchants  in 
London,  to  be  informed  of  the  mighty  ill-consequences  that  it  was 
pretended  would  ensue  by  obstructing  this  form,  and  they  had  told 
him  that  it  was  very  frequent  with  them  to  make  such  notes,  and 
that  they  looked  upon  them  as  bills  of  exchange,  and  that  they  had 
been  used  for  a  matter  of  thirty  years;  that  not  only  notes  but  bonds 
for  money  were  transferred  frequently,  and  endorsed  as  bills  of 
exchange,"  and  the  reporter  winds  up  significantly,  "the  Court  at 
last  took  the  vacation  to  consider  of  it."  Parliament  stepped  in  and 
saved  them  from  considering  it  any  further,  for  by  an  act  of  the 
year  1704  '  it  was  expressly  provided  that  promissory  notes  should 
be  deemed  as  negotiable  as  bills  of  exchange.  The  preamble  of  the 
Act  began ;  "  Whereas  it  hath  been  held  that  promissory  notes  are 
not  indorsable  over,  within  the  custom  of  merchants,  therefore  to 
encourage  trade  and  commerce  be  it  enacted."  So  in  this  case  also 
the  custom  of  merchants  introduced  an  innovation  into  the  law  of 
"Westminster  Hall,  although  it  needed  the  sanction  of  Parliament  to 
induce  Westminster  Hall  to  recognize  it. 


8  (1702)    2  LorH   Raymond,  758. 
»  fi  Modern  Reports,  p.  29. 
1  .3  4  4  Anne,  c.  9. 


in.    2.]  HISTORY   OF   NEGOTIABLE   INSTRUMENTS.  29 

The  next  step  in  the  liistory  was  that  bankers  and  goldsmiths  who 
held  money  on  deposit  began  to  issue  promissory  notes  payable  on 
demand,  that  is  to  say  they  began  to  issue  Bank  Notes.  To  these 
again  the  custom  of  merchants  very  speedily  gave  negotiability,  and 
in  the  leading  case  of  Miller  v.  Race.''  Lord  Mansfield  decided  that 
bank  notes  also  were  negotiable  instruments,  holding  that  it  was 
necessary  for  the  purposes  of  commerce  that  their  currency  should 
be  established  and  secured.  And  by  the  custom  of  merchants,  bank 
notes  have  acquii-ed  a  superior  position  to  promissorv  notes.  They 
are  payable  to  any  holder  who  may  present  them  without  the  necessity 
of  his  indorsing  them.  There  is  a  legend  that  the  Bank  of  England 
always  required  persons  presenting  their  bank  notes  to  indorse  them, 
and  that  on  one  occasion  when  the  clerk  of  the  bank  behind  the 
counter  spoke  in  rather  a  cavalier  manner  to  a  gentleman  who  came 
in,  telling  him  that  he  could  not  be  paid  unless  he  wrote  his  name 
on  the  back,  the  gentleman  with  the  note  walked  out  and  promptly 
sued  the  Bank  of  England  for  dishonoring  their  promissory  note, 
and  of  course  sued  tbem  successfully,  with  the  result  of  altering  the 
custom  at  the  Bank.  Bank  of  England  notes  are  now  legal  currency 
and  tender,  and  in  the  case  of  country  banks  their  notes  may  be, 
under  certain  circumstances,  treated  as  currency  and  payment. 

The  next  step  was  when  the  banks,  besides  issuing  their  promis- 
sory notes  payable  on  demand,  or  bank  notes,  accepted  and  honored 
bills  of  exchange  drawn  on  them  by  their  customers,  payable  on 
demand;  that  is  to  say  when  the  system  of  Cheques  came  into  exist- 
ence, for  a  chef|ue  is  a  bill  of  exchange  drawn  on  a  bank  by  its  cus- 
tomer, payable  on  demand.^  To  cheques,  also,  the  practice  of  mer- 
chants has  affixed  certain  incidents,  as  for  instance  the  practice  of 
crossing  cheques,  which  originated  partly  in  the  usages  of  commerce 
and  partly  in  the  Clonring  House;  and  has  now  been  dofinitcly  recog- 
nized by  Act  of  Parliament.  Banks,  by  the  custom  of  merchants,  are 
also  bound  to  honor  cheques  if  they  have  funds  of  flic  customer  in 
their  hands;  tliough  a  drawee,  even  though  he  had  funds  in  his 
hand,  would  not  be  bound  to  accept  a  bill  of  exchauiro. 

So  far,  the  law  of  negotiable  instruments,  (hills  of  exchange, 
promissory  notes,  cheques,  bank  notes),  has  been  codified  by  l^irlia- 
ment  in  the  Bills  of  Exchange  Act,  1882;  "an  Act  to  codify  the  law 
relating  to  bills  of  exchange,  cheqiies,  and  promissorv  notes,"*  and 
on  all  matter  treated  on  by  that  Act  the  f.aw  Mcrcbiint  is  now  to  be 
founri  in  its  clauses,  and  not  in  the  cases  and  customs  on  which  those 
clauses  were  founded. 


2  1   Smith's  T-fnflinp  f'nflos,  ntti  rd.  p.  400. 
«  BillK   nf   KxrlinriKf   Act    (1882),   §   73. 
<  45  &  46  Vic.  c.  61. 


30  Tin-:    LAW    M  KUCHA  NT.  [ART     L 

Chalmers'  Digest  of  Bills  of  Exchange,  etc. 

[From  the  hitroduction  to  the  Third  Edition.] 

The  results  of  this  I'oriiintion  ol'  tlie  law  by  custom  are  instructive. 
A  reference  to  Marius"  treatise  on  Bills  of  Exchange,  written  about 
1670,  or  Beawes'  Lex  Mereatoria,  written  about  1720,  will  show  that 
the  law,  or  perhaps  rather  the  practice,  as  to  bills  of  exchange,  was 
even  then  pretty  well  deiined.  Comparing  the  usage  of  that  time 
with  the  law  as  it  now  stands,  it  will  be  seen  that  it  has  been  modified 
in  some  important  respects.  Comparing  English  law  with  French, 
it  will  be  seen  that,  for  the  most  part,  where  they  differ,  French  law 
is  in  strict  accordance  with  the  rules  laid  down  by  Beawes.  The  fact 
is,  that  when  Beawes  wrote,  the  law  or  practice  of  both  nations  on  this 
subject  was  uniform.  The  French  law,  however,  was  embodied  in  a 
Code  by  the  "  Ordonnance  de  1673,"  which  is  amplified  but  substan- 
tially adopted  by  the  Code  de  Commerce  of  1818.  Its  development 
was  thus  arrested,  and  it  remains  in  substance  what  it  was  200  years 
ago.  English  law  has  been  developed  piecemeal  by  judicial  decision 
founded  on  custom.  The  result  has  been  to  work  out  a  theory  of  bills 
widely  ditTerent  from  the  original.  The  English  theory  may  be  called 
the  Banking  or  Currency  theory,  as  opposed  to  the  French  or  Mer- 
cantile theory.  A  bill  of  exchange  in  its  origin  was  an  instrument 
by  which  a  trade  debt,  due  in  one  place,  was  transferred  in  another. 
It  merely  avoided  the  necessity  of  transmitting  cash  from  place  to 
place.  This  theory  the  French  law  steadily  keeps  in  view.  In  England 
bills  have  developed  into  a  perfectly  flexible  paper  currency.  In 
France  a  bill  represents  a  trade  transaction ;  in  England  it  is  merely 
an  instrument  of  credit.^  English  law  gives  full  play  to  the  system  of 
accommodation  paper;  French  law  endeavors  to  stamp  it  out. 

A  comparison  of  some  of  the  main  points  of  divergence  between 
English  and  French  law  will  show  how  the  two  theories  are  worked 
out.  In  England  it  is  no  longer  necessary  to  express  on  a  bill  that 
value  has  been  given,  for  the  law  raises  a  presumption  to  that  effect. 
In  France  the  nature  of  the  value  must  be  expressed,  and  a  false 
statement  of  value  avoids  the  bill  in  the  hands  of  all  parties  with 
notice.  In  England  a  bill  may  now  be  drawn  and  payable  in  the 
same  place  (formerly  it  was  otherwise,  see  the  definition  of  bill  in 
Comvns'  Digest).®     In  France  the  place  where  a  bill  is  drawn  must 

5  This  passage  was  writton  in  1878.  when  the  first  edition  was  published. 
The  theory  it  advances  is  ind<'pendently  confirmed  by  the  excellent  introduc- 
tion to  the  Portuguese  rommercial  Code  in  the  French  edition,  published  by 
the  Comite  de  Legislation  Utrang^re.     See  p.  xxix. 

«  "A  bill  of  exchange  is  when  a  man  takes  money  in  one  country  or  city 
upon  exchange,  and  draws  a  bill  whereby  he  directs  another  person  in  another 
country  or  city  to  pay  so  much  to  A,  or  order  for  value  received  of  B.,  and 
Bubscribes  it." 


III.    2.]  HISTORY   OF   NEGOTIABLE   INSTRUMENTS.  31 

be  so  far  distant  from  the  place  where  it  is  payable,  that  there  may 
be  a  possible  rate  of  exchange  between  the  two.  A  false  statement 
of  places,  so  as  to  evade  this  rule,  avoids  the  bill  in  the  hands  of  a 
holder  with  notice.  As  French  lawyers  put  it,  a  bill  of  exchange 
necessarily  presupposes  a  contract  of  exchange.^  In  England,  since 
1765,  a  bill  may  be  drawn  payable  to  bearer,  though  formerly  it  was 
otherwise.*  In  France  it  must  be  payable  to  order;  if  it  were  not  so, 
it  is  clear  that  the  rule  requiring  the  consideration  to  be  expressed 
would  be  an  absurdity.  In  England  a  bill  originally  payable  to  order 
becomes  payable  to  bearer  when  indorsed  in  blank.  In  France  an  in- 
dorsement in  blank  merely  opera'tes  as  a  procuration.  An  indorsement, 
to  operate  as  a  negotiation,  must  be  an  indorsement  to  order,  and 
must  state  the  consideration;  in  short,  it  must  conform  to  the  con- 
ditions of  an  original  draft.  In  England,  if  a  bill  be  refused  accept- 
ance, a  right  of  action  at  once  accrues  to  the  holder.  This  is  a 
logical  consequence  of  the  currency  theory.  In  France  no  cause  of 
action  arises  unless  the  bill  is  again  dishonored  at  maturity;  the 
holder,  in  the  meantime,  is  only  entitled  to  demand  security  from 
the  drawer  and  indorsers.  In  England  a  sharp  distinction  is  drawn 
between  current  and  overdue  bills.  In  France  no  such  distinction 
is  drawn.  In  England  no  protest  is  required  in  the  case  of  an  inland 
bill,  notice  of  dishonor  alone  being  sufficient.  In  France  every  dis- 
honored bill  must  be  protested.  Grave  doubts  may  exist  as  to  whether 
the  English  or  the  French  system  is  the  soundest  and  most  beneficial 
to  the  mercantile  community,  but  this  is  a  problem  which  it  is  bejond 
the  province  of  a  lawyer  to  attempt  to  solve. 


(b)   Other  negotiable  paper. 

ScBUTTON,  Elements  of  MEncANTii^E  Law.     1891. 

[From   Chapter  If.'\ 

There  arc,  however,  other  negotiable  instruments  besides  tliose 
wbifh  have  been  dealt  with  by  the  Act  of  1882,  and  to  such  instru- 
ments the  rules  of  the  Common  Law  and  the  customs  of  the  Law 
Merchant  are  still  applicable.  F'resh  usages  may  be  introduced,  or  new 
dornments  may  be  proved  by  the  usage  of  merchants  to  have  tlu'  two 
marks  of  negotiability  already  stated."  The  usage  that  is  proved 
must,  however,  be  a  usage  of  English  merchants.  In  the  case  of 
Picker  v.   The  London  and  County  Hank,^  an  attempt  was  made  to 

T  Thin  rtilp  is  aairt  to  bo  now  ohsolntr;   but  the  Code  remains  unaltered. 
■  See  Struart  v.   flnilqrH   (lf.02).   12  Mod.  .30. 
•Ante,  p.  26.     [Herein  pp.  25-26.  —  TT.l 
1  18  Q.  n.  n.  p.  515. 


32  THE    LAW    MKRCllANT.  [aRT.    I. 

treat  certain  rnissian  bonds  as  nejiotiahlc  instruments  in  England; 
but  the  only  evidenee  that  was  oU'ered  was  that  those  bonds  were 
m'gotiahk'  by  the  eitsloiu  of  rnissiaii  merehauts,  and  the  Court 
unamniDUsly  rejected  the  evidenee  as  iusulliciiMit.  As  it  was  pointedly 
put,  the  fact  that  in  Africa  ct)\vri(s  ari'  iic^;()tiable  instruments  does 
not  therefore  hind  the  lMi_i;Iish  Courts  to  accept  cowries  as  negotiable 
instruments  in  pjigiaiul,  aiul  the  same  principle  lias  always  been 
applii'd  in  any  attempt  to  |)rove  the  negotiability  of  instruments  in 
England  ;  the  usage  prov(;d  must  be  n  ns-.ura  o^— Btrr^l f<!h-  merchiints. 
It  is  not  necessary  thnTlliat  usage  should  he  from  time  immemorial. 
Mr.  Justice  Blackburn  did,  indeed,  in  one  case  -  lay  down  that  such 
a  usage,  existing  as  part  of  the  ancient  Law  Merchant  was  neces- 
sary; but  in  the  later  case,  Gnodvin  v.  Roharts.^  both  the  Court  of 
Appeal  and  the  TTouse  of  Lords  hehl  that  to  lie  ton  narrow  a  limita- 
tion, deciding  tbat  the  Law  Merchant  mighl  be  ad(h'(|  to  by  proof  of 
recent  usage,  and  thus  that  new  negotiable  instruments  might  be 
from  time  to  lime  created.  We  find  in  the  JJeports  a  series  of  illus- 
trations of  these  principles  of  law  in  the  various  (hxuments  that  have 
been  from  time  to  time  proved  or  not  proved  to  be  negotiable  instru- 
ments. For  instance,  in  tbe  case  of  (Ih/nn  v.  Jldhwr*  East  India 
bonds  were  held  not  to  be  negotialile  in  the  aljsenee  of  any  evidence 
that  they  customarily  passed  l)y  delivery;  but  the  ilccision  in  the 
Courts  was  immediately  remedied  by  I'arliament,  wlio  passed  an 
Act  giving  to  East  India  bonds  the  character  of  negotiability.''  In 
Dixon  V.  Bovill,'^  a  document  called  an  "  iron  warrant,"  ruiming  "  I 
will  deliver  one  hundred  t(ms  of  iron  when  required  after  Sept.  ISth 
to  the  pai'ty  lodging  this  document  with  me,"  was  held  by  the  TTouse 
of  Lords  not  to  be  a  negotiable  instniiiicnt.  and  not  therefore  to  pass 
by  deliver}',  there  being  no  evidence  bcfnre  the  T'onrt  of  any  mer- 
cantile usage  affecting  suHi  documents:  it  i<.  lto\\cv('r.  vcit  probable 
that  if  the  cjuestion  of  iron  warrants  came  before  the  Court  at  the 
present  day.  they  could  be  abundantly  proved  to  be  negotiable. 

To  come  to  more  recent  cases,  in  Tlir  Fiiir  Ai'fs  Socirfji  v.  The 
Union  BanV^  it  was  held  that  Post  Oflice  orders  crossed  for  collec- 
tion bv  a  bank  were  not  negotiable  instrumcTits :  and  in  Crouch  v. 
The  Crrdil  Fourier^  debenture  bonds  of  an  English  eompanv  were 
held   not   negotiable  because   the  only   proof  of  usage   tendered   was 


^Crouch  V.  Credit  Fnnrirr.  T-.  R.  8  Q.  K.  -TT).  followed  on  this  by  Manisty,  J., 
in  20  Q.  P..  1).  at  p.  2:?0, 

aL.  R.   10  Ex.  at  p.  355:    1   App.  C.  at  p.  494. 

*  13  East.  509. 

5  51   Gfo.  III.  c.  04. 

8  3  ATarriuoon's   Hoports,  p.   1. 

T  17  Q.  B.  D.  705. 

«L.  R.  8  Q.  B.  D.  374. 


III.    2.]  HISTORY   OF    NEGOTIABLE   INSTRUMENTS.  33 

one  originating  in  the  last  twenty  years.  On  the  other  hand,  in 
(Jorgier  v.  Mieville,^  certain  foreign  bonds  were  held  to  be  negotia- 
l.'e  instruments  on  proof  that  bonds  of  that  description  were  sold  in 
li:e  English  market,  and  passed  from  hand  to  hand  daily  like 
l^xchequer  bills.  And  that  case  was  followed  in  Goodwin  v.  Roharts,^ 
in  which  certain  scrip,  which  on  the  payment  of  all  instalments  due 
was  to  be  exchanged  for  bonds,  was  held  a  negotiable  instrument 
on  proof  of  usage  of  the  English  Stock  Exchange.'  There  is  one 
other  case  I  wish  to  mention  to  you  as  an  illustration  of  the  Common 
Law  maxim  I  have  already  reminded  you  of,  that  a  man  cannot  give 
what  he  has  not  got.  and  therefore  if  he  has  not  got  a  title  cannot 
give  it.  The  recent  case  of  Barton  v.  The  London  and  North  Western 
Railway  ^  is  at  the  present  time  exciting  very  great  apprehension  in 
commercial  circles.  Mr.  Barton  held  certain  shares  in  the  L.  &  N.  W. 
Eailway  which  passed  to  his  executors,  and  one  of  the  executors  by 
forging  the  signature  of  the  other  executor  sold  those  shares  some 
twelve  or  thirteen  years  ago.  The  purchaser  took  the  transfer  with 
the  forged  signature  to  the  L,  &  N.  W.  Railway  Company,  who  regis- 
tered it,  and  for  the  twelve  or  thirteen  years  the  purchaser  has  been 
registered  for  those  shares  and  has  received  the  dividends.  The 
executrix  whose  signature  was  forged  —  for  a  lady  was  concerned  — 
did  not  find  out  the  absence  of  these  shares  for  the  thirteen  years,  but 
on  finding  it  out  and  on  proof  of  the  forgery,  the  L.  &  N".  "W.  Com- 
pany were  ordered  to  replace  her  name  on  the  register,  and  the 
unfortunate  purchaser?  have  had  to  give  up  their  shares,  and  to  pay 
l*ack  the  dividends  which  thoy  have  received  during  the  thirteen  years. 
A  man  cannot  give  what  he  has  not  got. 

The  people  who  purported  to  pass  these  shares  had  not  got  them 
to  give.  At  present  agitation,  if  one  may  use  such  a  word,  is  taking 
f)lace  on  every  English  Stock  Exchange  for  an  Act  which  will  pro- 
tect the  people  whose  transfers  have  been  registered  by  Railway 
Companies  against  the  rules  of  the  Common  Law.''  -^^"' 

•  3  B.  4  C.  45. 

1  L.  R.  10  Kx. 

2  For  TPCfnt  oasps  in  wliirli  tlio  qiu'stion  of  nopnf  inhility  was  rfli''('H  nop  Lord 
Fhrffirld  V.  Lnnihtn  Joint  Slorh  Hank,  ^..  K.  U  App.  C.  r?:i.T.  and  Colonial  Rank 
V.    Willinmii.   ]5  App.  ('.   p.  207. 

»L.  R.  21  Q.  B.  n.  77. 

*  See  also  on  tlic  siihirrt,  of  nr'(:f)tialilp  instnimonts,  eflMT  than  hilN.  nntrs 
nnfl  rhpcl{«.  f'liaIni<TH'  Rills  of  Exrlianpp  Art  (.'itli  ci\.) .  pp.  :?12  :^27:  2  Amps' 
('a-px  on  RillH  an.l  N'otps.  pp.  748-7H4;  2  Danipl  on  N^g.  Inst.,  pp.  406-595.  730 
IHF,      -  II. 

KKOOT.   IN8THUMENT8  —  8 


ARTICLE  II. 

Form  and  Interpretation. 

(i)    Form  Required. 

1.  Writing  and  signature. 

§20  GEARY  V.  PHYSIC. 

5  Baknkwall  &  Creswell    (K.  B.)    234.  —  1826. 

Assumpsit  by  tlie  pluinliU'  as  indorsee  against  the  defendant  as 
maker  of  a  promissory  note  for  the  sum  of  30/.  payable  two  months 
after  date  to  the  order  of  one  Folder,  and  indorsed  by  him,  Folder, 
to  one  Kemp,  who  subsequently  indorsed  the  note  to  the  plaintiff. 
At  the  trial  before  Abbott,  C.  J.,  at  the  London  sittings  after  Hilary 
term,  1825,  it  appeared  that  the  indorsement  by  Kemp  to  the  plain- 
tiff was  in  pencil,  and  it  was  thereupon  objected  that  the  plaintiff 
could  not  recover:  an  indorsement  in  pencil  not  being  such  an  indorse- 
ment as  the  law  and  custom  of  merchants  recognizes  to  be  sufficient 
to  pass  the  interest  in  a  bill  of  exchange,  and  promissory  notes  being 
by  the  statute  3  and  4  Ann,  c.  9,  §  1,  assignable  or  indorsable  in  the 
same  manner  as  unpaid  bills  of  exchange  are  according  to  the  custom 
of  merchants.  The  Lord  Chief  Justice  thought  it  sufficient,  and 
directed  the  jury  to  find  a  verdict  for  the  plaintiff,  reserving  liberty 
to  the  defendant's  counsel  to  move  to  enter  a  nonsuit,  if  the  court 
should  be  of  opinion  that  the  indorsement  of  the  promissory  note  in 
pencil  was  not  a  good  and  valid  indorsement. 

Abbott,  C.  J.  —  There  is  no  authority  for  saying  that  where  the 
law  requires  a  contract  to  be  in  writing,  that  writing  must  be  in  ink. 
The  passage  cited  from  Lord  Coke  shows  that  a  deed  must  be  written 
on  paper  or  parchment,  but  it  does  not  show  tliat  it  must  be  written 
in  ink.  That  being  so,  1  am  of  opinion  that  an  indorsement  on  a 
bill  of  exchange  may  be  by  writing  in  pencil.  There  is  not  any 
great  danger  that  our  decision  will  induce  individuals  to  adopt  such 
a  mode  of  writing  in  preference  to  that  in  general  use.  The  imper- 
fprtinn  of  |]]jg  mr\i\a  nf  wrifjj^nr^  jts  being  SO  subjcct  to  ^I)![iteratl6n, 
and  the  impossibility  of  proving  it  when  it  is  obliterated,  will  pre- 
vent  it  beinggenerally  adopted?  There  being  no  authority  to  show 
that  a  contract  which  the  law  requires  to  be  in  writing  should  be 
written  in  any  particular  mode,  or  with  any  specific  material,  and  the 
law  of  merchants  requiring  only  that  an  indorsement  of  bills  of 
exchange  should  be  in  writing,'  without  specifying  the  manner  with 

*  8ee  custom  stated  in  Lutwyche,  878. 

[34] 


WRITING  AND  SIGNATURE.  35 

which  the  writing  is  to  be  made,  I  am  of  opinion  that  the  indorse- 
ment in  this  case  was  a  suflieient  indorsement  in  writing  within  the 
meaning  of  the  law  of  merchants,  and  that  the  property  in  the  bill 
passed  by  it  to  the  plaintiff. 

Bayley,  J.  —  I  think  that  a  writing  in  pencil  is  a  writing  within 
the  meaning  of  that  term  at  common  law,  and  that  it  is  a  writing 
within  the  custom  of  merchants.  I  cannot  see  any  reason  why, 
when  the  law  requires  a  contract  to  be  in  writing,  that  contract  shall 
be  void  if  it  be  written  in  pencil.  If  the  character  of  the  handwrit- 
ing were  thereby  wholly  destroyed,  so  as  to  be  incapable  of  proof, 
there  might  be  something  in  the  objection ;  but  it  is  not  thereby 
destroyed,  for,  when  the  writing  is  in  pencil,  proof  of  the  character 
of  the  handwriting  may  still  be  given.  I  think,  therefore,  that  this 
is  a  valid  writing  at  common  law,  and  also  that  it  is  an  indorsement 
according  to  the  usage  and  custom  of  merchants ;  for  that  usage  only 
requires  that  the  indorsement  should  be  in  writing,  and  not  that 
that  writing  should  be  made  with  any  specific  materials. 

Holroyd,  J.,  concurred. 

Rule  discharged.* 

§  20  REG.  r.  HARPER. 

L.  R.  7  QuEEN'.s  Bench  Division,  78. —  1881. 
[Court  for  Crown  Cases  Reserved.] 

Indictment  for  forging  an  indorsement  to  a  bill  of  exchange.  John 
Watson  &  Son  drew  a  bill  on  Harper,  but  did  not  sign  it.  Harper 
accepted  it,  forged  the  indorsement  of  John  Hunt,  and  returned  it. 

•Accord:  Broti:n  v.  liutchers,  etc.,  Bank,  6  Hill  (N.  Y.)  443,  post,  p.  37; 
Closson  V.  Stcmns,  •)  N't.  11;  Ret-d  v.  h'onrk,  14  Tex.  329.  Where  an  accept- 
anop  of  a  hill  i-;  rf(jiiir<'(l  hy  statute  to  he  in  writing  (Neg.  Inst.  L.,  §  220),  a 
telegra|)hic  afceptance  satisfies  the  statute.  Garrcttson  v.  North  .itchison 
Bank,  3!)  Fed.   Hep.   103;   47   Fed.  Rep.  867;   51   Fed.  Rep.   lf)8. 

A  negotiahh-  instrument  may  he  drawn  in  any  language.  Re  \farseilles  Co., 
L.    H.   30  f"h.   I).  598.  — H. 

[Signature  to  a  check  hy  a  hank  depositor  hy  her  mark  in  lead  pencil  is 
valid.  "Citation  of  authority  is  not  necr-ssary  to  show  that  it  is  immaterial 
with  what  kind  of  an  instrument  a  signature  Is  made."  1>ai)0,  .1.,  in  Drrfahl  v. 
•Security  Snv.   Bk..    132   Iowa   503.  573. 

Ft  was  held  in  Flnndrrs  v.  Snnrr,  37  I*a.  Super,  ft.  28,  that  there  is  nothing 
in  the  Negotiahle  Instruments  Law  to  prevent  the  use  of  a  rubher  stamp  in  the 
indorsement  of  negf)tiahle  paper.  "  f)f  course,  we  are  not  to  he  understood  as 
saying  that  an  inrlorsenient  made  hy  the  use  of  a  ruhher  stamp,  any  more 
than  one  made  in  manuscrij)!.  proves  itself.  In  «'ifher  case  the  maker  or 
acceptor,  when  called  upon  to  pay  hy  one  claiming  to  he  the  lawful  holder  by 
virtue  of  such  indorsement,  may  demand  proper  proof  of  the  genuineness  and 
authenticity  of  the  indor.semeut."     Head,  .1.,  p.  31.  —  C] 


S6  FOUM    KEQUIHED.  [aRT.    II. 

Watson  and  Son  indorsed  it  and  placed  it  in  bank  for  collection. 
Tiio}  did  not  at  ixny  time  sign  it  as  drawers.  The  following  is  a  copy 
of  the  bill : 

£22  109.  4d  Kii.MABNOcK,  2  Nov.  1880. 

Ont>  iiioiitii  after  date  pay  to  me  or  order  the  sum  of  £22  lOs.  4d.,  that  being 
for  value  received  in  machinery. 

To  Mr.  J.  HAKt'KK,  Etc. 

[Across  tlie  face]:  Accepted  payable  at  the  Union  Bank  of  London.  John 
Harpkb. 

[Indorsed]:  John  Hunt.    John  Watson  &  Son. 

Harper  was  convicted  and  sentenced,  but  execution  of  the  sentence 
was  suspended  till  the  decision  of  the  case  by  the  Court  for  Crown 
Cases  Reserved. 

Lord  Coleridge,  C.  J .  —  The  conviction  cannot  be  sustained. 
The  instrument  was  not  a  bill  of  exchange;  it  was  an  inchoate  bill 
of  exchange.  The  point  requires  no  authority,  though  it  has  the 
authority  of  the  cases  of  McCall  v.  Taylor  (34  L.  J.  C.  P.  3G5)  ; 
Stoessiger  v.  South  Eastern  Ry.  Co.  (3  E.  &  B.  549)  ;  Peto  v.  Reynolds 
(23  L.  J.  Ex.  98;  9  Ex.  410;  11  Ex.  418)  ;  and  Rex  v.  Paieman  (Russ 
&  Ry.  455). 

Stephen,  J.  —  Though  I  entirely  agree  with  the  opinion  expressed 
by  my  Lord,  I  cannot  help  observing  that  the  act  of  the  prisoner 
has  all  the  etfect  of  a  forgery  punishable  under  the  statute  as  a  felony; 
the  prisoner  could,  however,  have  been  indicted,  and  ought  to  have 
been  indicted,  for  forgery  at  common  law. 

Grove,  Hawkins  and  Lopes,  JJ.,  concurred. 

Conviction  quashed.'' 


§  20  ^^AJ^        TAYLOR  v.  DOBBINS. 

1  Stbange   (K.  B.)   399. —  1720. 

In  case  upon  a  promissory  note  the  declaration  ran,  that  the 
defendant  made  a  note,  et  manu  sua  propria  scripsit.  Exception  was 
taken,  that  since  the  statute  he  should  have  said  that  the  defendant 
signed  the  note,  but  the  Court  held  it  well  enough,  because  laid  to 
be  wrote  with  his  own  hand,  and  there  needs  no  subscription  in  that 
case,  for  it  is  sufficient  his  name  is  in  any  part  of  it.  I.  J.  S.  promise 
io  pay,  is  as  good  as  I  promise  to  pay,  subscribed  J.  <S.' 

7  Accord:  Tevis  v.  Young,  1  Mete.  (Ky.)  197;  Heman  v.  Francisco,  12  Mo. 
App.  560.  —  H. 

8  Vide  Eliot  v.  Coirper,  1  Rtranjire,  HOO.  [Accord:  Qtiin  v.  Sterne,  26  Ga.  223. 
The  courts  make  a  clear  distinction  V)ptwppn  the  statutory  requirement  that  an 
instrument  shall  be  "  signed  "  and  the  requirement  that  it  Bhall  be  "  sub- 
■cribed."  —  James  v.  Patten,  G  N.  Y.  9.  —  H.] 


n.    1.]  NOTE  MOSt  CONTAIN  A  PEOMlSE.  Zf 

§  20      BROWN  V.  BUTCHERS  &  DROVERS'  BANK. 
6  Hill  (N.  Y.)  443.  —  184. 

On  error  from  the  Superior  Court  of  the  city  of  New  York,  where 
the  Butchers  and  Drovers'  Bank  sued  Brown  as  the  indorser  of  a  bill 
of  exchange,  and  recovered  judgment.  The  indorseiueiiL  was  made 
with  a  lead  pencil,  and  in  figures,  thus,  "  1.  2.  8."  no  Uiuue  being 
written.  Evidence  was  given  strongly  tending  to  show  that  the 
figures  were  in  Brownis  handwriting,  and  that  he  meant  they  should 
bind  him  as  indorser;  though  it  also  appeared  he  could  write.  The 
court  below  charged  the  jury  that,  if  they  believed  the  figures  upon 
the  bill  were  made  by  Brown,  as  a  substitute  for  his  proper  name, 
intending  thereby  to  bind  himself  as  indorser,  he  was  liable.  Excep- 
tion. The  jury  found  a  verdict  for  the  plaintiffs  below,  on  which 
judgment  was  rendered,  and  Brown  thereupon  brought  error. 

By  the  Court,  Nelson,  Ch.  J.  —  It  has  been  expressly  decided  that 
an  indorsement  written  in  pencil  is  sufficient;  (Geary  v.  Physic,  5 
Bam.  &  Cress.  234)  ;  and  also  that  it  may  be  made  by  a  mark.  (George 
v.  Surrey,  1  Mood.  &  Malk.  516).  In  a  recent  case  in  the  K.  B.  it 
was  held  that  a  mark  was  a  good  signing  within  the  statute  of  frauds; 
and  the  court  refused  to  allow  an  inquiry  into  the  fact  whether  the 
party  could  write,  saying  that  would  make  no  difference.  (Baker  v. 
iJening,  8  Adol.  &  Ellis,  94  ;  and  see  Harrison  v.  Harrison,  8  Ves.  186 ; 
Addy  V.  Grix,  id.  504.) 

These  cases  fully  sustain  the  ruling  of  the  court  below.    They  show, 
1  think,  that  a  person  may  become  bound  by  any  mark  or  designation 
he  thinks  proper  to  adopt,  provided  it  be  used  as  a  substitute  for  his  -<-, 
name,  and  he4»ten44a-l»ind  himself.' 

^(jj^    ,  Judgment  affirmed. 


n.  Unconditional  promise  or  order  to  pay  a  sum  certain  in  money.  V.^ 

1.  A  Note  Must  Contain  a  Promise.  "aV 

§20  OAY  V.  ROOKE. 

151   Mah.sachl'sk'ti.s,   llf).  —  1890. 

Cnntrart  on  the  following  instrument,  declared  on  aa  a  promis- 
Rory  note : 

MABi.riORo'.  RrPT.  2.3.  IHHl.  I.  ().  IJ.,  E.  A.  (Jay,  the  mim  of  seventeen 

dolls.  5- 100  for  value  rt-cfivod.  JoHW    R.    KouKJC 

Writ  dated  September  19,  1887.  At  the  trial  in  the  Superior  Court, 
without  a  jury,  before  Dewey,  J.,  the  only  issue  was  whether  the 

"See  Rogers  v.  Coit,  6  Hill,  322,  3. 


38  Foim  KKtiiuuKi).  (aht.  11. 

phuiitiir  was  (.'utitlt'ii  tn  intoivst  from  tlu'  daU'  of  the  instrumeut,  or 
from  that  of  the  writ,  the  service  of  whicli  was  tlie  only  demand 
made  hy  tlie  phiintilT. 

The  phiintiir  asked  the  judge  (o  riih',  as  a  matter  of  law,  that  he  was 
entitled  to  interest  from  the  date  of  the  instrument.  The  judge 
declined  so  to  rule,  and  ruled  that  interest  could  be  recovered  from 
the  date  of  the  writ  only,  and  found  for  the  plaintiff  for  $17.05  only ; 
and  the  plaintiff  alleged  exceptions. 

Devens,  J. —  In  order  to  constitute  a  good  promissory  note  there 
should  be  an  express  promise  on  the  face  of  the  instrument  to  pay 
the  money.  A  mere  promise  implied  by  law,  founded  on  an  acknowl- 
edged  iiidebtedness,  will  not  be  sufficient.  {Story,  Prom.  Notes,  §  14; 
Broirn  v.  Gilman,  13  Mass.  158.)  While  such  piomise  need  not  be 
expressed  in  any  particular  form  of  words,  the  language  used  nmst 
be  such  that  the  written  undertaking  to  pay  may  fairly  1^;  deduced 
therefrom.  (CommonweaJth  Ins.  Co.  v.  Whitney,  1  Mt't.  21.)  In 
this  view  the  instrument  sued  on  cannot  be  considered  a  promissory 
note.  It  is  an  acknowledgment  of  a  debt  only,  and,  although  from 
such  an  acknowledgment  a  promise  to  pay  may  be  legally  implied, 
it  is  an  implication  from  the^existence  of  the  debt,  and  not  from  any 
promissory  language.  Something  more  than  this  is  necessary  to  estab- 
lish a  written  promise  to  pay  money.  It  was  therefore  held  in  Gray 
V.  Bowden  (23  Pick.  282),  that  a  memorandum  on  the  back  of  a 
promissory  note,  in  these  words,  "  I  acknowledge  the  within  note  to 
be  just  and  due,"  signed  by  the  maker  and  attested  by  a  witness, 
was  not  a  promissory  note  signed  in  the  presence  of  an  attesting 
witness  within  the  meaning  of  the  statute  of  limitations.  In  Eng- 
land an  I.  0.  IT.,  there  being  no  promise  to  pay  embraced  therein, 
is  treated  as  a  due  bill  only.  The  cases,  which  arose  principally  under 
the  Stamp  Act,  are  very  numerous,  and  they  have  held  that  such 
a  paper  did  not  require  a  stamp,  as  it  was  only  evidence  of  a  debt. 
(1  Danl.  Neg.  Inst.  3d  ed.  §  36 :  1  Randolph  Com.  Paper,  §  88; 
Fesenmayer  v.  AdcocTc,  16  M.  &  W.  449;  Melanotie  v.  Teasdale,  13 
M.  &  W.  216;  Smith  v.  Smith,  1  F.  &  F.  539;  Gould  v.  Coombs,  1 
C.  B.  543;  Fisher  v.  Leslie,  1  Esp.  425;  Israel  v.  Israel,  1  Camp.  499; 
Childers  v.  Boulnois,  Dowl.  &  Py.  N.  P.  8 ;  Beeching  v.  Westbrook, 
8  M.  &  W.  411.) 

WTiile  in  a  few  States  it  has  been  held  otherwise,  the  law  as  gen- 
erally understood  in  this  country  is,  that,  in  the  absence  of  any 
statute,  a  mere  acknowledgment  of  a  debt  is  not  a  promissory___note, 
and  such  is,  we~lhmk,  tfie  law_oT"l[His  Commonwealth?'  (Gray  v. 
Bowden,  23  Fick:  2^; 'Commonwealth  Ins.  Co.  v.  Whitney,  1  Met.  21 ; 
Daggett  v.  Daggett,  124  Mass.  149;  Almy  v.  Winslow,  126  Mass. 
342;  Carson  v.  Lucas,  13  B.  Mon.  (Ky.)  213;  Garland  v.  Scott,  15 
La.  Ann.  143;  Currier  v.  Lockwood,  40  Conn.  349;  Brenzer  v.  Wight- 


1-^ 


II.    1.]  NOTE  MUST  CONTAIN  A  PROMISE.  39 

man,  7  Watts  &  Serg.  264;  BMup  v.  Oherle,  6  Mo.  App.  583.) 
Some  States  have  by  statute  extended  the  law  of  hills  and  promissory 
notes  to  all  instruments  in  writing  whereby  any  person  acknowledges 
any  sum  of  money  to  be  due  to  any  other  person.  (1  Randolph,  Com. 
Paper,  §  88;  Rev.  Sts.  III.  1884,  c.  98,  §  3;  Gen  Sts.  Col.  1883,  c.  9, 
§  3;  Rev.  Sts.  Ind.  1881,  §  5501 ;  Code.  Iowa,  1873,  §  2085;  Rev.  Code 
Miss.  1880,  §§  1123,  1124.) 

We  have  no  occasion  to  •comment  upon  those  instruments  in  which 
words  have  been  used  or  superadded  from  which  an  intention  to 
accompany  the  acknowledgment  with  a  promise  to  pay  has  been 
gathered,  or  where  the  form  of  the  instrument  fairly  led  to  that  con- 
clusion. (Daggett  v.  Daggett,  124  Mass.  149;  Alniy  v.  Winslow,  126 
Mass.  342.)  No  such  words  exist  in  the  instrument  sued,  nor  is  it^^^  %? 
in  form  anything  but  an  acknowledgment.  The  words  "  for  value  ' 
received  "  recite  indeed  the  consideration,  but  they  add  nothing 
which  can  be  interpreted  as  a  promise  to  pay.  It  is  therefore 
unnecessary  to  consider  whether  it  the  paper  were  a  promissory 
note,  interest  should  be  calculated  from  its  date.  Upon  this  point 
we  express  no  opinion.'  J f  it  is  to  be  treated  ;is  an  ;i(  knowledgiu(>nt 
of  debt  only,  as  we  think  it  must  be,  the  plaint i IT  ijjiot  entitled  to 
interest  except  from  the  date  of  tp^p  wiut  F,vpn  if  'it  was  tl\i'  duty 
of  the  defendant  to  have  paid  the  debt  on  demand,  yet  if  no  demand 
was  made,  if  no  time  was  stipulated  for  its  payment,  if  there  was  no 
contract  or  usage  requiring  the  payment  of  interest,  and  if  the 
defendant  was  not  a  wrongdoer  in  acquiring  or  detaining  the  money, 
interest  should  he  computed  only  from  the  demand  made  by  the 
service  of  the  writ.  (Dodge  v.  Perhins,  9  Pick.  3fi8;  Hunt  v.  Nevers, 
15  Pick.  500.)  "In  general."  says  Chief  Justice  Shaw,  "when 
there  is  a  loan  without  any  stipulation  to  pay  interest,  and  where 
one  has  the  money  of  another,  having  been  guilty  of  no  wrong  in 
obtaining  it,  and  no  fa\ilt  in  retaining  it,  interest  is  not  charge- 
able." (Ilvhhard  v.  Cliarlestown  Railroad,  11  Met  124;  Calton  v. 
~Fragg,  15  Kast.,  222;  Shaw  v.  Ficton,  4  B.  &  C  715;  Moses  v.  Mac- 
ferlan,  2  Burr.  1005;  Walker  v.  Constable,  1  Bos.  &  P.  300.) 

Exceptions  oven  iil«'d.  < 

1  It  sppma  that  in  tho  oaso  of  a  nc^'otiahlc  instrument  payabio  on  drniand.  no 
interest  heinjr  n-^^prvcd,  interest  will  rnn  only  from  the  (hite  of  demand.  .SVovtl 
V.  ficnvil,  4.'i''Barh.  (N.  Y.)  ."il?;  ffrrrirk  v.  Woolrrrtnn.  41  N.  Y.  .'581;  Ziel  v. 
Dukr/t,  \2  Calif.  470.  Hnt  hrinping  an  antion  enn«titntes  demand.  Pirrre  v. 
F(>th*.-rinll.  2  RinR.  N.  (".  107;  Hank  v.  Davidson,  70  N.  Car.  118.  See  §  130, 
pojit,  and  caaea.  —  H. 


'/( 


') 


a.f' 


40  FORM   KKQUIRED.  [ART.    II. 

§20  SMTTTT  v.  ALLEN. 

6  Day    (Conn.)    337.  —  1812. 

Smith,  J.  —  This  was  n  writ  of  error,  brought  by  the  defendants 
in  the  court  bolow,  to  reverse  a  judgment  rendered  against  them  in 
that  court. 

The  declaration  was  in  common  form,  in  assumpsit,  counting  upon 
a  promissory  note,  and  demanding  $100  damages.  To  this,  there 
was  a  demurrer  and  joinder  in  demurrer.  The  writing  counted  upon, 
and  recited  in  the  declaration,  was  of  the  following  tenor,  viz. 

Due  John  Allen  ninety-four  dollars,  91  cents,  on  demand. 

Joseph  L.  Smith. 
Seth  p.  Beebs. 
LrrcHFiELD,  August  30,  1808. 

The  court  below  adjudged  the  declaration  to  be  sufficient  and 
rendered  judgment  for  the  plaintiff,  to  recover  111  dollars,  99  cents, 
damages.     *^   *     * 

On  this  subject,  in  my  view,  it  is  very  clear,  that  where  a  writing 
contains  nothing  more  than  a  Imic  a(  kimw  Irdgment  of  a  debt^  it__ 
does  not,  in  legal  construction,  import  aii  express  promise  to  pay. 
It  would  not  appear,  from  siieli  a  wi'iting,  tliat  the  parties  intended' 
the  debt  should  be  paid.  Their  meaning  might  be,  in  such  case, 
merely  to  settle  their  accounts,  in  writing,  with  a  view  to  further 
dealings. 

/    But  where  a  writing  imports  not  only  the  acknowledgment  of  a  / 
/debt,    but   an    agreement    to   pay    it,    this    amounts    to    an    express  / 

'        From  the  writing  in  question,  it   is   perfectly  manifest   that   the/ 
debt  acknowledged  to  be  due  was  to  be  paid  on  demand,  as  fully, 
as  if  the  words  "to  be  paid"  or  "which  we  promise  to  pay,"  had 
been  inserted  next  before  the  words  "  on  demand." 

I  think,  therefore,  that  the  declaration  is  sufficient;  and  that  the 
cause  ought  to  be  remanded  for  further  proceedings. 
The  other  judges  severally  concurred  in  this  opinion. 

Judgment  reversed,  and  the  cause  remanded.^ 


2 "  Due  A.  B.  $325  payable  on  demand,"  Kimball  v.  Huntinfiton,  10  Wend. 
(N.  Y.)  675;  "  I.  0.  U.  £20  to  be  paid  on  the  22d  instant,"  Brooks  v.  Elkins,2 
Meeson  &,  Welsby,  74,  accord.  "  Borrowed  this  day  of  A.  B.  £100  for  one  or 
two  months;  chock,  £100,  on  ttie  Naval  Bank,"  Ilyrie  v.  Dcudney,  21  Law 
Journal,  Q.  B.  278,  contra.  If  the  due  bill  have  words  of  negotiation  as  "or 
order  "  or  "  or  bearer,"  it  is  generally  held  to  be  a  promissory  note.  Russell 
V.  Whipple,  2  Cow.  (N.  Y.)  536;  ' Sackett  v.  Spencer,  29  Barb.  (N.  Y.) 
180.  —  H. 


II.    1.]  NOTE  MUST  CONTAIN  A  PROMISE.  41 

§  20  Hegeman  v.  Moon,  131  New  York,  462.  —  1892.  "  One  year 
after  my  death  I  hereby  direct  my  executors  to  pay  to  A.  B.,  etc., 
being  the  balance  due  him  for  cash  advanced,  etc."  Peckham,  J.  — 
"  The  acknowledgment  of  the  indebtedness,  and  that  it  is  due,  im- 
plies a  promise  to  pay  it  on  demand.  It  is  a  promissory  note  within 
the  statute.  *  *  *  The  direction  is,  however,  in  the  nature  of  a 
promise  and  expresses  a  time  of  payment,  and,  therefore,  excludes 
the  presumption  that  it  is  payable  immediately,  which  would  other- 
wise arise  from  the  use  of  the  word  due." 


d,^^^^^      }ot^  .'I  '^-^ 


§  20  ScHMiTZ  V.  Hawkeye  Gold  Mining  Co.,  8  S.  Dak.  544,  67 
N.  W.  K.  618.  — 1896.  "Time  Check,  No.  189.  $98.65.  General 
Managers'  Office,  Hawkeye  Gold  Mining  Company.  Pluma,  So. 
Dak.,  June  10th,  1803.  Due  W.  C.  Robinson  the  sum  of  ninety-eight 
dollars  and  sixty-five  cents  ($98.65),  payable  at  this  office,  on  the 
20th  day  of  June,  1893,  to  him  or  order.  David  Hunter,  General 
Manager,  by  L.  A.  Fell.  W.  C.  Eobinson."  [Indorsed]  "  W.  C. 
Robinson."  Fuller,  J.  — "As  the  writing  before  us  is  negotiable 
in  form,  and  the  signer,  in  legal  effect,  promises  to  pay  a  specified 
sum  of  money,  we  conclude  that  tlie  instrument  is  a  promissory 
note,  and  that  appellant's  fRobinson'sl  liability  was  only  that  of 
an  indnrser.  The  word^;  '  payable  to  W.  C.  Robinson  or  order,' 
unconditionally,  nt  n  spccifiod  time  nnd  place,  a  cerlain  amouhfof 
—  nrnncv,  jm])orl  ;i  promi.-i' ;  and  the  instrument  contains  every  essen- 
tiaTeTement  of  a  promissory  note.  *  *  *  There  was  no  allega- 
tion   in    the   complaint   nor   proof   at   the  trial   by   which   to   charge 

appellant,  as  an  indorser  or  otherwise." 

/■    » 

§20  HiiRSEY  V.  Winrlow.  59  Maine,  170.  —  1R70.  "  Noliloboro, 
Oct.  4.  1869.  Nathaniel  O.  Winslow.  Cr.  V>\  labor  I6.14  days  @ 
$4  per  day,  $67.00.  (Jood  to  licarcr.  William  Vannab."  T'^an- 
FORTil.  J.  —  "It  would  spcm  that  the  only  possible  construction 
which  ran  be  given  (o  this  instrument  is,  substantially.  Ibis:  In 
consideration  of  16)4  days'  labor,  performed  by  Nathaniel  O.  Winslow, 
at  $4  per  day,  amounting  to  $67.00.  T  promise  to  pay  him,  or  bearer, 
that  sum  on  demand.  Signed,  William  Vannab.  Here  we  have 
every  element  of  a  negotiable  promissory  note;  a  maker,  a  payee,  a 
promise  or  engagement  to  pay  a  certain  sum  of  ffloney  at  a  specified 
; -4«inf,  ahvMlllt<^ly  and  unconditionally,  and  the  word  bearer  to  mako 
it  negotiable.** 


^  V^  (U—  /-  ^-^ 


42  FOUM   REQUIRED.  [ART.    II. 

§20  CURRIKK  r.  I.OCKWOOD. 

40    t'ONNKCTU'l'T,   341). —  1S73. 

Assiimpsit  upon  a  writton  iiistruninit,  wliiih  the  plaintiffs  claimed 
was  a  [noinii^sorv  noto,^  nun-neyi)tial)lt\  and  was  not  harrcd  until 
seventeen  years  I'nun  its  dale.  The  trial  court  held  it  not  a  promis- 
sorv  note  and  that  it  was  barred  by  the  statute  of  limitations. 

Seymouh.  ('.  .1.  —  The  first  (piestion  in  this  case  is  whether  the 
writing  <uvi\  iipiui  is  a  promissory  note  within  the  meaning  of  those 
words  in  the  statuli'  o\'  limitations.  The  statute  is  as  follows:  "No 
action  shall  he  hroui^dit  on  any  bond  or  writing  obligatory,  contract 
under  seal,  or  promissory  note  not  negotiable,  but  within  seventeen 
years  next  after  an  action  shall  accrue."  The  instrument  sued 
upon  is  as  follows : 

Bridgeport,  Jan.  22nd,  18G3,  $17.14.  Due  Currier  and  Barker  seventeen 
dollars  and   fourteen  cents,  value  received.  Frkderick  Lockwood. 

Promissory  notes  not  negotiable  are  by  the  statute  above  recited 
put  upon  the  footing  of  specialties  in  regard  to  the  period  of  limita- 
tion, and  for  most  other  purposes  such  notes  have  been  regarded  as 
specialties  in  Connecticut.  The  instrument,  however,  to  which  this 
distincCTorT  has  been  attached  is  the  simple  express  promise  to  pay 
money  in  the  stereotyped  foiin  familiar  to  all.  The  writing  given 
in  evidence  in  this  case  is  a  due  1)111  and  nothing  more.  Such 
acknowledgTriuiita  of-.dubt  ait*  Linnmon  and  pass  uffaer  the  name  of 
due  bills.  They  are  informal  memoranda,  sometimes  here  as  in 
England  in  the  form  "1.  0.  U."  They  are  not  the  promissory  notes 
which  are  classed  with  speci.ilties  in  the  statute  of  limitations.  The 
law  implies  iiiilccd  n  promise  to  pay  from  such  acknowledgments, 
but  the  pmiiiisc  is  simply  implied  and  not  express.  Tt  is  well  said 
by  Smith.  J.,  in  SniilJi  v.  Allen' (5  Day","  337).  "Where  a  w^riting  con- 
tains nothing  more  than  a  hare  acknowledgment  of  a  debt,  it  does 
not  in  legal  construction  import  an  express  ^promise  to  pay;  but 
where  a  writing  imports  not  only  the  acknowledgment  of  a  debt  but 
an  agreement  to  pay  it,  this  amounts  to  an  pxpr^n3S333iit*flct." 

Tn  that  case  the  words  "  on  demnnd  "  were  held  to  import  and  to 
be  an  express  promise  to  pay.  That  case  adopts  the  correct  prin- 
ciple, namely,  that  to  constitute  a  promissory  note  there  must  be  an 
express  as  contra-distinguished  from  an  implied  promise.  The 
words  "on  demand  "  are  here  wanting.  The  words  "  value  received," 
which  are  in  the  writing  signed  by  the  defendant,  cannot  be  regarded 
as  equivalent  to  the  words  "  on  demand."  The  case  of  Smith  v.  Allen 
went  to  the  extreme  limiTTh  holding  the  writing  there  given  to  be  a 
promissory  note,  and  we  do  not  feel  at  liberty  to  go  further  in  that 
direction  than  the  court  then  went. 


/ 


\ 


II.    1.]  NOTE  MUST  CONTAIN  A  PROMISE.  4? 

The  writing  then  not  being  a  promissory  note,  the  plaintiff's  action 
is  barred  by  the  six  years"  clause  of  the  statute,  unless  revived  by  a 
new  promise  to  pay. 

A  new  trial  is  not  advised.' 

Park  and  Carpenter,  JJ.,  concur.  Foster  and  Phelps,  JJ., 
dissent. 

0^  ^^^     (UJ  '"*-^ 

§30  MILLER  V.  AUSTIN. 

13  Howard   (U.  S.)    218. —  1851. 

Action  by  indorsee  against  indorser,  alleging  due  presentment, 
demand,    notice   and   protest.      Judgment    for   plaintiff.      Defendant  '^'C-v 

brings  writ  of  error.  ^ 

Mr.  JrsTTCE  Catron  delivered  the  opinion  of  the  court. 

The  only  question  this  case  presents  that  we  deem  worthy  of 
notice  is,  whether  the  paper  sued  on  is  a  negotiable  instrument ;  it 
is  88  follows : 

No.  959.  Afis.sissippi  Union  Bank, 

Jackson.  (Miss.)  Feb.  8,  1840.  1  hereby  certify,  that  Hugh  Short  has  de- 
posited in  this  bank,  payable  twelve  months  from  1st  May,  1839,  with  5  per 
cent.  intoH'st  till  due,  fifteen  hundred  dollars,  for  the  use  of  Henry  Miller,  and 
payable  only  to  his  order  upon  the  return  of  this  certificate.  .'P1..500. 

William  P.  Grayson,  Cashier. 

The  suit  was  by  the  hist  indorsee  against  his  immediate  indorser, 
and  brought  in  Ohio.  The  statute  of  that  State  declares  all  promis- 
sory notes,  drawn  for  a  certain  sum,  payable  to  any  person  or  order, 
or  to  any  person  or  his  assigns,  nsgotiable  by  indorsoniont. 

The   ostabli>hf'd   doctrine   is,   Ihat   51    lirdfllisr- to  deliver,   or   to  be 
acfonntable   for.  so  mncli   money,   is  a  good  bill   or  note.     Here  the 
sum    is   certain,    and    tlio    promise    direct.      Every    reason    exists    why 
tho  indorser  of  this  paper  shfuild  be  hold   responsible  to  his  indorsee, 
that  ran  prevail  in  cases  where  the  pnper  indorsed  is  in  the  ordinnrv 
form  of  a  promissory  note:  and  as  such  note,  the  State  courts  cren- 
erally.  have  treated  certificates  of  deposit  payal)le  to  order;  and  the  ' - 
principles  adopted  by  the  State  courts  in  coming  to  this  conclusion, 
are    fully   sustained    by    the    writers   of    treatisos   on    bills    nnd    notes.         /* " 
Being   of   opinion    that    the   Circuit    Court    propcrlv    bebl    the    paper      "V 
indorsed,  negotiable,   it   is  ordcnd   (bat    tbc  jiidgiiicnt    be  affirmed.*     /  / 


*/. 


•  Contra:   Jarquin  v.    Warrm,  40   III.   450;    lirndy   v.   Chnndlir.   31    Mo.   28. 

For  criticism  of  Currirr  v.  F.orkwonri,  .sec   14   Am.   L.   Rcf;.  N.  K.  20. —  M.  _i 

♦  Accord:    Pnrdre  v.   Fish,  00   \.    Y.   205;    Frank   v.    irr.<i.sr/.v.   fi4    N.    V.    155:         ^v 
Rrnrff.ttry  v.   Wrhhrr.   101  Virh.  88;    h'irkirnorl  V.   Fin^t   \nt.   nic.  40   NVl.    4S4 
Klnuhcr  v.   fiigtjrrstaff,  47   Wis.  551.     The  certificate  of  deposit  in  to  be  din 


44  FORM  REQUIRED.  [ABT.    II. 

2.  A  Bill  Must  Contain  an  Order. 
§20  IIOYT  V.  LYNCH. 

2  Sandfokd's  SuncRioR  Court  Rkv.    (N.   Y.)    328.  —  184D. 

Assumpsit  on  nii  order  druwii  uitoti  the  (l(d"tM)(l:ui(.  with  the  com- 
mon counts.  At  tho  trial,  it  appcMrcd  that  Stnitli  and  Woj^lom, 
ttiiildors,  erected  certain  l)nil(linus  lor  tlic  defendant  in  VVilliams- 
biir<ih,  in  1847.  The  ])laintilV  vlii'incd  to  have  tiinied  the  roofs  and 
put  up  the  gutters  for  those  huildiiius,  and  his  bill  for  the  work, 
rendered  to  S.  &_VVju'_'lIl^?V.P.i!i'^^  ^'^  $;5U0.(SS.  They  gave  an  order  on 
the  defendant,  written  at  the  foot  oTt-hr  hill,  as  hereafter  set  forth. 
The  order  was  presented  by  one  Harris  lo  the  defendant,  who  said 
he  could  not  pay  it  until  he  went  and  saw  how  the  buildings  pro- 
rO  gressed.     The   plaintiff   then    proved    by    Harris,   that   two   or   three 

davT'afterwards  the  defendant  met  the  hitter  at  the  buildings,  and 
there  promised  to  pay  the  order  as  soon  as  the  sashes  were  put  in, 
and  those  were  put  in  early  in  .January,  181S. 

The  bill  and  order  were  read  in  evidence  in   these  words,  viz:  — 

New   York,   IGth  Dec,   1847. 
Messrs.   R.MiTir   and  Wogi.om, 

To  C.  H.  HoYT,  Dr. 

To  tin   roof.  86  ft.  x  STMj   ft.  3225   ft.   @   TVoc $241.87 

112   of   3    in.   leader 11.20 

85  ft.  of  copper  gutter,  48  6d 47.81 

.$300.88 


f  OL 


WiLLiAMSBURGH,   Dec.    16,    1847. 
Mb.  .7.  Lynch 

Please  pay  the  above  bill,  being  the  amount  for  tinning  your  houses  on 
South  Sixth  street,  and  charge  the  same  to  our  aecount, 

.  And  much  ohli<To  yours, 

1^^  V  '     '  vi  fjj(  Smith  &  Woolom. 

tinguished  from  the  "  deposit  slip."  wliich  is  merely  a  receipt  or  memorandum, 
containinc  no  promise,  nnd  requiring  no  return.  First  Nat.  lik.  v.  Clark.  134 
N.  V.  368.  372. 

For  orders  on  savings  banks,  see  ]Vliilr  v.  Ctishinfi,  88  Me.  330,  po.sl, 
p.  46.  —  H. 

f"  Doubtless  n  enrf ifiente  of  deposit  may  be  is«ued  in  the  form  of  a  nego- 
tiable instrument.  {Frank  v.  Weftftpls.  64  N.  Y.  15.5.)  But  from  our  exami- 
nation of  the  subject  theie  seems  to  be  no  uniform  usage  in  commercial  circles 
or  with  monetary  institutions  as  to  their  forms.  Some  are  plainly  negotiable, 
some  equally  plainly  aro  not  nenjotiable,  while  l)ftweon  the  two  extremes  are 
many  of  the  debatable  class."  Culi.en,  C.  J.,  in  Zander  v.  ^^  Y.  Security  d 
Trust  Co.,   178  N.  Y.  208.  210. 

For  certificates  of  deposit  held  to  Ix;  negotiable  under  the  Negotiable  Instru- 
ments Law,  see  Forrest  v.  l^afrfy  Jiankinq  <f  Trust  Co.,  174  Fed.  345;  Kava- 
nagh  v.  Bank  of  America.  230  111.  404;  Dickey  v.  Adler,  127  Southwestern 
(Kansas   City  Ct.  App.,  Mo.)    593. —  C] 


II.    2.]  BILL    MUST    CONTAIN   AN    ORDER.  45 

By  the  Court.  Oakley,  Ch.  J.  —  [After  disposing  of  another 
matter.]  There  was  another  question  argued,  "whicli  must  arise  on 
a  new  trial.,  and  it  is  right  that  we  should  express  our  views  upon  it 
at  this  time.  It  is  said  that  the  order  upon  which  the  suit  is  founded, 
is  a  bill' of  exchange,  and  that  there  is  no  written  acceptance  of  the 
same. 

On  consideration,  we  have  come  to  the  conclusion  that  this  is  a 
bill  of  exchange.  It  is  an  order  in  writing,  drawn  by  one  party  on 
another,  requesting  the  latter  to  pay  a  certain  sum  of  money  to  a 
third  party,  at  all  events;  depending  upon  no  contingency,  and  pay- 
able out  of  no  particular  fund.  It  comes  within  the  reason  of  the 
statute  requiring  a  written  acceptance  to  charge  the  drawee.  It  is 
true  this  order  is  not  negotiable,  but  that  is  not  necessary  to  mak^ 
it  a  bill  of  exchange.'^  /^  /  ^  ^C^  ^  /^^  '  ''  ^  ^^^  ^^ 
•^  1-^ '        /  New  'trial  granted.      ^L, 


§20  The  King  v.  Ellor,  1  Leach,  Crown  Law,  323. —  1784. 
"  Messrs.  Songer,  —  Please  to  send  £10  by  the  bearer,  as  I  am  so  ill  I 
cannot  wait  on  you.  Elizabeth  Wery."  Ellor  was  indicted  for  forging 
a  bill  of  exchange.  Tiik  Court.  —  "  This  appears  to  be  a  mere  letter, 
rather  requesting  the  loan  of  money  than  ordering  the  payment  of  it. 
The  terms  of  it  do  not  import  anything  compulsory  on  the  part  of 
the  drawee  to  pay  ft?*"  /V  -^^^.^^^^       '•vv*'^    fv-->ct  . 


^  20  KuFF   V.   Webb,   1    Espinasse,    129.  —  1794.       "  Mr.    Nelson 
will   much  oblige  Mr.   Webb   V)y   paying  J.   RufF,  or  order,   twenty 
guineas   on   his   account."     "  Lord   Kenyon   said,   that  he   was   of      j^ 
opinion,  that  the  paper  oflTored   in  evidence  was  a  bill  of  exchange;   /j 
that  it  was  an  order  by  one  person  to  another,  to  pay  money  to  the  ^^  *} 
plaintiff  or  his  rwAov  ^x^\,^\x  Mfi^J_2_r"il^tiifli^  fni-m  •x  hill  of  exchange." 


S^' 


8  20  Little  v.  Slackford,  Moody  &  Malkin,  171.  — 1828.  "Mr. 
Little:  —  Please  to  lot  the  bearer  have  seven  pounds,  and  place  to  my 
account,  and  you  will  oblige,  your  humble  servant,  K.  Slackford."  — 
Lora)  Tknterden,  C.  J.  —  "The  paper  does  not  purport  to  be  a 
demand  made  by  a  party  having  a  right  to  call  on  the  other  to  pay. 
The  fair  meaning  is,  'you  will  f)l)lige  me  by  doing  it.'"" 


«  Rpp   Mrhlbrrfj  v.   Tinhrr,  24   Wis.   fid?,  pni^t.  —  H. 

•  "  Thnmns  WillinrriH,  Esq. —  Plraao  lot  tho  bpurpr  havp  if.'ifl.  T  will  nrranpte 
it  with  v""  this  noon.  Yours,  most  obedient,  S.  R.  Hirspnthull,"  was  hold  to 
be   a  hill   of  exchange.     Biescnthall  v.   Williams,    1    Duval!    (Ky.)    .320,    1864. 


46  FORM   REQUIRED.  [aRT.    II. 

3.  The  Promise  ok  Okder  Must  be  Unconditional. 

(a)   Cunditional  pninilsrs  or  orders  arc  not  negotiable.^ 

§  20  WHITE  V.  GUSHING. 

88   Maine,  339.—  1896. 

Assumpsit  on  an  order.  The  trial  court  ruled  that  the  order  was 
negotiable  and  the  action  could  he  maintained  in  the  name  of  White 
by  a  simple  indorsement  by  Lawler.     Defendant  excepted. 

Foster,  J.  —  The  plaintiir"sues  as  indorsee  of  an  order  signed  by 
the  defendant  of  the  following  tenor: 

r£j  $120.  Dover,  Oct.  27,  1893. 

Piscataquis  Savings  Bank. 
/.  Pay  James  Lawlcr,  or  order,  one  hundred  and  twenty  dollars,  and  charf^e  to 

I  yi^^^t^v^"'^  my  account  on  book  No.  — .  J.  N.  Cushino. 

Witness  

The  bank  book  of  the  depositor  must  accompany  this  order. 

The  order  was  indorsed  in  blank  on  the  back  by  James  Lawler  and 
Samuel  Lewis,  and  the  plaintiff  claimed  to  recover  against  the  defend- 
ant as  upon  a  negotiable  instrument.  The  ^seal.  question  jyesented 
is  whether  the  instrument  declared  on  is  negotiable,  so  tliat  an  action 
may  be  maintained  upon  it  in  the  name  of  the  indorsee. 

To  constitute  a  negotiable  draft  or  order,  it  must  be  a  written 
order  from  one  party  to  another  for  the  payment  of  a  certain  sum 
of  money,  and  that  absolutely,  and  without  any  contingency  that 
would  embarass  its  circulation,  to  a  third  party  or  his  order  or  bearer. 

It  has  often  been  held  tliat  a  bill  or  note  is  not  negotiable  if~made 
payable  out  of  a  particular  fund.  But  there  is  a  distinction  between 
such  instruments  made  payable  out  of  a  particular  fund,  and  those 
that  are  simply  chargeable  to  a  particular  account.  In  the  latter 
case,  the  payment  is  not  made  to  depend  upon  the  adequacy  of  that 
fund,  the  only  purpose  being  to  inform  the  drawee  as  to  his  means 
of  reimbursement,  and  the  negotiability  of  the  instrument  is  not 
affected  by  it. 

The  objection  thatis  raised  to  the  negotiability  of  this  instrument 
is,  not  that  it  is  made  payable  out  of  a  particular  fund,  but  that  it  is 
subject  to  such  a  contingency  as  necessarily  embarrasses  its  circula- 

VVords  of  civility  do  not  prevent  the  instrument  from  being  an  order.' 
•WKeafley  v.  HllUbV,  II  Cal.  32: 

By  the  law  merchant  a  bill  of  exchange  need  not  be  payable  to  order  or 
bearer,  or  have  the  words  value  received,  or  he  payable  at  a  day  certain  or  at 
any  particular  place.  Thus:  "To  Hoxie  &  Pvich :  Please  pay  to  Ciias.  .Mehl- 
berp  the  sum  of  .$69.20,  and  charpe  to  me.  ('has.  Tisher,"  is  a  hill  of  rxclianpe 
by  the  law  merchant.  Mehlherg  v.  Tisher,  24  Wis.  607,  post.  See  §  26, 
post.  —  H.  

7  See  note  in   125  Am.  St.  Rep.  at  p.   192. —  C. 


(I.    3.]  MUST   BE 'iTNCONDITIONAL.  47 

tion  and  imposes  a  restraint  upon  its  negotiability,  by  means  of  these 
words  contained  upon  the  face  of  the  order:  "The  bank  book  of 
the  depositor  must  accompany  this  order."  Although  these  words 
are  upon  the  face  of  the  order  below  the  signature  of  the  drawer, 
they  were  there  at  the  time  of  its  inception,  became  a  substantive 
part  of  it  and  qualified  its  terms  as  if  they  had  been  inserted  in  the 
body  of  the  instrument.  (Littlefield  v.  Coombs,  71  Maine.  110;  dish- 
ing V.  Field,  70  Maine,  50,  54;  Johnson  v.  Heagan,  23  Maine,  329; 
Barnard  v.  Cushing,  4  Metcalf.  230;  Heywood  v.  Perrin.  10  Pick. 
228;  Benedict  v.  Cowden,  49  N.  Y.  396;  Costelo  v.  Croivell,  127  Mass. 
293,  and  cases  there  cited.) 

Was  the  order  negotiable?  The  answer  to  that  depends  upon  the 
effect  of  the  words  "  The  bank  bcok  of  the  depositor  must  accom- 
pany this  order."  If  not  negotiable,  the  plaintiff  as  indorsee  cannot 
maintain  an  action  upon  it.  (Noyes  v.  Oilman,  65  Maine,  589.)  If 
their  effect  is  such  as  constitutes  a  contingency  in  relation  to  the 
-pdvmml  of  the  aoiefrdgpgndent  upon  the  prodiitllon  uf  the  dfawut'n, 
bank  book  by  the  holder  or  indorsee  of  the  order,  then  they  must 
be  regarded  as  such  an  embarassment  to  the_ii£satiation  of--lhc — ^pfy^ 
order,  and  such  restriction  upon  its  circulation  for  commercial  /^\^ 
purposes  as  to  render  it  non-negotiable.  ,  T/ 

Without  these  words  the  order  is  payable  absolutely,  and  there  is^    "'  i^ 
no  apparent  uncertainty  affecting  its  negotiability.     With  thorn,  the  /         ^< 
order  is   payable   only   upon   contingency,   or  condition,   and   that   is  ^'"**^ 


upon  the  production  of  the  drawer's  bank  book.     This  is  rendered  q 
imperative  from  the  language  employed,  and  the  bank  upon  which  ^^'^^-^ 
the  order  is  drawn,  would  have  the  right  to  insist  upon  such  produc-  J^%, 

tion  of  the  book  in  compliance  with  the  forms  of  the  order:  and  fhe"^.    U   ^ 
case  shows   that   it   has   refused   payment   trpfm--fM-esentation   of   the  >, 
order  for  the  reason  that  it  was  not  accompanied  by  the  bank  book.        - 
It  cannot,  therefore,  be  regarded  as  payable  absolutely  and  without  •^<^ 

any  contingency  that  would   embarrass  if_a_uxciiliition.     'i'ho  drawer V*      ,j< 
has  it  in  his  power  to  defeat   ifs  payment  by  wilhholding  fbo  bank      "^^ 
book.     CJertainly  the  bank  book  of  the  depositor  is  within   his  own 
control  rather  than  that  of  the  indorsee  of  this  order. 

It  was  the  necessity  of  certainty  aiid^pTm+4<jttJ£Linor(anlilo  affairs 
and  the  inconvonioncos  which  would  result  if  c-nrnnicnial  paper  was 
incumbered  with  conditions  and  rontirigoncios.  that  led  to  the  estab- 
lishment of  an  inflexible  rule  that  to  he  negotiable  they  must  be 
payable  absolutely  and  without  any  conditions  or  contingencies  to 
embarrass  their  circulation.  {American  Kr.  Hank  v.  lilanrhard.  7 
Allfn,  33.3.)  In  Ih.lt  rase  the  words,  "subject  to  the  policy,"  being 
included  in  a  promissory  note,  were  held  to  render  the  promise  con- 
ditional and  not  absolute,  and  so  the  note  was  held  not  to  be  nego- 
tiable. (Noyes  V.  Oilman,  65  Maine,  589,  591  ;  Ifnhhard  v.  Mnxriy,  11 
Gray,   170.) 


r^ 


48  FORM   REQUIRED.  [ART.    II, 

A  caee  in  every  ossential  like  the  one  we  are  considering  was 
before  the  Supreme  Court  of  Pennsylvania  in  1801.  A  far  simile  of 
the  order  is  <jiven  in  the  opinion.  No  two  oases  could  he  nearer 
alike.  There,  as  here,  the  order  was  drawn  on  a  savings  bank.  The 
suit  was  by  the  indorsee  against  the  drawer  as  in  this  case.  There, 
as  here,  the  order  contained  a  statement  upon  its  face,  but  below  the 
signature  of  the  drawer,  that  the  "  Deposit  book  must  be  at  bank 
before  money  can  be  paid."  In  discussing  the  question  of  its  nego- 
tiability cases  are  cited  from  the  courts  of  Maine,  Vermont,  Massa- 
chusetts and  New  York,  as  well  as  from  Pennsylvania.  In  the 
course  of  the  opinion   the   court  says: 

"  It  sufliciently  appears  from  the  memoranda  on  its  face  that  it 
was  drawn  on  a  specially  deposited  fund  held  by  the  bank  subject  to 
certain  rules  and  regulations,  in  force  between  it  and  the  depositor, 
requiring  certain  things  to  be  done  before  payment  could  be  required, 
viz. :  previous  notice  of  depositor's  intention  to  draw  upon  the  fund, 
return  of  the  notice  ticket  with  the  order  to  pay,  and  the  presenta- 
tion of  the  deposit  book  at  the  bank,  so  that  payment  might  be 
entered  therein.  *  *  *  j^  jg^  j^  substance,  merely  an  order  on 
the  dollar  savings  bank  to  pay  J.  W.  Quinn,  or  order,  nine  hundred 
dollars  in  nine  weeks  from  date,  or  February  1,  1888,  provided  he  or 
his  transferee  present  to  the  bank,  with  the  order,  the  notice  ticket, 
and  also  produce  at  and  before  the  time  of  payment  the  drawer's 
deposit  book.  As  already  remarked,  these  are  undoubtedly  pre- 
requisites which  restrain  or  qualify  the  generality  of  the  order  to 
pay  as  contained  in  the  body  of  the  instrument.  They  are  also  pre- 
requisites with  which  it  may  be  dithcult,  if  not  sometimes  impossible, 
for  the  payee,  transferee,  or  holder  of  such  an  order  to  comply." 
(Iron  City  Nat.  Bank  v.  McCord,  139  Pa.  St.  52,  23  Am.  State  Rep. 
166.) 

The  order  in  question  was  drawn  upon  a  savings  bank,  and  it  is 
common  knowledge  that  all  such  banks  in  this  State  have  a  by-law 
which  all  depositors  are  required  to  subscribe  to,  that  "  no  money 
shall  be  paid  to  any  person  without  the  production  of  the  original 
book  that  such  payment  may  be  entered  therein." 

This  court  in  the  case  of  Sullivan  v.  Lewiston  Inst,  for  Savings  (56 
Maine,  507),  has  considered  the  purpose  and  necessity  of  these  salu- 
tary regulations.  We  should  be  slow  to  countenance  any  departure 
from  this  rule  needed  for  the  protection  of  depositors  in  our  savings 
banks  now  numbering  more  than  160,000,  and  W'here  deposits  aggre- 
gate nearly  $60,000,000. 

Inasmuch  as  this  order  is  not  negotiable  and  no  suit  can  be  main- 
tained upon  it  by  the  plaintiff  as  indorsee,  it  becomes  unnecessary  to 
consider  the  other  exceptions. 


Exceptions  sustained. 


-^^ 


'  iT 


U.   3.]  MUST  BE   UNCONDITIONAL.  49 

(b)  An  order  or  promise  to  pay  out  of  a  particular  fund  it 
conditional.^ 

§82  WORDEN  v.  DODGE. 

4  Denio  (N.  Y.)    159. —  1847. 

Assumpsit.  On  the  trial  the  plaintiff  gave  in  evidence  an  agree- 
ment, signed  by  the  defendants,  bearing  date  October  12,  1839,  by 
which,  fofnraTue  receded,  they  jointly  and  severally  promised  to  pay 
to  the  plaintiff,  by  his  name  or  order,  $250,  with  interest,  payable 
one-half  in  two  years  and  the  other  half  in  three  years  from  the  day 
of  said  agreement,  "  out  of  the  net  proceeds,  after  paying  the  cost 
and  expenses  of  ore  to  be  raised  and  sold  from  the  bed  on  the 
lot— this  day^  conveyed  by  Kdward  l\radden  to  Edwin  Dodge,  which 
bed  is  to  be  opened  and  the  ore  disposed  ©f  as  soon  as  conveniently 
may  be." 

On  reading  the  agreement  th(^  plaintiff  rested,  and  the  defendants 
moved  for  a  nonsuit,  as  the  plaintiff  had  not  shown  that  the  defend- 
ants had  received  enough  from  the  ore  to  pay  the  note,  nor  had  they 
shown  any  default  or  negIigenc£_on  their  part.  The  judge  held  that 
the  plaintiff  could  noTTecover  without  proving  that  the  defendants 
had  received  funds  from  the  ore  to  enable  them  to  pay,  or  had  neg- 
lected to  work  the  ore  bed,  and  directed  a  nonsuit. 

The  plaintiff  excepted.  /.  ,      '    ' /^     i-^    —  j^^  <i^J-ut^_y  ^^ 

By  the  Court,  Beardsley,  J.  —  The  nonsuit  was  proper.     A  prom-  ^^ 
issory  note  must  be   payable  ahsohrtely.  and   not   upon   any  contin-      /^^^^y 
gency  as  to  time  or  event.     (3  Kent,  5th  ed.  p.  74;  S?nlth  on  Merc. ~>-t,^ 
Law,  113,  lUir^Uorji  on  Prom.  Notes,  §§  1,  22  to  26;  Id.  on  Bills  of 
Exch.  ^§  46,  47;  Chit,  on  Bills,  10th  Amer.  ed.,  p.  132  to  139.) 

This  was  not  such  an  engagement,  for  although  the  promise  was 
to  make  payments  at  certain  specified  times,  the  payments  wore  to 
be  made  "out  of  the  net  proceeds"  "of  ore  to  be  raised  and  sold" 
from  a  cerTairron!  btd.  Here  was  a  contingency;  the  fiiml  might 
turn  out  to  be  inadequate,  in  wliich  case  there  would  be  no  obliga- 
tion to  pay  at  any  time.  It  is  not  a  promise  to  pay  "absolutely 
and  at  all  events,"  as  a  promissory  not(^  always  is. 

New  trial  denied.* 

■  Sep  notf  in    12.5   Am.  St.   T?pp.  at  pagfi   IflO.  —  ('. 

»"  I'U'aHc  pay  A.  R.,  or  onh'r,  $500,  for  value  roppivj'd,  .  .  .  out  of  tho 
proo«'f<iH  of  the  rlaim  aKainst  the  Pcahody  Kstato,  now  in  your  hands  to  roll««ct, 
v,\trn  iUf  name  shall  have  Ix'cn  collected  hy  you."  in  not  a  ne<rotiahle  instru- 
ment, as  the  money  is  payable  out  of  a  [(articular  fund.  h'irh<inlsi)n  v.  Car- 
prntrr,  40   N.   Y.  000. 

■'  You  will  please  pay  to  A.  B.  the  amount  of  a  note  for  if'.?. 000.  dated 
December  .Tlwt,  180H,  and  deduct  the  same  from  my  share  of  the  profits  of 
NKQOT.  INBTRTTMKNTB  —  4 


60  KOHAl    i;i\'l  lUIOD.  I  Aid'.    II. 

(c)   An  indication  of  a  jkirtivulur  fund  doen  ri<d  ic.iidcr  promise 
~  ""  (3jjidiUmmi'f~' 

§22  SCHMITTLKK  v.  SIMON. 

101   Nkvv   Vokk,  554.-188(5. 


RuGER,  Cli.  J.  —  'I'lic  plaiiilitV  clniiiuH]  to  recover  as  the  holder  of 
dn 
foU^T 


a    draft   dragat*  upon    and    accoptod    hy    the    defendant,    reading    as 


New   York,  February  'ifi.   1877. 
Mr.   Adam  Simon,  executor,  will   please  pay  to  Johannos  Schniittler  or  Ins 
order,  on   the  first  day  of^  July,  wliicli   will   be  in   the  year    1H70,   the  sum  ot 
$900,   with    seven   per   cent,   interest,   to   be    paid    besides    this   amount    yearly, 
July  month,  and  charge  the  amount  aj^ainst  me  and  of  my  mother's  estate. 

William  J.  Sciiaren. 
[Written  upon  the  face]:   Accept,  Adam  Simon,  executor;   [and   indorsed]: 
Pay  to  the  order  of  Mary  Schniittler,  the  amount  of  note. 

Johannes  Schmittlkr. 

Upon  the  trial,  after  proving  the  execution  of  the  draft,  its  accept- 
ance and  transfer,  and  offering  to  prove  the  payment  of  a  considera- 
tion by  the  plaintiff  to  the  payee,  which  was  objected  to  by 
defendant,  and  excluded  hy  "ttie  "c6urt,  the  plaintiff  rested.  The 
defendant  thereupon  moved  to  nonsuit  upon  the  ground  that  the 
obligation  was  not  binding  upon  the  defendant  personally,  but  he 
was  liable  thereon,  if  at  all,  in  his  representative  character  alone, 
and  that  it  was  p^'ab^e'"out  of  a  specific  fund,  and  a  recovery 
thereon  could  not  be  had  without  proving  the  existence  and  extent 
of  such.  fund.  The  court  thereupon  nonsuited  the  plaintiff,  to  which 
decision  sh£.  excepted.  The  General  Term  having  affirmed  the 
determination  of  the  trial  court,  the  plaintiff'  took  this  appeal. 

We  think  the  court  below  erred  as  to  both  of  the  grounds  upon 
which  their  judgment  proceeded.  That  the  defendant  was  liable 
upon  the  draft,  if  liable  at  all,  in  his  individual  capacity  alone,  seems 
jinder  the  authorities  to  admit  of  no  doubt.-     *     *     * 

our  partnership  business  in  malting,"  is  not  a  bill  of  exchange,  for  it  is  pay- 
able out  of  an  uncertain  fund,  from  profits.  Mu^u/er  v.  Shannon,  61  N.  Y.  251. 
Jos.SELYN  V.  Lacikr,  10  Mod.  R.  204,  316. —  1715.  Evans  drew  a  bill  upon 
Josselyn,  requiring  him  to  pay  Lacier  seven  pounds  every  month  out  of  the 
growing  subsistence  of  Evans,  and  place  it  to  his  account.  Josselyn  accepted 
it,  and  afterward  refused  to  pay.  Parker,  C.  J.  —  "We  are  all  of  opinion 
that  it  is  not  a  bill  within  the  custom  of  merchants;  it  concerns  neither  trade 
nor  credit;  it  is  to  be  paid  out  of  tlie  growing  subsistence  of  the  drawer;  if 
the  party  die,  or  his  subsistence  be  taken  away,  it  is  not  to  be  paid."  Accord: 
Jenney  v.  Eerie.  2  Ld.  Kaym.  1361;  McCJee  v.  Larramore,  50  Mo.  425;  Jack- 
man  V.  Bowker,  4  Met.   (Mass.)   235.  —  H. 

1  See  note  in    125   Am.  St.   Rep.   at  page   196  —C. 

2  On  a  subscf|uent  appeal  after  a  new  trial,  the  court  though,-  thir  n-^'-^^H 
micht  be  qualified  by  parol  evidence,  s.  c.  114  N.  Y.  177.  See  Neg.  Inst.  .^ 
§  74.  — H. 


(I.    3.]  MUaT  BE   UNCONDITIONAL.  51 

Being    of    the    opinion,,  therefore,    that    the    defendant    is    liable    •-    ,, 
upon  the  draft  in  question  in  his  individual  capacity  alone,  the  ques-     ^     '^'    > 

tiou  still  remains  as  to  the  extent  of  such  liability.     *     *     *     ^f he      ■'^'^-_  . 

court  below  held  that  the  draft  in  question  was  payable  only  from  a 
particular  fund,  and  was,  therefore,  non-negotiable,  and  enforceable 
only  to  the  extent_of  the  fund  referred  to. 

Considering  the  queslion  as  we  are  compelled  to  do  from  the 
language  of  the  instrument  alone,  we  are  unable  to  agree  to  the 
interpretation  thu.'^  put  upon  it.  It  is  not  claimed  that  there  is  any 
distinction  between  the  instrument  in  question  and  an  ordinary  bill 
of  exchange  except  that  made  by  the  clause  referring  to  the  mother's 
estate.  T^nless  that  clause  deprives  the  paper  of  its  commercial 
character,  the  rights  and  liabilities  of  the  parties  thereto  must  be 
governed  i)y  the  rules  pertaining  to  negotiable  securities,  which 
would  render  the  defendant  liable  for  the  amount  named  in  the  draft, 
upon  the  theory  that  his  acceptance  was  an  admission  by  him  of 
assets  applicable  to  its  payment.  ^'i-w 

The  distinction  between  a  fund  from  which  a  draft  or  order  is 
directed  to  he  paid,  and  one  referred  to  as  the  means  of  reimburse- 
ment f<)  iis  drawee,  is  a  in;iteri;)l  one  and  cannot  be  disregarded  in 
the  coiistniction  of  such  instiunients.  Thus  it  is  said:  "When  a 
refeTPtrrr- i>;  made  to  a  special  fund  merely  as  a  direction  to  the 
drawee  1,ua  lo  reimburse  himself,  and  the  payment  is  not  made  to  •' 
depend  u\uu\  the  adequacy  of  the  fund,  it  will  not  vitiate  the  bill."^ 
(Edw.  on  I'ilis  and  Notes,  §1''J8;  see  also  Parsons  on  Merc.  Law, 
87;  Chilly  on  Bills,  158.)  Dwight,  Com.,  in  Munger  v.  Shannon  (61 
N.  '^'.  2^}')),  says:  "A  bill  is  an  order  drawn  by  one  person  on 
anotlier  lo  pay  a  third  a  certain  sum  of  money  absolutely  and  at  all 
events.  I'nder  this  definition  the  order  cannot  be  paid  out  of  a 
particular  fund,  but  must  be  drawn  on  the  general  credit  of  the 
drawer,  though  it  is  no  objection,  when  so  drawn,  that  a  particular  ,  yv  j 
fund  is  ><[)ef'ifK'd  from  which  the  drawee  may  reimburse  himself."/^^-^ '/ 
Judge  Knpallo  in  Jirill  v.  Tntfle  (81  N.  Y.  457),  says:  "  Tf  a  draft  t-  c\^>^^ 
be  dniwn  genenilly  upon  the  drawee,  to  be  paid  by  him  in  the  first 
instnnee.  on  I  he  credit  of  the  drawer  and  without  regard  to  the 
source  from  wliicli  the  money  used  for  its  payment  is  obtained, 
the  designntif)n  by  the  drawer  of  a  particular  fund,  out  of  which  the 
dnuvce  is  to  subserpienlly  reimburse  himself  for  such  pavment,  or  a 
frirticnbir  account  to  which  it  is  to  he  cliarged,  will  not  convert  the 
drjift  into  an  assignment  of  the  fund,  and  the  payee  of  the  draft  can 
have  no  action  thereon  against  the  drawee  unless  he  duly  accepts." 
In  that  case  the  drawee  refused  to  accept  and  the  action  was  sought 
to  be  maintained  upon  the  theory  of  an  equitable  assignment.  It 
was  held  under  the  [)eculiar  circumstances  of  the  case,  and  the  form 
of  the  instrument,  that  it  did  transfer  the  fund. 


-y 


52  VOiiM.  KEl^UlKKD.  [aBT.    II. 

It  is  thus  seen  that  the  iulmv  mention  of  a  fund  in  a  draft,  does 

noPiiTves7;irily  ilepiivt'  i(  of  tlie  character  of  coinniercial  paper.^)ut 
it  I  ;  iM   ;iii|)i';ii,  in  nrdi^r  to' iiave  tiiat  efTeci,  that  it  contains 

eiihv.   .iU  t.  .\  pivi^ii  r  iin|tli(Ml  direclion  to  pay  it  tlierefroni,  and  not 
othrrvrjse.      -i...  /( 

I  Tlie  question,  therefore,  tolir  ilcd  riniiud  liere  is,  wlietligx^the  fund 
'in  question  is  referred  to  as  the  "nieasurV  of  liahility  or  the  means  oT 
roimbursement.  \\'liili'  I  lie  point  i~  not  free  from  doubt,  we  think  a 
reasonable  construct  ion  of  (Ik^  dralt  favors  the  conchision  that  it  is  / 
mentioned  only  as  the  source  of  rciniltnrsciiicnt.  No  express 
language  in  it  can  be  })ointed  out  as  requiring  its  payment  from  the 
fund  mentioned,  and  none  from  which  that  requirement  can  be 
implied,  except  such  as  exists  in  all  drafts  where  a  fund  is  referred 
to.  Its  language  is  to  "  charge  the  amount  against  me  and  of  my 
mother's  estate "  and  contains  no  provision  for  delay  until  the 
amount  is  realized  from  the  estate,  or  for  payment  pro  tanto  in  case 
the  estate  should  pxoi'e  insuthcient  to  pay  the  whole  amount.  There 
is  no  language  importing  a  transfer  of  the  fund  to  the  payee,  and 
nothing  from  which  such  an  intention  can  be  inferred.  The  draft 
contains  an  absolute  direction  to  pay  a  fixed  sum,  at  a  specified 
date,  with  interest.  It  imports  a  present  indebtedness  of  a  sum 
named,  from  the  drawee  to  the  payee,  and  an  absolute  direction  to 
pay  that  sum  at  a  fixed  date,  subject  to  no  contingency  either  as  to 
time  or  amount.  In  express  language  he  directs  the  amount  when 
paid"^  be  charged  against  him  individually,  and  adds  the  words, 
plainly  implving,  as  we  thiiiJk:>-ihat  the  fund  for  the  acceptor's  reim- 
bursement would  be  found  in  an  amount  eventuall)',  or  immediately 
pavable  to 'tlTFThTi'Wer'Trom  iTis  motln  i"s  c-late. 

We  think,  also,  that  the  insertion  of  words  expressly  making  the 
paper  negotiable,  was  quite  significant  and  indicated  an  intention 
orTTTi^-^ftrt  of  all  parties,  that  it  would  be  transferable,  and  partake 
of  the  character  of  commercial  paper.  Any  contingency  inferable 
from  the  language  of  the  draft,  making  the  amount  payable  thereon 
indefinite  and  uncertain,  would  tend  largely  to  depreciate  its  value 
for  such  purpose,  and  defeat  the  intention  with  which  it  was  appar- 
ently made. 

If  the  language  of  the  paper  could  be  considered  at  all  ambiguous, 
it  was  the  dufyo7"the  dcfcnrlant  to  limit  his  liability  by  apt  words 
of  acceptance  when  it  wa~  presented  to  hiiTiT  but  as  it  is,  he  has 
unqualifiedly  pr6miseia"t(j  ])ay  a  fj^^and  definite  sum  at  a  specified 
time^aiTt^we  think,  should  be  held  to  the  contract  which  other  pa^•tie8 
were  authorized  by  his  acceptance  to  infer  he  intended  to  make. 

The  case  of  Tassey  v.  Church  (4  Watts  &  Sergeant,  346),  seems 
quite  in  point.     The  instrument  there  read: 


-y 


II.    3.]  MUST  BE   UNCONDITIONAL.  53 

$555.48.  Alleghany,   1st  July,  1840. 

Please   pay    Church,   McVay    &    Gordon    $555.48    and    eharge   the    estate   ol 
Thomas  C.   Patterson.  Adam    Flemmixg,   Trustee. 

To  John  Tassey,  Adtuinisfrator. 

[Indorsed]  :    Accepted.  John   Ta.s.sey,   Administrator. 

Fleming  was  the  trustee  of  ]\Irs.  Patterson,  who  was  the  heir  at  law 
of  Thomas  C.  Patterson ;  Tassey  was  the  administrator  of  Patter- 
son's estate.  It  was  held  that  the  promise  of  the  acceptor  was 
unconditional  and  bound  him  absolutely.  In  Childs  v.  Monins  (6 
Kn;^.  C.  L.  228),  the  defendants,  as  executors  of  the  estate  of 
Thomas  Taylor,  promised  to  pay  £200  on  demand  with  interest, 
signing  as  executors.  It  was  held  that  they  became  personally  liable, 
and  that  the  plea  of  plene  administravit  was  no  defense.  It  was  fur- 
ther held  that  the  promise  to  pay  interest  made  the  debt  that  of  the 
administrators  personally.  In  Kelly  v.  Brooklyn  (4  Hill,  263),  the 
action  was  upon  an  order  drawTi  by  the  mayor  upon  the  treasurer  of 
the  defendant  in  the  following  words:  "Pay  Alexander  Lyon  or 
order  $1,500  for  award  No.  7,  and  charge  to  Bedford  Road  Assess- 
ment." It  was  held  that  it  was  a  bill  of  exchange  and  not  payable 
from  a  particular  fund.  For  further  illustration  of  the  point  under 
di.scussion  we  would  refer  to  HoUister  v.  Hopkins  (13  Hun,  210)  ; 
Redman  v.  Adams  (51  Me.  429)  ;  Luff  v.  Pope  (5  Hill,  413).  The 
case  of  Tooker  v.  Arnoux  (76  N.  Y.  397),  is  referred  to  by  the 
respondent  as  sustaining  the  views  of  the  court  below;  but  we  are  of 
tiie  opinion  that  it  cannot  be  so  regarded.  The  order  there  directed 
the  drawee  to  pay  a  certain  sum  out  "  of  the  money  to  be  realized 
from  the  sale  "  of  certain  houses.  This  order  was  accepted,  and  it 
was  held  that  a  sale  of  the  houses  was  a  condition  precedent  to  any 
liability  on  the  part  of  the  acceptor.  This  was  the  plain  language 
of  the  contract. 

In  all  the  cases  examined  by  us  where  an  order  has  been  held  to 
operate  as  an  eciuitable  assignment  of  a  fund,  there  were  either 
special  phrases  contained  in  the  instrument,  indicating  an  intent  to 
have  it  bo  operate,  or  ambiguous  language  used,  which,  construed  in 
llic  light  of  surrounding  circumstances,  justified  the  inference  of  a 
limitation  (,f  liability.  (Parker  v.  Syrarusr,  31  X.  Y.  376;  Alyer  v. 
Srott,  54  id.  11  ;  Mtingrr  v.  Shannon,  61  id.  251  ;  Erirhs  v.  De  Mill, 
7')  id.  370;  Hrill  v.  Tulllc,  siij)ra.)  Here,  however,  there  is  no  such^ 
language^  iind  tliin  riiiitr:i<t  !<  lQ_pay~a  fixed  amount  aLiL  apaaifiod- 

|ifi.|v    iin.l     iiiw.i.>iiji;t[y;j{|]Jj|y^_^  fi 

,  therefore,  of  th(!  ()j)inion  that  the  instrument  in  question 
of  exchange  and    rendered    the  parties  executing  it   liable 
absolutelv  for  the  amount  stated  therein. 


■^•> 


J  ijKjLt-^^     ^'  \yj: 


54  i\)|;m  i!i:i,>i  iukd.  [akt.  il. 

Tlic  jiulgnient   of  (lie  coiiiis   hi-low   slioiild    Ik'   rcwrscd   and   ii   new 
trial  ordtMi'il,  with  costs  to  ubide  tlie  event. 


All  I'onciir. 


J  u  dg  mentj:£V£r8ed. 


s"  Please  pay  to  order  of  (1.  F.  and  (".  W.  Tilderi  forty  dollars,  and  charge 
same  against  whatever  ainoinit  may  lie  diif  nic  for  niv  share  of  tish  caught 
on  board  schooner  '  Mornitig  Star'  for  the  lishing  season  of  IHdO."  lid'; 
negotiable  in  L'ttlnian  v.  Ailaiits,  51  Me.  429.  "  In  this  ease  the  order  re(|iiire> 
the  drawees  to  jiay  to  the  order  of  tJ.  F.  and  ('.  W.  'lilden  the  sum  of  forty 
dollars,  absolutciN  and  without  contingency.  .\  means  of  reind)ursement  is 
indicated  to  tlie  driiwces  in  the  words  appended,  '  and  charge  the  same  against 
whatever  amount  may  be  due  me  for  my  share  of  fish,'  etc.,  but  the  pay- 
ment of  the  order  is  not  made  to  depend  upon  his  liaving  any  share  of  tish, 
nor  is  the  call  limited  to  the  proceeds  thereof."     Barrows,  J.,  on  p.  433. 

A  bill  reading,  pay  to  the  order  of  A,  $1,500,  "on  account  of  contract 
between  you  and  the  Snyder  Planing-mill  Company  "  signed  by  the  com- 
pany, held  to  be  negotiable.  "Section  10  (N.  Y.  §  22)  of  our  negotiable 
instruments  law,  which  is  merely  declaratory  of  the  common  law  upon  the 
subject,  reads  as  follows:  .  .  .  The  controversy  is  thus  narrowed  down 
to  whether  the  words  '  on  account  of  contract  between  you  and  the  Snyder 
Mill  Company  '  amount  to  a  direction  to  pay  out  of  a  particular  fund,  or, 
on  the  other  hand,  are  to  be  considered  as  simply  indicating  the  fund  from 
which  the  drawee,  Lightner,  might  reimburse  himself.  .  .  .  The  weight 
of  authority  and  reason  supports  the  proposition  that  the  words  amount  to 
no  more  than  an  indication  of  the  fund  from  which  the  drawee  is  to  reim- 
burse himself.  The  words  used  are  substantially  the  same  as  though  the 
orders  read  '  and  charge  to  account  of  contract  with  Snyder  I'laning-mili 
Company,'  or  '  credit  to  account  of  contract,'  etc."  Porter,  J.,  in  First 
'National  Iia)ik  v.  JAfihtner.  74  Kan.  73(i,  742.  See  this  case  with  notes  in 
8  L.  N.  S.  231.  118  Am.  St.  Kep.  353,  and  11  Am.  and  Eng.  Ann.  Cas.  596. 
See  also  note   in  7   Col.  Law  Rev.  210. 

In  Hibbs  V.  Brown,  190  N.  Y.  107,  the  action  was  to  replevy  stolen  coupons 
originally  attached  to  a  bond  issued  by  the  Adams  Express  Company,  an  unin- 
corporated joint  stock  association,  and  appellant's  right  to  recover  turned  on 
the  question  whether  said  bond  and  coupons  were  negotiable.  The  bond  was 
issued  by  the  E.xpress  Company  in  its  association  name  and  was  secured  by  a 
trust  indenture  conveying  and  pledging  for  its  payment  a  large  amount  of 
securities  and  property.  Among  other  clauses  was  one  providing  that  "  no 
person  or  future  shareholder.  oiFicer,  manager  or  trustee  of  the  Express  Com- 
pany shall  be  personally  liable  as  partner  or  otherwise  in  respect  to  this  bond 
or  the  coupons  f)ertaining  thereto,  but  the  same  shall  be  payable  solely  out 
of  the  assets  assigned  and  transferred  to  the  said  Trust  Company  or  out  ot 
other  as.sets  of  the  Express  Company." 

Appellant  claimed  that  this  clause  rendered  the  bond  non-negotiable  as  it 
prevented  the  bond  from  being  collected  from  the  individual  property  of  the 
members  of  the  association  and  therefore  made  the  remaining  property  from 
which  it  could  be  collected  a  particular  fund.  He  pointed  out  the  diti'erence 
between  a  joint  stock  association  and  a  corporation,  contending  that  the 
individual  liability  of  the  members  of  the  former  is  as  essential  a  character- 
istic as  it  is  in  the  case  of  a  partnership,  and  that,  therefore,  it  could  not  be 
elimin'ited  without  materially  afTecting  the  contrr^t  of  the  association. 

Ht.scocK.  J.,  held  that  "so  many  of  the  attributes  and  characteristics  of  a 
corporation  have  been  impressed  upon  the  modern  joint  stock  association  that 


II.    3.]  MUST   BE   UNCONDITIONAL.  55 

{d)  Statement  of  tranmcium  irhirh  yirfs  rise  to  instrument  does  not 
■ — rvTCUer  promisi'  (onilHional. 

§  22      SIEGEL  V.  CHICAGO  TRUST  &  SAVINGS  BANK. 
131  Illinois,  569. —  1890. 

Mr.  Chief  Justice  Shope  delivered  the  opinion  of  the  Court. 
This  was  an  action  of  assumpsit^  by  appellee,  against  appellants, 
upon  the  following  instrument: 

$300.  Chic.\go.   March  5,   1887. 

On  July  1,  1887,  we  promise  to  pay  D.  Dalziel,  or  order,  the  sum  of  three 
hundred  dollars,  for  the  privilege  of  one  framod  advertising  sign,  size  —  .v  — 
inches,  one  end  of  each  of  one  hundred  and  fifty-nine  street  cars  of  the  North 
Chicago  City  Railway  Co.,  for  a  term  of  three  months,  from  May  15,  1887. 

SiEGF.L,  Cooper  and  Co. 

—  which  was  indorsed  by  Dalziel,  the  /payee,  to  appellee,  for  value 
on  the  day  of  its  execution.    —  /^' ^,   /    "•       ^^^  -  *-' 

The  first  question  presented  is,  is  this  instrument  negotiable  ?  — 
and  this  case  has  been  answered  affirmatively  by  the  Circuit  and 
.\ppollate  Courts.  The  Appellate  Court  having  affirmed  the  judg- 
ment in  favor  of  the  plaintiif,  the  case  is  brought  here  by  appeal, 
upon  certificate  of  importance  granted  by  that  court. 

It  appears,  that  before  the  time  when  the  privilege  of  advertising 
was  to  commence  Dalziol  forfeited  any  right  he  may  have  acquired 
to  use  the  cars  in  the  manner  indicated,  and  the  privilege  specified 
never  was  furnished  appellants;  and  it  is  insisted  that  the  instru- 
ment is  a  simple  contract,  only,  and  that  therefore  the  same 
defense,  —  failure  o"  consideration,  —  is  available  against  the 
indorsee  of  the  pa^^er  for  value,  and  before  due,  as  might  be  inter- 
pdscd  against  such  paper  in  the  hands  of  the  payee.  It  is  also 
insisted,  that  the  instrument  shows,  on  its  face,  that  payment 
d<'j)ended^iipon  a  condition  _precedenf  to  be  performed  by  the  payee, 
and   therefore  the  indorsee  took  if   with  notice,  and  by  the  failure  of 


in  my  opinion,  for  the  purposes  of  the  question  now  before  us,  we  are  amply 
juHtifled  in  regarding  simjdy  the  joint.  qutiNi  corporate,  entity,  and  in  saying 
that  an  ohiigation  issued  in  its  nanjc  n|Min  its  general  credit,  and  liinding  all 
its  assets,  complies  with  the  rc(|nircniciits  for  a  negotiable  instrument,  even 
though  (he  [iractically  unimportant  indivirlual  liabilitv  of  nictnluTs  is  ex- 
cluded."     V.    177. 

('CLLK.N.  ('.  .1.,  and  \\  K.KNUt  and  I'.Ain  LKIT,  .1.1.,  held  that  if  the  clause  were 
cfTective  it  would  render  the  bond  non-negotiable,  but  held,  further,  (hat  the 
cliuise  w.'is  void,  and  that  the  bond  wa«  fhercfore  negoti.-ible. 

Hrav  and  Haichit,  .T.T.,  concurred  with  TFiscock.  .1.,  and  O'Mrikn,  .1.,  con- 
curred with  Mi.sforK.  .T.,  in  opinion,  thus  making  the  views  in  tht'se  opinions 
the  holding  of  the  majority  of  the  court. 

See  note  on  "  Negotiability  of  joint  stork  association  Iwinds  exempting 
shareholders'  liabilitv  "  discussing  the  llibbs  case  in  8  Col.  f.,aw  Kev.  215. 
See  also  19  IJarv.  Law  Kev.  61(5,  and  '21   Uarv.  Law  Kev.  441.  —  C. 


54  KOKM   UKVUIUKD.  [aKT.    II. 

the  payee  to  perform  tlie  I'oiulitioii,  no  lii^lit  of  recovery  exists  in  the 
indorsee.  It  is  not  e-ontcndcd  that  the  indorsoe  hud  any  otiior  notice 
than  that  contained  in  the  instrument  itself,  and  it  is  apparent  that 
at  tlie  time  of  its  indorsement,  which  was  the  day  of  its  execution, 
no  right  to  the  consideration  had  accrued  to  the  makers.  It  is  a 
promise  to  pay  a  certain  sum  of  money  at  a  day  certain,  for  a  con- 
sideration thereafter  to  be  rendered,  and  depends  for  its  validity 
upon  the  implied  promise  of  the  payee  to  furnish  tlie  consideration 
at  the  time  and  in  the  manner  stip\ilated,  —  that  is,  it  is  a  promise 
to  pay  a  sum  certain  on  a  particular  day,  in  consideration  of  the 
promise  of  the  payee  to  do  and  perform  on  his  part.  A  promise  is 
a  valuable  consideration  for  a  promise. 

But  the  question  remains,  whether  the  statement  or  the  recital  of 
the  consideration  on  the  face  of  the  instrument  impairs  its  negotia- 
bility, and,  in  this  instance,  amounts  to  a  condition  precedent.  The 
mere  fact  that  the  consideration  for  which  a  note  is  given  is  recited 
in  it,  although  it  may  appear  thereby  that  it  was  given  for  or  in 
consideration  of  an  executory  contract  or  promise  on  the  part  of  the 
payee,  will  not  destroy  its  negoTTability,  "tintess  it  appears,  "Tlirough 
the  recital,  that  it  Mualifi^sjh^jiimgy^,,jfo  p'^yi  and  renders  it  con- 
ditional or  linc^ffaTiCeithera^oineti^^  or  the  sum  to 
be  paid.  (Daniel  on  Neg.  Inst.  sees.  790-797;  Davis  v.  McCrcady, 
17  N.  Y.  320;  State  Nat.  Bank  v.  Casson,  39  La.  Ann.  865;  Goodloe 
V.  Taylor,  13  N.  C.  458;  Stevens  v.  Blunt,  7  Mass.  240.) 

In  State  Nat.  Bank  v.  Casson  (supra),  it  is  said :  "  Plaintiif  received 
the  note  before  maturity,  and  before  the  failure  of  the  consideration. 
Even  if  it  were  known  to  him  that  the  consideration  was  future  and 
contingent,  and  that  there  might  be  otTsets  against  it,  this  would 
not  make  him  liable  to  the  equities  lictweon  the  defendant  and  the 
payee.  It  cannot  affect  the  negotiability  of  a  note  that  its  considera- 
tion is  to  be  hereafter  realized,  or  that,  from  contingency,  it  may 
never  be   enjoyed." 

The  most  that  can  be  said  of  a  recital  in  the  instrument  itself,  of 
the  consideration  upon  which  it  rests,  is,  that  the  indorsee,  taking  it 
before  maturity,  is  chargeable  with  notice  of  the  recital.  Such 
recital,  however,  is  not  sufficient,  of  itself,  to  advise  him  that  there 
i-'  was,  or  wmildjfppgsarily  hf^  nTnUiTro  of  consideration,  but  if,  at  the 
iime— ef-HTe'mdorsement,  the  consideration  has  in  fact  failed,  the 
rpcita1_ might  he  Bufficient  to  put  liiiii  ii|)()n  inquiry,  and,  in  connec- 
tion  with  other  facts,  amount  to  notice.  (Uenneberry  v.  Morse,  56 
111.  394.)  The  case  at  bar  does  not,  however,  fall  within  the  rule 
just  stated,  for  the  assignment  was  made  the  same  day  the  note  was 
made,  and  by  the  terms  of  the  recital  it  was  apparent  the  payee  was 
required  to  do  no  act  till  the  15th  of  May  following,  —  an  interval  of 
seventy  days. 


-'-tf*-*^ 


w-^f^ 


[I.    3.]  MUST  BE   UNCONDITIONAL.  57 

There    is    a    distinction,    clearly    recognized    in    the    authorities, 
between  an   instrument  payabli'  at  a  particular  (la^,  and  one  payable 

-trpon^Tltre  "7l»|ipeniiig  ol  some  event :  and  the  rule  is,  that  where 
the  parties  insert  a  specific  date  of  payment,  the  instrument 
is  then  payable  at  all  events,  —  and  this,  although,  in  the  same 
instrument,  an  uncertain  and  different  time  of  payment  may  be 
mentioned,  as,  that  it  shall  be  payable  upon  a  particular  day,  or 
upon  the  completion  of  a  house,  or  the  performance  of  other  con- 
tracts, and  the  like.  (MrCarty  v.  How^elh  24  111.  341,  and  authorities 
supra.)  But  the  doctrine  of  this  and  kindred  cases,  where  there  are 
both  a  certain  day  of  payment  and  one  more  or  less  contingent, 
need  not  be  here  invoked,  for  the  time  of  payment  in  the  instrument 
under  consideration  is  not  made  to  depend  upon  the  happening  or 
not  happening  of  any  event,  but  is  specific  and  certain,  and  must 
occur  by  the  efflux  of  time,  alone. 

If,  therefore,  it  be  CSnceded,  as  it  must,  that  a  condition  inserted 
in  a  promissory  note,  postponing  the  day  of  payment  until  the  hRp- 
ppninpc  ^f  ,^(^in^f  nnppffi^in  QiuiOBtingent  event,  will  destroy  its  nego- 
tiability and  render  the  instrument  a  mere  agreement,  yet  under  the 
M  authorities,  if  by  the  instrument  the  maker  promises  to  pay  a  sum 
certain  at  a  day  certain  Ig,  a  certain  person  or  his  ordgfj  sych  instru- 
ment  musT  he  regarfled  as  negotiaNe.  althnugh  it  also  contains  a 
recTtMl  nf  th(j  (^'Ofisideration  upon  wlnVh  it  is  based,  and  although  it 
fu'ffhf'T  appear  that  such  consideratinn.    if  e\,( nfory,   mav  not  have 

_beerr7)crf()rmed.      Here,   the  money   wus   payable,   alisolufely,   on  'tTir  , 

T?rr]of7JuIy,  i'^R7,  —  a  time  when  the  contract  for  the  adver-  /'  -' 
tising    could    not    have    been    completed.     I£_  the     instrument    had 
remained  the  property  of  the  payee,  and  upon  its  maturity  and  per- 
formanre  -to  thUTtTme,  suit  fifHt  brpii  lMMiiulIf',"?rT<?  clear  that  no  plea 
of  partial  failure  of  consideraTi^Tr^i'MiiM  li;?vp  hfvn  sustained,  for  the 
reason   that  the  entire  term  had~not  then   expired.      No  analysis  of 
the    instrument'  ifseTf'ls"' necessary.      The   most  careful    examination  '""^"'^'''Sy 
of  it  will  fail  to  disclose  a  condition  precedent  to  the  payment  of  the    "^  Jv<~> 
money  at  the  time  stipulated.     Nor  is  there  anything  in  the  recital    f,    "^^ 
of  the  consideration  to  put  the  indorsee  upon  infjuiry  at  the  time  the 
indorsement    was   made.      Indeed,    it   is   clear   that   at    that   time    no 
inrpiiry  would  have  led   to  notice  that  Dalziel   would   fail   to  comply 
with  his  contract^n  the  1.5th  of  May  thereafter,  when  the  term  was 
to  comnicrice.     All   that  the  recitals  would  give  notice  of  was,  that 
the  note  was  given  in  consideration  of  an  agreement  on  the  part  of 
the    payee    that    the    privilege    of    advertisement    named    should    be 
enjoyed  by  the  makers  for  three  months,  from  May  15,  1887.     Giving 
to   the  language  employed   its  broadest   possible   meaning,   it  cannot 
be  construed  as  notice  to  the  indorsee  of  the   future  breach   of  the 
contract  by  Dalziel.     The   presumption   of   law    would    be,   that   the 


5S  KOICM    liKliriKKK.  I  AIM'.    II. 

contract  would  be  tarrioil  out  in  gooil  faith,  and  the  consideration 
performed  as  stipulated.  The  makers  had  put  their  promissory  note 
in  the  hands  of  Dalziel  upon  an  express  i-onsideration  which  they 
were  tluM-eafter  to  receive,  and  for  the  perfonnamc  of  which  they 
had  seen  fit  to  rely  upon  the  undertaking^  of  Dalziel,  and  we  are 
aware  of  no  rule  hy  which  they  can  hold  this  indorsee  for  value, 
hefore~"dTjr"TTTid  before  the  time  of  performance  was  to  begin,  charge- 
abl(>  with  notice  that  the  promise  upon  which  the  makers  relied 
would  not  be  kept  and  performed.  {Wnde  on  Notice,  §  0 4a  ;  Loomis 
V.  Maury,  15  N.  Y.  312;  Davis  v.  McCready,  supra.)  *  *  * 
The  judgment  of  the  Appellate  Court  will  be  affirmed. 

Judgment  affirmed.* 
.  •  '       La 


4/LJ   -.r^^^f^M^ 


§  22 


^HOATE  t;JsTEVENS.  /' 


116   Michigan,   28.  —  U 


Hooker,  J.  —  The  defendants  have  appealed  from  a  judgment 
upon  three  written  instruments,  substantially  alike,  of  one  of  which 
the  following  is  a  copy:  "$115.00.  Detroit,  July  25.  1893.  For 
value  received,  March  16,  1895,  after  date,  I  promise  to  pay  to  the 
order  of  T^ow's  Art  Tile  Soda-Fountain  Co.,  one  hundicil  and  fifteen 
dollars,  with  interest  6  per  cent.  The  consideration  of  this  and  other 
notes  is  the  soda-draught  apparatus  described  in  contract  of  same 
date  as  this  and  other  notes,  which  soda-draught  apparatus  the 
undersigned  has  received  of  said  Low's  Art  Tile  Soda-Fountain  Co. 
Nevertheless  it  is  understood  and  agreed  by  and  between  the  nn!!(M- 
signed  and  the  said  Low's  Art  Tile  Soda-Fountain  Co.  that  the  tit  I" 
to  the  above-mentioned  property  does  not  pass  to  the  undtMsiuncd. 
and  that,  until  all  said  notes  are  paid,  the  title  to  the  aforesaid  si.:  II 
remain  in  the  said  Low's  Art  Tile  Soda-Fountain  Co.,  who  shall  have 
the  right,  in  case  of  nonpayment  at  maturity  of  either  of  said  notes. 
without  process  of  law,  to  enter  and  retain  immediate  possession  of 
said  property,  wherever  it  may  be,  and  remove  the  same.  Payable  at 
the   Preston   National   Bank." 

Each  bears,  as  an  indorsement,  the  name  of  the  payee.  The  de- 
fendants say  that  they  were  improperly  admitted  in  evidence,  for  the 
reason  that  they  are  not  promissow^-iiQies,  an(Lif_the  indorsements 
are  to  be  treated  as  an  assignment  of  the  chose  in  action,  it  should 
have  been  alleged  trt-the  declaration ;  and,  further,   that  there  was 

*  .Accord:  Chase  v.  Behrrnnn.  10  Daly  (N.  Y.)  344.  Contra:  Jnrms  v.  Wil- 
kin.i.  7  >I.  &  W.  41f>,  where  the  inBtniment  read:  "  I  undertake. to  pay  A.  B. 
the  sum  of  £6  4s.,  for  a  suit  of,  ordered  by  Daniel  Page."  Fletcher  v.  Thomp- 
son. 55  N.  H.  308.  — H. 


f 


,-^-1- 


II-    3.]  MUST   BE    UNCONDITIONAL.  59 

no  evidence  that  the  plaintiff  was  the  owner  of  the  notes  sued  upon. 
Both  briefs  indicate  that  the  (juestion  considered  most  important,  if 
not  decisive  of  Jhe  case,  is  that  of  the  negotiability  of  tlie  notes.  The 
instruments^- to~nTe~end  of  the  fifth  "line  ^  —  are  in  form  promis- 
sory notes.  If  there  were  nothing  more,  they  would  be  as  perfect 
and  complete  promissory  notes  as  it  is  possible  to  make.  The  writ- 
ing proceeds  to  state  the  consideration  for  said  notes,  which,  though 
not  essential,  was Jiarmless.  {Wright  v.  Irwin,  33  Mich.  32.)  This 
is  followed  by  the  statement  that  the  parties  agree  that  the  title  to 
the  property  for  which  the  notes  were  given  shall  remain  in  the  payee, 
who,  in  case  of  nonpayment  at  maturity  of  either  of  said  notes, 
"  may  enter  and  retain  immediate  possession  of  the  property,  without 
process  of  law,  wherever  it  may  be,  and  remove  the  same."  If  it 
can  be  said  that  this  writing  shows  a  sale  of  the  soda  fountain,  as 
contradistinguished  from  a  contract  to  sell,  the  provisions  as  to  title 
amount  to  no  more  than  a  chattel  mortgage.  Mr.  Justice  Harlan 
said  in  the  case  of  Chicago  Ry.  Equipment  Co.  v.  Merchants'  Bank, 
136  U.  S.  280,  10  Sup.  Ct.  1002 :  "  The  fact  that,  by  agreement,  the 
title  is  to  remain  in  the  vendor  of  personal  property  until  the  notes 
for  the  purchase  price  are  paid,  does  not  necessarily  import  that 
the  transaction  was  a  conditional  sale."  In  that  case  the  court  was 
able  to  find  from  the  evidence  that  the  parties  intended  to  effect  a 
sale,  and  that  the  title  reserved  was  merely  the  title  of  a  mortgagee. 
The  distinguished  jurist  added  that  "each  case  must  depend  upon 
its  special  circumstances,"  winch  proposition  is  emphasized  by  the 
case  of  Hnrkness  v.  Russell,  118  V.  S.  663,  7  Sup.  Ct.  51,  where  the 
facts  were  held  to  show  a  conditional,  and  not  an  absolute,  sale.  If 
we  can  place  this  construction  on  this  transaction, —  i.  e.  that  it  was 
a  sale, —  there  is  no  difliculty  in  sustaining  the  negotiabilitv  of  this 
note,  under  our  own  decisions.  See  Brooke  v.  Struthers  (110  Mich. 
562;  Wilson  v.  Campbell,  id.  580.) 

The  record  shows  that  the  soda  fountain  was  furnished  under  a 
written  contract,  and  that  these  notes  were  given  some  davs  later 
after  delivery,  in  accordance  with  its  terms.  If  we  were  to  consider 
the  provisions  of  this  contract,  we  should  not  liesitate  to  say  that 
this  was  a  sale  with  a  reservation  of  title  1)V  way  of  security.  As 
said  in  Brooke  v.  Strnthers  (110  Michigan,  562),  there  are  cases 
whicli  hold  that  a  contemporaneous  writing  may  be  examined  to  de- 
termine the  negotiability,  or  non-negotiability  of  a  note.  See  cases 
cited.  While,  perhaps  this  contract  is  not  strictly  a  contemporaneous 
writing,  it  was  one  of  the  surrounding  circumstances  undfr  which 
the  notes  were  made.  Rut  we  find  it  unneccssarv  to  pass  upon  that 
question,  as  we  think  the  same  is  implied  by  the  notes.     These  being 


'Through   thr  wordB:    "With   intorcst  0   [kt  rrnt." 


60  FORM    REQUIRED,  [ART.    II. 

negotiable  notes,  a  declanition   upon   the  common  counts  was  suffi- 
cient under  our  well-settled  rule.     *     *     * 

We    tiiid    no   error   in    the    record,   and    the   jiidgment   is   affirmed. 

The  other  justices  concurred." 


§  22  WORDEN  GROCER  CO.  v.  BLANDING. 

126    NOBTHWESTLBN    REPORTER     (MiCH.)     212.  —  1910. 

Action  on  the  following  note: 
$150.  Coral,  Mich.,  April  2,  1903. 

Sixty  days  after  date,  for  value  received,  we  promise  to  pay  to  the  order 
of  Fred  Smiles,  one  hundred  and  fifty  dollars,  at  the  bank  of  O'Donald  &  Scott 
at  Howard  City,  Michigan,  with  interest  at  7  per  cent,  per  annum  until  paid. 
This  note  is  given  sutjJMMfc  t«  iLc^jpfov^l  of  Fred  Soules,  Coral,  Michigan, 
for  a  stock  of  groceries  invoiced  at  $933.00  tin?  day  received  of  Fred  Soules; 
the  title  to  the  said  stock  of  groceries  to  remain  in  said  Soules  until  this 
note   is    fully    paid.  W.  A.  Blanding. 

James  Blandinq. 

There  appeared  on  the  back  of  the  note  the  indorsement  "Fred 
Soules,  Coral,  Mich." 

Judgment   for   defendants,   and   plaintiff   brings   error. 

Blair,  J.  —    *     *     * 

First.  The  principal  question  in  this  case  is  whether  the  note  in 
question    is   negotiable   on    its    face.      Counsel    for   plaintiff   contend 

8  See  this  case  reported  with  note  in  43  L.  R.  A.  277. 

"The  real  purpose  of  this  clause  (namely,  §  22,  subd.  2),  as  we  learn  from 
Mr.  Crawford  (Crawf.  An.  Nog.  Tnst.  L.,  p.  12),  who  drafted  the  act,  and 
from  .Judge  Brewster  (10  Yalo  Law  -Tour.,  p.  87),  is  to  cover  the  case  of  a 
note  which  contains  a  statement  that  it  is  given  for  a  chattel,  which  is  to  be 
the  property  of  the  owner  until  the  note  is  paid.  Such  notes  are  usually 
regarded  as  negotiable  (citing  the  Choatc  case  and  Chicago  Co.  v.  Mcrch.  lilc, 
130  U.  S.  268:  Howard  v.  f<imph-itifi.  60  Ga.  773;  Heard  v.  Dubuque  Bk.,  S 
Neb.  10;  Mott  v.  Havana  Bk.,  22  Hun.  3.54;  Nat.  Bk.  of  Royer.iford  v.  Dams, 
6  Montg.  Co.  99;  Kimball  v.  Mellon.  80  Wis.  133).  Several  states,  however, 
have  taken  the  opposite  view,  holding  that  such  notes  are  non-negotiable 
(citing  f^loan  v.  McCarthy.  134  Mass.  245;  South  Brnd  Co.  v.  Paddock,  37 
Kan.  510;  Third  \at.  Bk.  v.  .Armfttrontj.  25  Minn.  530;  Dcerinrj  v.  Thorn,  29 
Minn.  120).  and  it  was  to  bring  the  latter  states  into  accord  with  the  more 
general  view  and  unify  the  law  on  this  point  that  this  clause  was  inserted." 
McKeehan.  41   Am.  Law  Ki'g.,  N.  S.,  p.  443. 

See  further  in  Mr.  McKoehan's  artiole  for  a  statement  of  the  doubts  which 
have  been  raised  as  to  whether  this  subdivision  of  the  law  will  accomnlish  the 
above  result.  In  tiiis  connection  note  the  following  case  of  Worden  Grocer 
Co.  V.  Blanding.  See  also  Kimpton  v.  Htudcbaker  Bros.  Co.,  14  Idaho,  552, 
where  a  title  retaining  note  was  held  non-negotiable  under  §§  20  and  24  of 
the  Negotiable  Instruments  Law.  The  effect,  however,  of  §  22,  subd.  2,  was  not 
discuH-sed.  See  the  authorities  pro  and  con  in  the  notes  to  this  case  in  125 
Am.  St.  Rep.  194,  and  in  14  A,  &  E.  Ann.  Cas.  1129. —  C. 


n.    4.]  MUST   BE  TO   PAT   A   SUM   CEKTAIN.  61 

that  it  is,  under  the  alleged  general  rule  that  a  reservation  of  title 
does  not  destroy  the  negotiability  of  a  note;  citing  4  Am.  &  Eng. 
Ency.  of  Law,  p.  127,  and  authorities  cited  in  footnote  4.  Reliance 
is  also  had  upon  the  case  of  Choate  y.  Stevens  (116  Mich.  28); 
as  approved  in  Van  Den  Borch  v.  Bowman  (138  Mich.  624).  We 
are  unable  to  agree  to  the  plaintiff's  contention  that  this  case  is 
ruled  by  Choate  v.  Stevens.  So  far  as  this  record  discloses,  the 
note  in  question  contains  the  entire  contract  of  the  parties,  and  it  is 
obvious  from  a  consideration  of  its  terms  that  it  presents  the  ordinary 
case  of  a  conditional  sale  in  which  the  title  never  passed  to  the  de- 
fendants, and  not  a  completed  sale  with  a  reservation  of  title  in 
defendants  by  way  of  security  only.  {Bunday  v.  Cohimhiis  Machine 
Co.  143  Midi.  10)'.  "On  the  other  hand,  the  case  of  Choate  v.  Stevens 
was  held  to  present  a  case  of  a  completed  sale  with  reservation  of 
title  by  way  of  ggiiurity  only,  and  the  judgment  of  the  court  pro- 
jceed€d~TJpon  that  basis.  We  are  of  the  opinion  that  this  case  falls 
within  the  rule  of  WrigJi't  v.  Traver  (73  Mich.  493).  Tn  that  case 
the  court  said:  "The  instrument  before  us  has  more  the  appear- 
ance of  a  contract  of  sale,  with  the  title  reserved  in  the  property 
to  the  seller  until  paid  for,  than  it  has  of  a  promissory  note."  And 
it  was  held  that  the  condition  contained  in  the  note  that,  "  if  not 
paid  when  due,  the  property  for  which  it  is  given  shall  be  the  prop- 
erty "  of  the  payee,  destroyed  its  character  as  a  promissory  note,  and 
reduced  it  to  a  mere  contract. 

The  precise  question  involved  here  was  before  the  Supreme  Ju- 
dicial Court  of  Massachusetts,  and  it  was  held  that  an  instrument 
otherwise  a  promissory  note  was  converted  into  a  mere  contract 
by  the  condition,  "Said  horse  to  be  and  remain  the  entire  and  abso- 
lute property  of  the  said  Sloan  until  paid  for  in  full  by  me."  Shan 
V.  MrCarty  (134  Mass.  24.5).  Wo  are  of  the  opinion,  therefore,  that 
the  court  did  not  err  in  treating  the  instrument  in  question  as  non- 
negotiable. 

[Dn  other  grounds,  however,  the  judgment  was  reversed  and  a  new 
trial  granted]. 


4.  The  Sum  to  rk  Patd  Mr-sT  be  Tertain. 

{a)    What  amounts  to  certainty  generally.'' 

§  20  DO  DOE  V.   EMEKSON. 

34  Maine,  !)0.  —  1852. 

Assumpsit,  by  the  indorsee  against  the  makers  of  a  note  payable 
to  the  Protection   Insurance  Company  or  order,  for  "$271.25,  with 

T  See  note  in  125  Am.  8t.  Rep.  at  p.  203.  —  C, 


t^ 


62  FORM   UKQUIItED.  (aUT.    II. 

6uch  additional  proinium  as   may  arise-  on   policy   No.   50,  issiunl  at 
the  Calais  agency." 

ArPLETOX,  J.  —  No  principle  of  law  is  more  fully  i'stal)lislie(l  by 
autliority  and  the  universal  concurrence  of  the  commercial  world, 
than  that  to  make  a  wiittcii  |)r()niisc  a  valid  promissory  note,  il  must 
ho  for  a  fixed  and  certain,  and  not  for  a  variable  amount.  In  I'' ranee 
it  is  so  deTernlinefl~"h'y  the"prbTrsiTjTis" Of  the  (.^ode  Napoleon,  it  is 
ithe  recognized  mercantile  law  of  continental  Europe  In  England 
and  in  this  country,  it  has  received  the  sanction  of  repealed  and 
well-considered  adjudications.  {Story  on  Promissory  Note.s,  §  20.) 
Without  this  essential  requisite,  a  written  promise,  though   in   terms 

V^-V       payable   to   order,  is  to  be   regarded   as  a   simple   contract  and    not 
negotiable.  f ■  ,  ,  '.,,  ,  /  ,^  /    ,  o 

C--'''  The  defendants  in  this  case  have  promised  to  pay  two  several 
sums;  one  certain  and  definite,  the  other  uncertain  and  contingent. 
The  defendants'  liability  being  for  both  these  sums,  is  obviously  for 
an  unascertained  and  indefinite  amount. 

It  is  insisted  in  argument,  that  the  plaintiff  may  abandon  all  claim 
for  the  additional  premium,  which  is  uncertain,  and  proceed  only  for 
the  certain  sum  expressed  in  the  contract.  Undoubtedly  he  may 
take  judgment  for  any  sum  less  than  the  amount  due,  and  in  that 
mode  abandon  a  portion  of  his  legal  claims,  luit  that  still  leaves  the 
contract  in  its  original  state,  and  can  in  no  way  afl'ect  its  legal  con- 
struction. He  could  not  erase  the  clause  relating  to  the  additional 
premium,  without  thereby  making  such  an  alteration  in  the  instru- 
ment declared  on,  as  would  discharge  the  defendants. 

In  Smith  v.  Nightingale  (2  Stark.  K.  375),  the  promise  was  to  pay 
the  payee  sixty-five  pounds  and  all  other  sums  that  may  be  due  him, 
and  it  was  claimed  for  the  plaint  ill'.  lo  whom  the  interest  in  the  con- 
tract had  passed  by  indorsement,  that  ho  might  disregard  the  Intter 
clause  and  recover  on  the  certain  sum  set  forth  in  his  coniract  as 
indorsee,  but  the  Oonrjiiiccided  otherwise.  (Darts  v.  Will-iitson,  10 
Adol.  «^'   El.   08.)  ^^^^-- 

The  inquiry  is  made  by  the  connsol  for  the  plaint ifT.  whether  the 
clause  providing  for  the  payment  of  an  additioti.il  sum,  int  i-odnced 
after  the  promise  to  pav  the  sum  fixed  and  certain,  controls  tliat  sum 
so  as  to  make  it  in  anv  event  uncertain.  The  amount  due  to  the 
plaintiff  is  uncertain.  Whether  the  contract  is  to  be  regarded  as  a 
promise  to  pay  one  sum,  which  shall  be  the  aggregate  composed  of 
a  certain  and  of  an  uncertain  sum,  the  amount  of  whicli  is  to  be 
ascertained  at  some  sul)sequent  time,  or  as  a  promise  to  pay  two 
Bums,  one  fixed  and  the  other  uncertain,  is  perfectly  immaterial. 
In  either  case  there  is  no  precise  and  ascertained  amount  due  by  the 
contract,  and  it  cannot  be  regarded  as  a  promissory  note.  If  it  was 
not   in   its   origin     ''    --annot   be   made   one  ~by   any   abandonment, 


II.    4.]  MUST   BE   TO    PAY    A    SUM    CERTAIN.  63 

which  the  plaintiff  may  deem  it  advisable  to  make,  of  any  portion 
of  the  sum  diu'  liini.  The  coutract  declared  on  not  being  iu  its 
chaiacter  negotiable,  the  action  cannot  be  maintained  by  the  present 
plaintiff.    ^ 

Plaintiff  nonsuit..". 


^  20      Mr.  Justice  Bradley  in  PARSONS  v.  JACKSON. 

99  United  States,  434,  438.  440.  —  1878. 

Each  bond,  on  its  face,  certifies  "  that  the  Vicksburg,  Shreveport, 
and  Texas  I^ailroad  Company  is  indebted  to  Jojui  Eay,  or  bearer, 
for  value  received,  in  the  sum  of  either  £225  sterling  or  $1,000 
lawful  money  of  the  United  States  of  America,  to  wit,  €225  sterling 
if  the  principal  and  interest  are  payable  in  London,  and  $1,000  lawful 
money  of  the  United  States  of  America,  if  the  principal  and  interest 
are  payable  in  Nevv.3lQik_or  New  Orleans^"  etc.  This  is  the  obliga- 
tory part  of  tfie  instrumentTand  is  necessarily  indotertninate  in  its 
character  without  some  further  designation  of  the  place  at  which  it 
is  to  be  paid.  ?]ach  bond,  further,  on  its  face  declares  that  "  the 
president  of  said  company  is  authorized  to  fix,  by  his  indorsement, 
the  place  of  payment  of  the  .principal  and  interest  inconformlty  with 
the  terms  -of  this  obligation."  And  on  the  back  of  the  bonds  is 
indorsed  a  printed  blank  in  the  following  words,  to  wit,  "  I  hereby 
agree  that  the  within  bond  and  the  interest  coupons  thereto  attached 
shall  be  payable 


The  unr-ertainty  of  the  amount  payable,  in  ilio  absence  of  the 
required  indorsement,  is  of  itself  a  defect  wliieh  deprives  these  instru- 
ments of  the  character  of  nefrotiabilitv.  As  they  stand,  they  amount 
to  a  promipe~Topay  so  many  pounds,  or  so  many  dollars,  —  without 
saying  which.     One  of  the  first  rules  in  regard  to  negotiable  paper 

•"$350.  an«l  niso  such  additional  prcmitim  as  may  beconu  duo  on  said 
poliry."  is  uncr-rtain.  I'nhncr  v.  Wnnl.  0  flray  (Alass. )  340;  Marrctt  v. 
Eqiiilnhlr  Inn.  Co.,  54   Mc  T):!?. 

".$I,<M^IO.  or  wliat  nii^til  \f  diic  after  dcfluctiiij,'  all  advancos  and  fxponsos," 
is  iincprfnin.     Cushninn   v.   llfii/rKn.  20   I'ick    (Mass.)    132. 

".$300,  Hiibji'ft  to  tin-  [trovisions  rontninfd  in  an  aproonicnt  tliis  diy  made 
betwprn  ('  and  niys«df."  is  nnnrtain  \vIut<'  tlir  aprocnirnt  referred  lo  i»iovidcs 
for  a   ronlinj.'r'nt   dfdiict ion.      ItilUji  v.    Van    Hir,   0   Wis.   200. 

.$0n.  lint  .^iSO  if  paid  liy  .Fan.  1st,  is  nnofrtain.  I'rnlirk  v.  Snrinn.  12  Mich. 
130. 

$200,  nwarfl  of  nssossor  of  daniajres  to  !«•  siiht  r;  ctcil.  uml  on  [):iymont  of 
award  notf  dolivprrd  up.  is  uiu-frtain.  and  in  llii-  nature  of  .i  penal  hrind. 
FAlrtt   V.   Hhrrts.  74    Iowa    r,07 . 

"  Pay  A  n  for  OK  bn,  wheat  in  store  ;it  tliroo  rents  below  (irst  r|ualitv 
whpat."  is  nnrertain.     hrnt  v.  Ilodiinuin,  I'l   Miirb,   (N.  Y.)   274.  —  H. 


64  FORM  REQUIRED.  [aRT.    II. 

is  that  tlio  iunount  to  be  paid  must  be  certain,  and  not  be  made  to 
depend  on  a  eontingeney.  (I  Daniel,  Neg.  Inst.,  §  53.)  And 
altliougli  it  is  lield  that  id  ccrluni  est  quod  cerium  reddi  potest,  —  a 
maxim  whieh  would  liave  given  the  bonds  negotiability  in  this 
instance,  had  the  requisite  indorsement  been  made,  —  yetj^without 
sueh  indorsement,  the  uncertainty  remains,  and  operates  as  an  in- 
trinsic defect  in  the  security  itself. 

■^  (6)   Engagement'  to  pay  interest:  contingency.* 

§  21  PARKER  V.  PLYMELL. 

23  Kansas,  402.  —  1880. 

JiiDGALEBOCjor  defendants  and  plaintiff  appeals.  ^ 

Brewer,  J.  —  This  was  an  action  on  two  notes,  and  for  a  fore- 
closure of  the  mortgage  given  as  security_  for  _them.  The  plaintiff 
was  a  bona  fide  holder  for  value,  before  maturity.  No  actual  notice 
of  any  defenses  was  *hown.  The  notes  were  negotiable,  unless  and 
save  as  affected  by  the  following  matters.  The  promise  was  to  pay 
interest  at  twelve  per  cent.,  after  maturity;  and  after  this  promise 
were  these  words:  "If  this  note  is^  not  paid  at  maturity,  the  same 
shall  bear  twelve  per  cent,  interest  from  date."  As  a  fact,  there  was 
usury  in  the  inception  of  the  notes.  As  a  conclusion  of  law,  the 
court  held,  that  by  reason  of  the  words  above  quoted,  the  purchaser 
took  the  notes,  charged  wi'th  notice  of  Jhe^  usury ;  and  this  presents 
the  sole  question  for  our  consideration.- — 

Clearly,  these  words  do  not  destroy  the  negotiability  of  the  paper. 

They  do  not  leave  uncertain  either  the  fact,  the  time,  or  the 
amount  of  payment.  Indeed,  up  to  and  including  the  maturity  of 
the  notes,  they  are  entirely  without  force.  They  become  operative 
only  after  the  notes  are  dishonored  and  have  ceased  to  be  negotiable, 
and  then  there  is  no  uncertainty  in  the  manner  or  extent  of  their 
operation.  They  create,  as  it  were,  a  penalty  for  non-payment  at 
maturity,  and  the  penalty  the  amount  of  which  is  definite,  certain 
and  fixed.     *^  *     * 

The  judgment  will   he  reversed,  and   the  case  remanded  with   in- 
structions to  render  judgment  for  the  full  amount  of  principal  and 
interest  due  upon  the  face  of  the  papers. 
,;  '  All  the  justices  concurring.',^ 


9  See  note  in  125  Am.  St.  Rep.  at  p.  204.  —  C. 

'Accord:  Crump  v.  Brrdnn,  07  Mich.  207;  Hope  v.  Barker,  112  Mo.  338. 
An  option  on  tbo  part  of  the  flobtor  to  pay  intorost  in  papor  money  at  7  3-10 
per  cent,  or  in  pold  at  6  per  cent,  does  not  destroy  negotiability.  Dinsmore  T, 
Duncan,  57  N.  Y.  573.  — H. 


II-    4.]  jIUST    liE   TO    1-AV    A    SUM    CHiRTAlN.  65 

§  21  MEREILL  v.  HURLEY. 

6  South  Dakota,  592.  —  1895. 

Question  was  as  to  the  negotiability  of  a  note  reading  in  part  as 
follows:  "we  promise  to  pay  *  *  *  six  hundred  dollars,  with 
interest  thereon  at  the  rate  of  seven  per  eeJitum  per  annum,  payable 
semi-annually.  *  *  *  jf  any  part  of  the  principal  is  not  paid  at 
maturity,  it  shall  bear  interest  at  the  rate  of  twelve  per  cent,  per 
annum,  payable  annually;  and,  if  any  interest  remains  unpaid  twenty 
days  after  date,  the  principal  shall  become  due  and  collectible  at  once 
without  notice,  at  tiie  option  of  thcjiolder." 

Fuller.  J.  —  *  *  *  Upon  the  authority  of  Hegler  v.  Corn- 
stock  (1  S.  D.  138),  the  respondents'  counsel  contend  that  the  fore- 
going is  not  a  negotiable  instrument.  *  *  *  q^he  provision  in 
the  note  in  the  case  of  Refjler  v.  Comstock,  considered  by  this  court 
and  found  to  be  sufficient  to  destroy  its  negotiability,  is  as  follows: 
"  With  interest  from  date  until  paid  at  the  rate  of  ten  per  cent,  per 
annum;  eight  per  cent,  if  paid  when  due."  While,  in  the  opinion  of 
the  writer  a  jmrmissory  note,  otherwise  unolijectionable,  meets  the 
requirements,  and  stands  the  test  of  negotiability,  when  there  is  no 
date  at  which  the^  exact  amount  then  due  cannot  be  ascertained  by 
inspection  and  computationTTTTis^conrt  has  placed  itself  in  line  with  ' 
a  class  of  authorities  which  require  such  a  degree  of  certainty  that 
the  exact  amount  to  become  due  and  payable  at  any  future  time; 
is  clearly  ascertainable  at  the  date  of  the  note,  uninfluenced  by  any 
conditions  not  certain  of  fulfillment ; 'arurTtnT  rule  thus  established^ 
must  control  cases  subsequently  arising,  where  the  facts  are  sub- 
stantially the  same.  But,  in  our  opinion,  the  note  in  suit  is  clearly 
distinguishable  from  the  note  in  the  case  of  Ilrgrler  v.  Comslock, 
supra.     That  note  is  inherently  uncertain  as  to  the  rate  of  interest 

that  will  be  paid  for  the  use  of  the  money.^ TIkmv  is  nothing  from 

which  the  payee  or  purchaser  can  determine  with  certainty  the  amount 
which  he  will  realize  n[)on  his  loan  or  invesfmt'nt,  or  the  rate  of  in- 
terest that  the  notf  is  drawing,  until  by  reason  of  its  flisbonor  it 
has  lost  every  element  and  inrirlfjit  of  negotiability.  Tin'  same  can- 
not be  said  concerning  the  note  befon^^'iis^.  If  the  maker  of  this 
note  fails  to  perform  his  contract,  he  becomes  absolutely  lialile  to 
pay  12  per  cent  interest  after^i  default  exists;  but  the  rat.'  of 
interest  beforf~dishonf)r  t.q^rrrn^nidjtionally  fixed  .ai—y— p^r  cent.,  and 
no  act  or  omission  oT^either  party"  can  cfiange  the  stipulated  rate 
of  interest,  which  is,  in  effect  7  per  cent,  from  date  till  due.  and 
12  per  cent,  tlicreafler.  and,  as  there  seems  to  be  no  condition 
not  certain  of  fulfillment,  we  characterize  and  regard  the  note  as 
a  negotiable  instrument,  it  was  said  in  Towne  v.  Rice  (122  Mass. 
67),   that  "  an    instrutncnt    wlii(li    in    its   terms  and   form   is  a  nego- 

KEOOT.  INSTRUMENTS  —  5 


66  FOHM    KKgiUHKI).  [aRT.    II. 

tiable  promissory  note  doos  not  lose  that  character  because  it  also 
recites  that  an  additional  rate  of  interest  will  be  paid  after  due." 
{De  Ilass  v.  lioberta,  59  Fed.  853;  Crump  v.  lU-rdan,  i>7  Mich.  293.) 

In  our  opinion,  there  is  no  provision  in  the  note  in  suit  which,  under 
the  statute  or  mcriantile  law,  di'stroys  its  negotiability. 


,  ,  SMITH  V.  CRANE.  if' 


§  21  ,  ,  SMITH  V.  CRANE. 

33  Minnesota,   144.  — 1885. 


Action  by  indorsee  aj2:ainst  inaker.  Court  charged  that  "  the 
instrument  olt'ered  in  evidence  is  not  a  promissory  note,  but  is  sub- 
ject to  all  equities_existing  between  the  defendant  and  D.  M.  Osborne 
&  Co.,  whether  it  was  assigned  before  or  after  maturity."  Defendant 
has  a  verdict,  and  plaintitf  appeals  from  an  order  refusing  a  new  trial. 

Berry,  J. :  — 

$100.  Good  I'nuNDER.  July  24,   1882... 

For  value  received  on  or  before  the  first  day  of  January,  1884,  I,  or  we,  or 
either  of  us,  promise  to  pay  to  the  order  of  D.  M.  Osborne  and  Co.  the  sum  of 
one  hundred  dollars,  at  the  office  of  Gebhard  and  Moore,  in  Mankato,  with 
interest  at  ten  per  cent,  per  annum  from  date  until  paid;  seven,  if  paid  when 
due.  ^  W.  J.  B.  Cbane. 

A  negotiable  promissory  note  must  be  certain  as  to  amount.  (Jones 
V  Radatz,  27  Minn.  240.)  It  is  so  certain  when  the  sum  to  become 
absolutely  payable  upon  it  at  any  given  time  is  ascertainable  upon 
its  face,  jil  Daniel,  Neg.  Inst.,  §53;  Towne  v.  Bice,  122  Mass.  67; 
Jones  V.  Rndatz,  supra.) 

The  defendants'  position  is  that  the  foregoing  instrument  is  rendered 
uncertain  as  to  amount  by  the  interest  clause,  and  therefore  is  not  a 
negotiable  promissory  note.— jVs  to  the  legal  effect  of  such  a  clause  the 
authorities  disagree.  _Some  hold  that  the  contract  reserves  the  higher 
rate  of  interest,  with  a  provision  for  its  ahatement ,  upon  a  condition 
to  be  performed,  and  that,  therefore,  the  difference  between  the  two 
rates  is  not  a  penalty,  but  the  contract  is  to  be  enforced  according  to 
its  literal  terms.  The  cases  holding  this  view  rest  upon  NicholJs  v. 
Maynard  (3  Atk.  519).  (See  Walmesley  v.  Booth,  Barn.  Ch.  478, 
481  ;  Bonafons  v.  Ryhot,  3  Burr.  1370;  Waller  v.  Long,  6  Munf.  (Va.) 
71.)  Other  authorities  hold  that  the  clause  is  the  same  in  effect  as  if 
it  had  reserved  the  lower  rate  of  interest,  with  a  provision  that  if  the 
indebtedness  is  not  paid  at  maturity,  interest  sli.ill  run  at  a  higher 
rate.  (Seton  v.  Slade,  7  Yes.  265,  and  see  Stanliope  v.  Manners,  2 
Eden.  197;  Brockway  v.  Clarh,  6  Ohio,  45;  Lonfjivorth  v.  Ash-en.  15 
Ohio  St.,  370;  Brown  v.  Barkham,  1   P.  Wms.  652.)     If  this  be  the 


II.    4.]  MUST   BE  TO   PAY    A    SUM    CERTAIN.  o7 

true  construction  of  the  clause,  it  is  generallj^  agreed  that  the  difference 
between  the  two  rates  is  to  be  treated  as  a  penalty.  {Talcott  v.  Mars- 
ton,. 3  Minn.  538,  (339)  ;  Newell  v.  Houlton,  22  Minn.  19;  and  cases 
last  cited.) 

In  our  opinion  the  view  taken  by  the  authorities  last  mentioned  as 
to  the  legal  effect  of  the  interest  clause  under  consideration,  is  the 
more  sensible,  and  most  in  accordance  with  what  would  seem  to  be 
the  real  object  of  the  parties  to  the  contract.  What  the  payee  really 
wants  is  his  money  at  the  due  date  of  the  contract,  and  to  secure 
Diis  he  holds  an  increase  of  the  rate  of  interest  over  the  debtor's 
head.  In  other  words  the  increase  is  a  penalty  for  the  debtor's 
delinquency.  Treating  the  increase  as  a  penalty,  it  follows,  under  the 
<lecisions  of  the  court  before  cited,  that  the  note  in  suit  will  in  law 
draw  the  same  rate  of  interest  before  as  after  maturity,  —  that  is 
to  say,  7  per  cent.,  —  and  that,  therefore  (whatever  might  he  the 
case  if  the  interest  clause  were  upheld  according  to  its  literal  terms), 
the  sum  absolutely  payable  upon  the  instrument  at  any  given  time  is 
thus  made  certain,  as  the  principal,  and  7jier  cent,  interest.     *     *     * 

Order  reversed  and  new  trial  directed.^  _ 

(c)   Engagement  to  pay  by  stated  instalments ;  contingent  instalments.' 

§21  COOKE  V.  HORN. 

29  Law  Times,  N.  S.  ( Q.  li. )  ,369.  —  1873. 

This  was  an  action  upon  a  promissory  note,  tried  before  Hony- 
irian,  J.,  at  the  York  Siuiuiht  Assizes.  A  verdict  of  175Z.  5s.  lOd. 
was  found  for  the  plaintill',  leave  being  reserved  to  the  defendant 
to  move  to  enter  a  verdict  for  him,  on  the  ground  that  the  note  was 
not  good.     "^----__ 

The  form  of  the  note  was  as  follows:  — 

£170.  2rAh  April,  1.S72. 

We  proiiiiso  <o  pay  to  Mossrs.  M.  H.  Cooko  nnd  Co.  170/.,  with  iritcroat 
tlHTfon  at  thf  rat<'  of  .5/.  [)«t  cent,  per  annum,  a.s  follows:  the  tirat  paynuMit,  to 
wit,  Jd/.,  or  tnorc,  to  lie  niailt-  on  the  Ist  Vt'U.  1S7.'},  and  5/.  on  th«-  lirst  day  of 
each  niontli  followinj/  until  this  note  and  intorost  shall  he  fully  satisfied.  And 
in  ea>4<'  defmiit  shiiil  lie  inadi-  in  jiaynient  of  any  of  the  saiil  iiiMtalinents,  the 
full  !itiir)iint  then  remainiiii/  due  in  respect  of  the  said  note  and  interest,  shall  Ih» 
forthwith    payahle. 


>  In  Conn.  Mut.  Life  Inn.  Co.  v.  Wcstcrhoff,  58  Neb.  379,  it  was  held  that 
a  provision  in  a  note  that  in  default  of  the  payment  of  the  semi-annna! 
interest  instalment  the  whole  debt  will  hear  interest  at  a  hipher  rate  than  it 
wfiuid  by  its  terms  otherwise  iM-ar,  i-<  in  the  nature  of  a  p-nalty  and  will 
not  be  enforced.     Followed  in   Kendall  v.  Sclby,  G6  Neb.  CO.  —  C. 

*See  note  in  125  Am.  St.  Rep.  at  p.  204.  —  C. 


68  FORM   HKQUIRKI).  [aRT.    II. 

The  note  was  signed  by  tlio  defendant  and  one  John  Horn,  since 
deceased. 

Blackbdkn,  J.  —  I  do  not  tliinU  Uhto  should  be  any  rule  in  this 
case.  The  objection  to  the  note  is,  that  if  the  first  payment  were 
more  than  40/.,  which  the  note  provides  it  might  be,  the  subseiiuent 
instahnents  and  the  final  time  of  payment  would  be  indefinite.  The 
amount  of  tlie  note,  however,  is  certain,  and  any  variation  in  the 
time  will  depend  only  upon  the  defendant.  No  case  has  been  cited 
wliicli  is  an  authority  against  tliis  note;  and  by  analogy  witli  other 
objections,  this  one.  as  it  seems  to  me,  ought  not  to  prevail.  I  do 
not  see  why  a  stipulation  which  enables  the  maker  of  a  note  to  reduce 
his  liability  for  interest,  should  prevent  the  instrument  containing  it 
from  being  a  promissory  note.    --^ 

Quain  and  Archibald,  JJ.,  concurred. 

Rule  refused. 


{\ 


A^J 


§  21  EIKER  V.  SPRAGUE  MANUFACTURING  CO. 

14  Rhode  Island,  402. —  1884. 

TiLLiNGHAST,  J.  —  This  case  and  the  following  one  ^  are  actions, 
this  case  against  the  maker  and  indorsers,  and  the  following  one 
against  the  indorsers  only,  of  a  large  number  of  promissory  notes, 
set  out  and  declared  on  by  the  plaintiff's  as  negotiable,  and  are  tried 
together,  by  agreement  of  parties,  upon  the  defendant's  petition  for 
a  new  trial,  in  each  case  on  the  ground  of  certain  alleged  misrulings  by 
the  court  at  the  jury  trials,  and  also  that  the  verdict  was  against  the 
evidence  in  each^case.  The  questions  raised  by  the  exceptions  to  the 
rulings  of  the  court  in  this  case,  in  so  far  as  they  were  relied  on  at 
the  trial,  are  first,  whether  the  notes  declared  on  are  negotiable ;  and 
second,  whether  there  was  a  waiver  l)y  the  indorsers  of  demand  and 
notice,  which  excused  the  plaintiff's  from  proofs  thereof  at  the  trial  to 
the  jury.. 

The  notes  are  all  in  the  following  form,  which  is  a  copy  of  one  of 
the  notes  in  suit : 

E.  No. 
$1,000  Pbovidencp:,   'November   1st,   1873. 

Three  years  from  January  1st,  1874,  for  value  received,  the  A.  &  VV.  Spraj^ue 
Manufacturing  Tompany  promise  to  pay  to  the  order  of  A.  &  W.  Rprague  One 
Thousand  Dollars,  with  interest  from  January  1,  1874,  payable  semi-annually, 
at  the  rate  of  seven  and  three-tenths  per  cent,  per  annum,  till  said  principal 
sum  is  paid,  whether  at  or  after  maturity;  and  all  instalments  of  interest  in 
arrear   shall   bear  interest  at  the   rate  aforesaid   till   paid,   but  reserving  the 

«  Post,  p.  105.  — H. 


II.   4.]  MUST  BE  TO  PAY  A  SUM   CERTAIN.  69 

right  to  pay  this  note  before  maturity  in  instalments  of  not  less  than  five  (5) 
per  cent,  of  the  principal  thereof,  at  any  time  the  semi-annual  interest  becomes 
payable.  Principal  and  interest  payable  at  their  place  of  business  in  said 
Providence.  Amasa  Spbague, 

Treasurer. 
Countersigned, 

Z.  Chafee,  Trustee. 
[Indorsed] 

A.  &  W.  Spbague. 

The  defendants  contend  that  said  notes  are  not  negotiable  for  two 
reasons,  namely:  fir^t,  because  the  time  of  payment  is  uncertain;  and 
second,  because  the "aiTSmst-ttt^'b^" paid  is  also  uncertain. 
^J£-^l»er-tTf  "th^se'^grounds  is  established,  the  ndffes  must  be  held 
not  negotiable,  and  this  action,  as  against  the  indorsers  at  least, 
cannot  be  maintained ;  for  it  is  elementary  law  that  amongst  the 
essential  requisites  of  a  negotiable  promissory  note  are  certainty  as 
to  the_  amount  to  be  paid,  and  certainty  as  to  the  time  when  the  pay- 
menl  is  to  be  made. 

First,  then,  are  the  notes  certain  as  to  the  amount?  They  are  each 
for  a  definite,  fixed,  and  certain  sum,  and  the  payment  of  this  sum 
is  not  subject  to  any  uneertainty.jQr  contingency.  But  the  defendants 
urge  that  by  reason  of  the  reserved  right  on  the  part  of  the  maker 
e.xpressed  in  the  body  of  the  note,  to  pay  the  same  before  maturity, 
in  instalments  of  not  less  than  five  per  cent,  of  the  principal  thereof, 
at  any  time  the  semi-annual  interest  becomes  payable,  the  amount  ot 
the  note  is  rendered  uncertain.  We  fail  to  see  how  the  amount  to  be 
paifTTjCcomes  any  less  certain  by  reason  of  this  reservation.  Suppose 
part  payment  to  be  maae  at  one  of  the  stated  periods  provided  there- 
for: that  is  a  payment  on  the  principal  of  the  note,  and  simply  reduces 
said  principal  by  so  much  as  is  paid,  leaving  the  note  as  definite  as  to 
amount  as  it  was  before;  so  that  although  the  amount  actually  due  L  , 
upon  the  principal  of  one  of  these  notes  at  a  given  time  in  its  existence  (/ *y.t 
might  be  different  froni  the  amount  due  aL-^tome  other  time,  yet  it   /  ! 

would  always  be  a  fixecfand  certain  amount,  and  the  total  sum  payable  ''  "-^  ^L/ 
would  not  be^changed.     The  object  of  the  law,  therefore,  in  re(]uiring  ^"^ 

certainty  as  to  amount  as  well  as  to  time  of  jjaymcnt,  which  is  to  give     '^'^ a^ 
to  negotiable   paf)er  as   far   as   possible   the   (piality   of  a  circulating    - 
medium,  like  money,  and  practically  to  make  it  represent  money,  is          Ay.  y 
fully  met  in  a  note  in  this  form.  '      ^ 

The  cases  in  which  it  has  been  held  that  there  was  not  that  (('rlainty 
as  to  amount  to  be  paid  which  the  law  requires  in  negotiable  pa[)er  are 
those,  in  the  main,  where  the  j)rin(ij)al  of  the  note  could  not  be  deter- 
mined by  anything  which  a[)[)earcd  therein:  as  whcr^  f\  prptni^^n  was 
mad('  tii  puya  certain  sum.  "  and  all  fines  according  to  rule  "  (.1  i/rcy  v.  (\^ 
Fearnaidps,  4  M.  Si  W.  IHS)  ;  f)r  a  certain  sum,  and  also  "all  other  ,- 
sums  which  may  be  flue"   (Sinilh  v.  Nightingale,  2  Stark.  375);  or/'-»-- > 


70  FORM    RKQl'lHKl).  [aUT.    II. 

a  certain  sum  with  inton'st.  and  also  lo  [)ay  "  tlio  demands  of  the 
sick  club  at,  etc.,  in  part  of  interest"  {Bolton  v.  DiKjdalc,  4  B.  &  Ad, 
619;  Davics  v.  Wilh-insun.  10  A.  &  E.  98) ;  or  a  certain  sum  deducting 
what  interest  or  money  A.  may  owe  the  maker  {Barlow  v.  Broadltiirsl, 
A  Aloore,  171)  ;  or  a  certain  sum  together  witli  all  cost  of  collection 
incluilinii  attorney's  fees  {Jones  v.  Radalz,  'i7  Minn.  240;  Mari/land 
Fertilizing  and  Manufac.  Co.  v.  Newman,  GO  Md.  584;  Johnston  v. 
Speer,  92  Pa.  St.  227.)  These,  and  many  others  of  like  character, 
illustrate  and  make  plain  wliat  is  meant  hv  the  term  "uncertain  as  to 
amount,"  as  a|)plied  to  promissory  notes,  and  what  degree  of  certainty 
is  essential  to  render  a  note  negotiable. 

That  no  such  uncertainty  exists,  however,  in  the  notes  declared  on 
in  the  case  at  bar,  is  clearly  manifest  upon  the  most  casual  inspection 
thereof;  and  we  conclude  that,  so  far  as  certainty  in  amount  is  con- 
cerned, they  unquestionably  come  within  the  rule  which  the  adjudged 
cases  make.         , ^ 

Second,  then,  are  they  certain  as  to  time  of  payment?*     And  upon 
this  point  let  us  first  ascertain  what  degree  of  certainty  is  meant  by  | 
this  expression.     We  think  the  rule  of  law  is  clearly  this,  namely:! 
"  thaj  if  the  time  of  payment  named  in  the  note  must  certainly  come.} 
although  the  precise  day  may  not  b&  ^pevifUd  lhwHif,'il  is  sufficiently 
certain  US  tO  tiiM."     In  other  words,  it  must  not  depend  upon  any 
contingen?5^as  to  "  when   A.  shall  marry,"    {Pearson  v.   Garrett,  4 
Mod.  242;  or  when  a  certain  ship  shall  arrive  {Coolidge  v.  Ruggles, 
15  Mass.  387;  Grant  v.  Wood,  12  Gray,  220:  Palmer  v.  Pratt,  2  Bing. 
185)  :  or  when  a  certain  suit  is  determined  {Shelton  v.  Bruce,  9  Yerg. 
24 ;  see,  also,  Woodbury,  Williams  and  English  v.  Roberts,  59  Iowa. 
348.)     And  here  the  maxim.  Id  cerium  est  quod  certum.  reddi  potest, 
is  applicable,  although  perhaps  it  is  not  as  to  the  amount. 

So  in  Cola  v.  Buck  (7  Met.  588),  it  was  held,  Shaw,  C.  J.,  deliver- 
ing the  opinion  of  the  court,  that  a  note  in  the  following  form, 
namely:  "For  value  received  I  promise  to  pay  J.  P.,  or  bearer, 
$5T0.50.  it  being  for  property  I  purchased  of  him  in  value  at  this 
date,  as  being  payable  as  soon  as  can  be  realized  of  the  above  amount 
for  the  said  property  I  have  this  day  purchased  of  said  P.,  which  is  to 
be  paid  in  the  course  of  the  season  now  coming."  was  a  negotiable 
promissory  note,  on  the  ground  that  it  was  payable  at  all  events 
within  a  limited  time,  namely,  "  the  coming  season,"  and  that  whether 
that  meant  "  harvest  time  or  the  end  of  the  year,  it  must  come  by  the 
mere  lapse  of  time  and  that  must  be  the  ultimate  limit  of  the  time  of 
payment." 

So,  also,  in  Curtis  v.  Horn  (58  N.  H.  504),  a  note  payable  "on  or 
before  the  first  day  of  May  next,"  was  held  to  be   negotiable.     In 


*  See  Neg.   In«t.   L.,  §  23. 


7  'Cu^ 


II.    4.]  MUST  BE  TO   PAY   A   SUM   CERTAIN.  71 

delivering  the  opinion   of  the  court  in  that  case,  Justice  Bingham 

said :     "  Tt  is  now  the  common  law,  that  where  the  payment  is  made 

to  depend  upon  an  event  that  is  certain  to  come,  and  uncertain  only 

in  regard   to  the  time  when   it  will  take  place,  the  note  or  bill  is 

negotiable.     In  Mattison  v.  Marks  (31  Micli.  421),  it  was  held  that 

a  promise  to  pay  "  on  or  before  "  a  day  named  stated  the  time  for 

payment    with    sufficient   certainty.      In    that   case   Cooley,   J.,   said: 

"  The  legal  rights  of  the  holder  are  clear  and  certain ;  the  note  is  due  ■'^  C/u.^  y  ^ 

at  a  time  fixed,  and  is  not  due  before.     True,  the  maker  may  pay  ^  ^-^ 

sooner  if  he  shf^]]  fhnnaa^  \lxxi-i]^\^  optioD,  it'  exercised,  would  be  3 

payment  in  advance  of  the  ktial   liahility  to  pay.  and  nothing  more. 

NotcB  likt  lliiti  are  common  in  commercial  transactions,  and  we  are  I  ^^  ^", 

irotTiivare'  mat  tlielT  negotiable  quality  is  ever  questioned  iiL..liusiae8s 

dealings."     (See,  also,  Edwards  oh  Btlls  ami   X<itr>,   142;  Story  on 

PrOTiiiisory  Notes,  §27;  Wheatley  v.  Williams,  M.  6i  \V.  533;  Ernst 

V.  Steckman,  74  Pa.  St.  13;  Daniel  on  Neg.  Inst.,  §§  43,  48.) 

Indeed,  the  cases  have  gone  so  far  in  this  direction  as  to  hold  tliat 
a  note  payable  within  a  limited  time  after  the  death  of  a  person  named 
is  sufficiently  certain  as  to  time.  {Cooke  v.  Colehan,  2  Strange,  1217; 
Colehan  v.  Cooke,  Willes,  393.)  So,  also,  it  has  been  repeatedly  held 
that  notes  payable  in  instalments  at  fixed  dates  are  negotiable.  (Van 
Buskirk  v.  Day,  32  111.  260;  Carlon  v.  Kencahj,  12  M.  &  W.  139.) 

The  cases  of  Way  v.  Smith  (111  Mass.  523),  and  Stults  v.  i9t7t;a 
(119  Mass.  137),  cited  by  the  defendants,  seem  to  support  their  posi- 
tion in  the  case  at  bar;  but  we  prefer  the  reasoning  of  the  court  in 
Ci)ta  v.  BtLck,  ante,  to  that  given  in  the  subsequent  case  of  Hubbard  v. 
Mosrly  (11  Gray,  170),  upon  which  these  cases  seem  to  rest. 

The  case  of  Carlos  v.  Fancourt  (5  Term  Rep.  482),  cited  by  the 
riefendants,  was  one  in  which  the  note  was  made  payable  out  of  a 
f II  11(1  that  should  arise  from  the  sale  of  certain  property,  and  wa8 
therefore  held  not  n<!g()tiaMe  because  not  payable  at  all  events.  It  is 
in  harmony  with  nearly  all  of  the  more  modern  decisions  upon  that 
point,  and  doubtless  states  the  law  correctly.  (Story  on  Prom.  Notes, 
§25.)  But  we  do  not  understand  it  to  be  seriously  clainunl  in  the 
case  at  bar,  nor  do  we  think  it  could  be  successfully  claimed,  that  the 
notes  are  necessarily  payable  out  of  any  particular  fund  or  property; 
or,  in  other  words,  that  the  payment  thereof  is  based  upon  any  con- 
tingency whatever. 

The  notes  in  suit  are  made  payable  three  years  from  .lanuary  1, 
1874,  wifl)  the  reserved  right  on  the  part  of  the  maker  to  pay  the 
same  before  maturity,  in  part  or  in  whole,  at  any  time  when  the 
semi-annual  interest  becomes  payable.  They  are  payable  at  all  events 
within  a  limited  time,  and  payment  cannot  be  enforced  until  the 
expiration  f)f  tlint  time;  but  the  maker  reserves  an  n[)tif)n  within  that 
limit  of  which  he  may  avail  himself    if  he  sees  fit.      Hut  even  this 


72  POUM  ut:(iuiuED.  [art.  ii. 

option  cannot  be  oxercisod  cxccpl  al  cortain  periods  which  are  definitely 
expressed  in  tlie  notes. 

We  tliink  tliat  a  note  is  neLjotiable  if  one  t-ertain  time  of  payment 
is  tixed,  altliough  the  option  of  another  time  of  payment  be  given. 

As  the  notes  in  suit  come  clearly  within  both  the  letter  and  spirit 
of  tlie  rule  wliicii  we  have  stated,  we  decide  that  tliey  are  negotiable 
promissory  notes. 

(Omitting  portion  on  waiver  of  demand  and  notice.] 

It  therefore  follows  that  the  notes  were  properly  admitted  in  evi- 
dence against  the  indorsers ;  and,  there  being  no  other  defense  than 
that  concerning  the  negotiability  of  tlie  notes,  which  we  have  already 
disposed  of,  that  it  was  the  plain  duty  of  the  court  to  direct  a  verdict 
for  the  plaintiffs.  The  petition  for  a  new  trial  must,  therefore,  be 
denied,  and  judgment  entered  on  the  verdict. 

/  ,  Petition  dismissed.* 

{d)   Engagement  that  on  default  the  whole  sum  shall  become  due. 

§  21  CARLON  V.  KENEALY. 

12  Meeson  &  Welsby    (Exch.)    139. —  1843, 

Assumpsit  by  the  indorsee  against  the  maker  of  a  promissory  note. 
The  declaration  stated,  thaFTlie  defendant  on,  etcVmade  his  promis- 
sory note  in  writing,  and  delivered  the  same  to  T^-G.,  and  thereby 
promised  to  pay  the  said  T-  C,  or  order,  521.  10s.,  by  two  equal  instal- 
ments, on  the  1st  of  May,  1843,  and  the  1st  of  November,  1843,  and 
that  the  whole  amount,  52/.  10s.,  should  become  immediately  payable 
on  default  being  made  in  payment  of  the.^-£iat— ijistalment.  The 
declaration  then  averred,  that  T.  C' endorsed  the  note  to  the  plaintiff; 
that  the  defendant  made  default  Tn  payment  of  the  first  instalment, 
and  that  he  had  not  paid  the  amount  of  the  note. 

Special  demurrer,  on  the  ground  that,  the  second  instalment  on 
the  said  promissory  note  being  made  payable  by  way  of  condition 
and  penalty  immediately  on  default  in  payment  of  the  first  instal- 
ment, the  note  was  not  made  according  to  the  custom  of  merchants 
with  regard  to  inland  bills  nf  exchange,  and  consequently  the  title 
thereto,  and  the  right  of  action  thereon,  could  not  pass  by  endorse- 
ment.    Joinder  in  demurrer. 

Lord  Abinger,  C.  B.  —  Suppose  the  case  of  a  note  payable  ten 

^  $50,  to  be  paid  in  such  instalments  and  at  such  times  as  the  directors  of 
said  company  may,  from  time  to  time  assess  or  require,  is  a  promissory  note. 
White  V.  Hmith,  77  III.  351;  Goshen  Turnpike  Co.  v.  Hurtin,  9  Johns.  (N.  Y.) 
217.    But  see  McClelland  v.  Ncn-folk  f^outhern  R.  Co..  110  N.  Y.  460,  475-G.— H. 


II.  4.]  MUST  BE  TO  PAY  A  SUM  CERTAIN.  73 

days  after  sight  —  there  the  subsequent  parties  do  not  know  when 
they  are  to  be  called  upou.  1  think  there  is  no  ground  for  saying 
the  defendant  is  not  liable*. 

Parke,  B.  —  Now,  to  hold  that  actions  could  not  be  maintained 
upon  such  notes  as  this,  would  be  to  impugn  all  the  established  prac- 
tice. Almost  every  note  payable  by  instalments  has  such  a  condition. 
It  is  not  a  contingency  —  it  depends  on  the  act  of  the  maker  himself; 
and  on  his  default,  it  becomes  a  promissury  note  for  the  whole  amount. 
The  pointy  was  in  effect  determined  in  Oridge  v.  iSkerburne  (11  M.  & 
W.  374). 

GuRNEY,  B.,  and  Eolfe,  B.,  concurred. 

Judgment  for  the  plaintiff." 

§  21  Mr.  Justice  Harlan  in  CHICAGO  RY.  CO.  v. 

MERCHANTS'  BANK. 

136  United  States,  208,  285-6. —  1889. 

Upon  like  grounds  it  has  been  held  that  the  negotiability  of  the 
note  is  not  affected  by  its  being  made  payable  on  or  before  a  named 
date,  or  in  mstalin'iits  i^{  ;i  particular  amount.  In  Arkley  School 
Disl.  V.  Hall  (113  L  .  .S.  i:;.:),  141) ).  it  was  lield  that  municipal  bonds, 
issued  under  a  statute  providing  that  they  should  be  payable  at 
the  pleasure  of  the  district  at  any  time  before  due,  were  negotiable ; 
for^  the  court  said :  "  By  their  terms,  they  were  payable  dl  U  Lime 
which  must  certainly  arrive;  the  holder  could  not  exact  payment 
before  the  day  fixed  in  the  bonds ;  the  debtor  incurred  no  legal  lia- 
bility for  non-payment  until  that  day  passed."  In  Matiison  v.  Marks 
(31  Mich.  -124),  whicli  was  fhc  case  of  a  note  payable  "on  or  before" 
a  day  namcfl,  it  was  said  :  "  True  the  inaker  may  pay  sooner  if  he 
shall  choose,  but  this  option,  if  exercised,  would  be  a  payment  in 
advance  of  the  legal  liability  to  pay,  and  nothing  more.  Notes  like 
this  are  rommon  in  commercial  transactions,  anrl  wo  arc  not  aware 
that  thoir  negotiable  r]uajity  is  ever  quejptio"'"^^  '^>  l>iieiT>£igg  dealings." 
{Cnrlnn  v.  KrvrnJJ/.']'*  M.  Sc  W.  139:  Cnlrhnv  v.  WUIrs,  Willes,  393; 
Jordan  v.  Talp,  19  Ohio  St.  586:  Curli^  v.  Homr,  r>8  N.  H.  504: 
ffovard  v.  Siwkivff.  60  Georgia.  340;  f^rofrrfiov  Ivfi.  Co.  v.  Ih'JJ,  31 
Conn.  534,  538:  GooHlop  v.  Taylor.  .3  Hawks,  458;  Hikrr  v.  Sprapue 
Mfg.  Co..  14  \i.  I.  40:?.)  In  the  laHt  named  case  it  was  saiti  that  if 
the  time  of  payment  named  in  the  note  must  certainly  come,  although 
the  precise  d«te  niay_jiQt_bc  specified,  it  is  sufficiently  certain  as  to 
time.     It  wag,'i!?)n8equently,  held  that  a  reservation  in  a  note  of  the 

«  Se«  Clark  v.  Skecn,  61  Kan.  526.  —  C. 


74  FORM   REQUIRED.  |  ART.    11. 

right  to  pay  it  before  matiiiilv  in  instiilnu'iits  of  not  less  than  five 
per  cent,  of  the  principal  al  any  lime  llu'  semi-annual  interest  becomes 
pavable,  did  not  impair  iis  nrmiiiabilil}' ;  the  court  observing  that  a 
note  is'Iie'^'oliable  if  oiir  rci  lain  lime' of  payment  is  lixed,  althoujfh  the 
option  of  anotlier  time  of  payment  be  given.  In  view  of  these  authori- 
ties, as  well  as  uj)on  j)rin(i|iU\  we  adjudge  that  the  negotiability  of 
the  notes  in  suit  was  not  allected  by  the  provision  that  upon  the  failure 
of  tlio  maker  to  j)ay  any  one  of  the  notes  of  the  series  to  which  those 
in  suit  belonged,  the  rest  should  become  due  and  payable  to  the  holder. 


(e)   Engagement  to  pay  exchange^ 

§21  HASTINGS  v.  THOMPSON. 

54   Minnesota,    184.  —  1893. 

Action  by  indorsee  against  maker  to  recover  on  promissory  notes. 
Defendant  answered  setting  up  a  good  defense,  unless  iW^^  wete 
negotiable  and  in  the  hands  of  a  bona  fide  indoDjefi-for  value.  Plain- 
tiff demurred,  and  the  sole  question  presented  was,  whether  the  inser- 
tion in  the  notes  of  the  words,  "  with  current  exchange  on  New 
York  City,"  rendered  the  notes  non-negofiable  and  open  to  the 
defense.  It  was  admitted  that  the  plaintilT  was  a  bona  fide  liolder 
foF- value  before  maturity.  The  trial  court  overrul^djthe  demurrer 
and  plaintiff  appeals.     \    .  /  > ,  %      /.'{{..:■■  ^.^.^j 


Mitchell,  J.  —  The^  only  point  raised  on  this  appeal  is  whether 
the  instruments  sued  on  are  promissory_notes,  for,  if  they  are,  they 
are  unquestionably  negotiable  under  the  law  merchant.  They  are 
promises  to  pay  specified  sums  of  money  m  St.  Paul,  "  with  current 
exchange  on  New  York  City;"  and  the  only  question  is  whether  this 
provision  as  to  exchange  renders  the  sums  re(|uired  to  discharge  them 
uncertain,  within  the  meaning  of  the  familiar  rule  that  one  of  the 
essential  qualities  of  a  promissory  note  is  that  the  amount  to  be  paid 
must  be  fixed  and  certain  and  Trot  contingent.  In  the  definitions  of  a 
promissory  note  or  bill  of  excTiange  if  is  generally,  if  not  always, 
stated  that  the  amount  necessary  to  discharge  it  must  be  ascertainable 
from  the  face  of  the  paper  itself,  without  having  to  refer  to  any 
extrinsic  evidence.  Construing  this  definition  literally,  it  must  bo 
admitted  that  the  instruments  in  question  do  not  strictly  fall  within  it, 
for,  of  course,  extrinsic  evidence  must  be  resorted  to  in  order  to 
ascertain  the  rate  of  exchange  at  a  given  time  between  two  places. 

Upon   examination   of  the  reports  and  text-books  it   is  surprising 


T  See  note  in  125  Am.  St.  Rep.  at  p.  212.  —  C, 


II.  4.]  MUST  BE  TO  PAY  A  SUM  CERTAIN.  75 

how  little  direct  authority  of  any  value  is  to  be  found  as  to  the  effect 
of  the  addition  of  such  a  provision  to  an  instrument  for  the  payment 
of  money.  Daniel,  Randolph,  and  Tiedeman  state  in  general  that 
such  ^"provision  does  not  affect  the  commercial  or  negotiable  character 
of  the  paper,  but  none  of  them  discuss  it  at  any  length,  and  all  of 
them  _treat  of  the  question  as  if  it  only  went  to  the  negotiability  of 
the  instruments,  whereas  the  real  question  lies  back  of  that,  and  is 
whether  they  are  promissorjiJM^tes  or  hills  of  exchange  at  alL  (Tied. 
Com.  Paper,  ^^EdJ'^and.  Com.  Paper,  §200;  Daniel,  Neg.  Inst., 
§  54.)  We  have  found  no  English  case  directly  in  point,  and  none 
bearing  on  the  question,  except  Pollard  v.  Harries  (3  Bos.  &  P.  335), 
where  such  an  instrument  was  declared  on  as  a  promissory  note. 

If  the  question  was  authoritatively  settled  in  the  leading  com- 
mercial states  of  the  Union  or  in  the  federal  courts,  we  would  be 
inclined,  for  the  sake  of  uniformity,  to  follow  their  decisions;  but  we 
have  been  unable  to  find  that  the  Supreme  Court  of  the  United  States, 
or  of  either  Massachusetts,  New  York,  or  Pennsylvania,  has  ever 
passedjipon  the  question.  The  only  cases,  state,  federal,  or  colonial, 
which  we  have  found  which  may  be  considered  as  having  passed  on 
the  question,  are  the  following,  which  may  be  classified  thus:  That 
such  instruments  are  not  promissory  notes:  (Lowe  v.  Bliss,  24  111.  168 ; 
Read  v.  McNulty,  12  liich.  Law,  445;  Carroll  Co.  Sav.  Bank  v. 
Strother,  28  S.  C.  504,  G  S.  E.  Rep.  313 ;  Palmer  v.  Fahnesioclc,  9  Up. 
Can.  C.  P.  172;  Saxlon  v.  Stevenson,  23  Up.  Can.  C.  P.  503;  Phila- 
delphia Bank  v.  Newkirk,  2  Miles,  442 ;  New  Windsor  Bank  v.  Bynum, 
84  N.  C.  24;  Russell  v.  Russell,  1  MacAr.  263;  Fiizharris  v.  Lcggait, 
10  Mo.  App.  527;  Hughitl  v.  Johnson,  28  Fed.  Rep.  865;  Windsor 
Sav.  Bank  v.  McMahon,  38  Fed.  Rep.  283).  That  such  instruments 
are  promissory  notes:  (Smith  v.  Kendall,  9  Mich.  242;  Johnson  v. 
Frishie,  15  Mich.  286 ;  Leqgelt  v.  Jones,  10  Wis.  35 ;  Morgan  v. 
Edwards,  53  Wis.  599,  (UN.  W.  Rep.  21)  ;  Bradley  v.  TAll.  4  Bliss, 
473).  In  very  few  of  ibcsp  cases  is  the  question  discussed  at  any 
length,  or  considered  on  principlf.  Some  of  them  were  docided  by 
courts  of  inferior  jurisdiction,  and  in  olbers  the  remarks  of  the  court 
wvre^^obiter.  Many  of  those  wbich  bold  tluit  sucb  insjriiinents  are  not 
promissory  notes  rest,  without  discussion,  uy)on  a  strict  literal  con- 
struction of  ibf  rnjp  tbat  tbe  sum  to  he  paid  iiuist  app(>ar  from  the 
face  of  the  papor  without  resort  to  extrinsic  evidence.     Ahont  the  only  \ 

cases  where  the  question  is  discussed  at  any  length  upon  priru'iplc  or  ^ 

authority  are  Smith  v.  Kendall.  Bradley  v.  Lilt,  Morgan  v.  Edwards, 
and  Wind.'<or  SaiJ:^fimhi&^.  MrMalion ,  supra. 

In  viow  of  this  state  of  the  decisions,  while  in  mere  nnmhers  the 
decided  weight  of  authority  may  he  in  favor  of  the  contention  of 
the  defendant,  we  feel  at  liberty  to  decide  the  question  in  llie  way 
we  deem  most  in  accordance  with  principle  and  business  usages,  and 


FORM   REQDIKED. 


[art.  II. 


^v-c^iX'~ 


/..I 


in  afcordanoc  with  tlio  ruU"  which,  in  viow  of  such  usages,  the  lead- 
ing courts  of  the  counLn  aiv  niu.si  likil}  to  linally  settle  down  upon. 
The  fcllowiug  arc,  in  brief  the  considerations  which  have  led  us  to 
the  conclusion  tiiat  such  instruments  ought  to  he  hehl  to  be  promis- 
Bory  notes  under  the  law  merchant  : 

1.  The  reason  and  purpose  of  (he  rule  that  the  sum  to  })e  paid 
must'be  cprtwin  is  that  the  parties  to  the  instrument  may  know  the 
amount  necessaT'y'^trr-THsrhn li^v' TT7~wiThoTr! "Tnv'osf igating  facFs  no^f 
wtttiiii  HiT'^neral  knowledge  mC  everyone,  and  which  may  ho  subject 
to  niMii'  Mf  Ir-s  unc  t'riiiiiii  V,  (ti-  iiimi-(>  or  loss  under  the  influencjCL-ar- 
control  (if  oiH'  or  ullior  of  Ihr  piii-fics  lo  tlic  instrumeat.  The  pro- 
vision  for  the  |iiviiiont  of  the  curront  r;tfo  of  exchange  between  the 
place  of  payment  and  some  other  place  is  not  within  the  reason  of 
this  rule,  or  subject  to  the  evils  or  inconveniences  which  it  was 
designed  to  prevent.  While  the  rate  of  exchange  is  not  always  the 
same,  and  while  it  is  technically  true  that  resort  must  be  had  to 
extrinsic  evidence  to  ascertain  what  it  is,  yet  the  current  rate  of 
exchange  between  two  places  at  a  particular  date  is  a  matter  of  com- 
mon  cojum&fei^l-  knowdedge,  or  at  least  easily  ascertaina^e  by  any 
one.  so  that  the  parties  can  always,  without  difficulty,  ascertain  the 
exact  amount  necessary  to  discharge  the  paper.  It  seems  to  us  that 
within  the  spirit  of  the  rule  requiring  precision  in  the  amount  to  be 
paid  a  provision  for  the  payment  of  the  current  rate  of  exchange  in 
addition  to  the  principal  amount  named  does  not  introduce  such  an 
element  of  uncertainty  as  deprives  the  instrument  of  the  essential 
qualities  of  a  promissory  note.  A  provision  for  the  payment  of 
exchange  is  very  difFcront  from  one  for  the  payment  6f  roasonalde 
attorneys'  fees>~in_case  of  suit,  as  in  Jr)r?r.s  v.  Eadatz  (27  Minn.  240, 
6  N.  W.  Rep.  800).  The  latter  introduces  an  element  of  uncertainty 
very  different  both  in  kind  and  degree  from  that  introduced  by  the 
former.  Not  only  is  the  amount  of  the  attorneys'  fees  incapable  of 
either  easy  or  definite  ascertainment,  but  the  amount  of  it  is  more 
or  less  under  the  control  of  the  holder  of  the  instrument.  More- 
over, such  a  provision  has  never  been  considered  in  business  circles 
as  properly  ancillary  or  incidental  to  commercial  paper,  or  any  part 
of  its  legitimate  "  lu^rgage." 

2.  The  law  menrhant,  including  the  law  of  negotiable  paper,  is 
founded  upon,  and  is  the  creature  of,  commercial  usage  and  custom. 
Custom  and  u:;;il:o  liavo  ronllv  made  tholinrTTm'd  court?,  in  thotL3eGi6— 
ions,  men  ly  iJi^i  1;i!t  it.  Tlic  l.iw  of  negotiable  ii;i[)cr  is  iiol  only  founded 
on~commercial  usage,  but  is  designed  to  be  in  aid  of  trade  and  com- 
merce. Its  rules  should,  therefore,  be  construed  with  reference  to 
and  in  harmony  with  general  business  usages,  and,  as  far  as  possible, 
with  the  common  understanding  in  commercial  circles.  This  was  the 
very  purpose  of  the  statute  of  Anne  placing  promissory  notes  on  the 


/  >~e 


^^ 


II.    4.]  MUST   BE  TO   PAY   A   SUM    CERTAIN.  77 

same  footing  as  bills  of  exchange,  and  thus  setting  at  rest  a  question 
upon  which  there  had  been  some  difference  of  opinion  in  the  courts. 
Now,  we  think  we  are  safe  in  saying,  and  justified  in  taking  notice 
of  the  fact,  that  if  hankers  or  other  business  men  accustomed  to 
dealing  in  commercial  paper  were  asked  whether  such  an  instrument 
is  a  promissory  note,  and  whether  they  would  deal  with  it  as  negoti- 
able paper,  the  answers  would,  in  almost  every  instance,  be  unhesitat- 
ingly in  the  affirmative.  We  have  no  doubt  but  that  this  is  the  way  in 
which  such  paper  is  genehri+Hnwkud  [[[jTyrTan^l  trpitmfrTrPrfTiiityinrnmT"*^^ 
and  (ither  Dusmess  circles;  and,  if  so,  the  courts  should,  as  far  as  / 
possiille,— flwke  iheir  decisions  to  conform  to  this  general  custom 
and  understanding.  We  recognize  the  importance  of  simplicity  iiptk  <  ■^ 
certainty  in  the  terms  and  conditions  of  coiumeMual  paper;  and 
appreciate  the  objections  to  permitting  it  to  be  loaded  down  with'*"^--'  /- 
unnecessary  "  luggage,"  but  we  cannot  see,  under  all  the  circum-  ~^ 
stances,  and  especially  in  view  of  what  we  believe  to  be  the  commercial 
usage,  that  any  practical  evil  will  result  from  permitting  the  addi- 
tion of  such  a  provision  for  the  payment  of  current  exchange  on  the 
principal  amount.  JNor  are  we  disposed,  as  a  rule,  to  extend  Tlie 
quality  of  negoiiable  paper  to  contracts  for  the  payment  of  money 
beyond  the  strict  limits  of  the  already  established  rules  of  law;  but 
to  exclude  from  that  category  paper  like  that  under  consideration 
would  be  to  exclude  the  very  class  of  paper  which  ought  to  be  hold 
negotiable,  if  any  promissory  notes  ought  to  be  so  Iteld,  —  paper 
given  and  taken  in  commercial  transactions,  properly  so  called ;  for 
rarely,  if  ever,  would  a  provision  for  exchange  be  incorporated  in 
any  other.  ^j     )si^ ^i^.,.^-^^^^  {/{ 

/UAv^S    ^      ^-^         /     (l^Orderlreversed.' 
Application  for  re-argument 

8  See  other  casefi.  pro  and  con,  cited  in  Haalach  v.  Wolf,  66  Neb.  600,  and 
in  tho  note  to  this  case  in  1   A.  &  E.  Ann.  (as.  385. 

"The  whole  matter  turns  upon  the  {|ueslioii  whetlior  such  a  sf ipnlalinii 
renders  the  amount  uneertain,  so  as  to  destroy  one  of  the  essential  elements 
of  neyotiahility.  While  it  is  true  that  in  a  sense  an  uncertain  eh-ment  is 
imported  into  the  instrument  by  the  agreement  to  pay  excliauf^e,  the  (iillicully 
is  more  specious  than  real.  Business  is  carried  on  more  or  less  in  subordina- 
tion to  certain  financial  centres,  tn  wliich  and  from  which  money  is  constantly 
flowing.  When  a  note  is  made  j)ayal)le  in  Lincoln  with  Thicago  exchaii<:e,  tho 
practical  business  effect  is  the  same  as  if  it  had  been  fiaynble  in  ("hieapo,  but, 
for  convenience,  the  parties  had  agreed  that  it  might  be  paid  at  Lincoln,  with 
the  cost  of  transmission.  .  .  .  Lof>keiI  at  in  tliis  way,  the  exchange  Ijecomes 
a  mere  incident,  not  alTccfing  the  amount  of  the  debt  itself,  and  analogous  to 
RJieh  matters  as  attf>rneys'  fees  and  costs  of  collection,  which  do  not  affect 
negotiability."     found,  (J.,  in  Uaslach  v.  Wolf,  66  Neb.  600,  601.  — C. 


78  FOHM    KKQUIRED.  [aRT.    11. 

(/)  Etujagevient  to  pay  costs  of  collection  or  attorney's  fees.* 
§  21       STAPLETON   v.  LOUlSVll.LE  HANKING  CO. 
95  Georgia.  802.  —  1895. 

Simmons,  C.  J.  —  Tlic  roiitrollini,'  (luoslion  in  this  ease  is,  whether 
a  promissory  note  is  rondcri'd  non-nogotial)lc  by  a  stipulation  to  pay 
"  all  costs  and  ton  per  cent,  on  amount  for  counsel  fees,  if  placed 
in  the  han^  of  an  attorney  for  suit."  There  is  no  prior  decision 
of  the  court  upon  Uj£,  ci^-'P^tion,  and  the  decisions  of  other  courts  as 
to  the  effect  of  sucii  stipulations  are  conflicting.  We  think  the  better 
view,  and  the  one  supported  by  the  weight  of  authority,  is  tliat  such 
a  stipulation  does  not  impair  the  negotial)le  character  of  the  paper. 
Our  code  defines  a  promissory  note  to  be  "  a  written  promise  made 
by  one  or  more  to  pay  to  another,  or  order,  or  bearer,  at  a  specified 
time,  a  specific  amount  of  money,  or  other  articles  of  value."  (§  2774.) 
It  is  defined  by  Story  to  be  "  a  written  promise  by  one  person  to  pay 
to  another  person  therein  named,  or  order,  a  fixed  sum  of  money,  at 
all  events  and  at  a  specified  time,  or  at  a  time  which  must  certainly 
arrive."  (Story,  Prom.  Notes,  p.  2).  The  note  in  question  con- 
forms to  all  these  requirements.  It  is  certain  as  to  the  payee,  as  to  the 
time  of  payment,  and  as  to  the  amount.  The  stipulation  as  to  costs  and 
attorney's  fees  is  not  a  part  of  the  main  engagement,  but  relates  to 
the  remedy  in  case  of  failure  to  comply  with  the  contract,  and  is  in- 
tended to  compensate  for  the  expense  resulting  from  its  breach.  It 
does  not  become  effective  unless  there  is  a  failure  to  pay  at  the  time 
specified;  and  it  cannot  then  affect  its  negotiability,  for  negotiability 
in  the  full  commercial  sense  ceases  at  maturity.  As  has  been  well 
said  by  Mr.  Daniel  in  his  work"mr~N'yg.  Iiisti'LlTnents  (vol.  1,  §  62a, 
4th  ed.),  "it  seems  paradoxical  to  hold  that  fnstruments  evidently 
framed  as  bills  and  notes  are  not  negotiable  during  their  currency,  be- 
cause when  they  cease  to  be  current  they  contain  a  stipulation  to  defray 
the  expenses  of  collection."  So  far  from  tending  to  check  the  cir- 
culation of  the  paper,  such  a  provision  adds  to  its  value  and  thus 
renders  it  more  available  for  commercial  purposes.  In  support  of 
these  views,  see  the  followmg  authorities:  (1  Daniel,  Neg.  Inst., 
4th  ed.  §  62  ct  seq.;  1  Randolph,  Com.  Paper,  §§  205,  206;  Parsons, 
Bills  and  Notes,  146,  147;  Tiechman,  Com.  Pap.,  §  28& ;  2  Am.  & 
Eng.  Enr.  of  Law,  324;  Montgomery  v.  Crossthivait,  ?)0  Ala.  553; 
Formers'  Nat.  Bank  v.  Sutton  Mfg.  Co.,  6  IT.  S.  Appeals,  312,  331; 
Shenandoah  Nat.  Bank  v.  Mar.<ih,  89  Iowa,  273;  Second  Nat. 
Bank  v.  Anglin,  6  Wash.  403;  Dorsey  v.  Wolff,  142  111.  589, 
aflRrming  38  111.  App.  305;  Stoneman  v.  Pyle,  35  Ind.  103; 
Proctor    v.    P,aldv:in,    82    Ind.    370;    Gaar    v.    Louisville    Banking 

»  See  note  in  125  Am.  St.  Rep.  at  p.  207.  —  C. 


II     4.]  MUST   BE  TO   PAY   A    SUM   CEKTAIN.  7Q 

Co.,  11  Bush  (Ky.),  180;  Seton  v.  Scovill,  18  Kans.  433;  Nick- 
erson  v.  Sheldon,  33  111.  373;  Dietrich  v.  Bayhi,  23  La.  Ann.  767; 
Trader  v.  Chidester,  41  Ark.  242;  Farmers'  Nat.  Bank  v.  Rasmussen, 
1  Dak.  60;  Heard  v.  Dubuque  Bank,  8  Neb.  10;  Howenstein  v.  Barnes, 
5  Dillon,  482;  507?^-  o/  Commerce  v.  Fuqxia,  11  Montana,  285.  See 
also  Toj^nf!  v  Ktre,  122  Mass.  67 ;  Arnold  v.  Rock  River  Valley  R.  Co., 
5  Duer,  207;  Adams  v.  Addington,  16  Fed.  Rep.  89;  Hughitt  v.  Jo/jn- 
son,  28  Fed.  Rep.  865.' 

It  was  complained  that  the  court  erred  in  directing  the  jury  to  find 
in  favor  of  the  plaintiff  the  amount  of  attorney's  fees  stipulated  in 
the  note,  in  addition  to  the  principal  and  interest,  the  objection 
being  that  there  wa?  no  evidence  to  show  that  the  note  had  ever 
been  placed  in  an  attorney's  hands  for  collection.  We  think  the 
fact  that  the  plaintiff  was  represented  in  this  action  by  an  attorney 
was  sufficient,  without  further  evidence,  to  authorize  the  court  to  so 
instruct  the  jury.     (See  No.  Atchison  Bank  v.  Gay,  114  Mo.  203.) 

• ,  Judgment  aflBrmed. 

i-      ^^        -^      ^    - 


L^      --;, 


[lER. 


'^■^  ■  '  -^^ 


IL-^ 


§  21  MAYNARD  j;.  MIEl 

85  Indiana.  317.  —  1882. 

Woods,  C.  J.  —  Appeal  from  a  judgment  on  a  promissory  note,  a 
copy  of  which  was  filed  with  the  complaint.  It  contains  a  promise 
in   the  ordinary   form,  to  pay  a  sum   named,  "with   interest  at  the 


1  Pont rn  :  Fir.it  Not.  Rk.  v.  Babcock,  04  Cal.  nO;  Maryland  FertiUzinp  Co.  v. 
Knrman.  fiO  Md.  .584;  Altmayi  v.  Rittcrshofcr,  08  Mich.  287;  -fonci  v.  Radafz. 
27  Minn  240;  McCoy  v.  Green,  8.3  Mo.  620;  Dccorah  First  Nat.  Bk.  v.  Lauyh- 
lin.  4  N.  Dak.  391;  Woods  v.  North,  84  Pa.  St.  407;  Stillwater  First  Nat.  Bk. 
V.  Larsrn.  00  Wis.  200.  —  IT. 

fSpp  note  in  4  A.  «i  E.  Ann.  Tas.  203.  ontitlcd  "  Nof^otiahilitv  of  note  con- 
taininp  stipulation  for  attornoy's  fees  and  costs  of  collection."  pivinp  a  larp« 
niinilifr  of  autliorities  pro  and  con. 

In  First  Nat.  Bank  v.  Miller,  13!>  Wis.  120,  Marshall.  ,1..  said  that  the 
Ne;;otiahlp  In>*l  rnrncnf  s  Law  "was  considerately  d^ -.igned  to  supersede  the 
judicial  rule  in  Moryan  v.  Edwards.  53  Wis.  SOU;  First  Nat.  Bk.  v.  Larsen, 
fiO  Wis.  200;  I'eterson  v.  Stouyhton  St.  Bk..  78  Wis.  113;  TV.  W.  Kimball  Co. 
V.  Mellrn.  80  Wis.  133,  and  similar  cases.  .  .  .  Wlien  the  Negotiable  Instru- 
ments Law  was  enacted  a  conflict  of  judicial  authority  on  the  subject  in  hand 
and  others  existed.  In  some  states  a  clause  similar  to  that  here  was  held 
to  render  the  amount  payable  on  the  instrument  uncertain  and  to  destroy  its 
negotiability.  In  many  other  states  the  obligation  as  to  costs  of  collection  was 
held  to  be  contin^rent  upon  collection  after  dishonor,  to  appertain  to  the 
remedy  for  a  breach  of  the  primary  contract,  not  to  the  debt  itself,  and,  there- 
fore, not  to  render  the  amount  uncertain,  militating  against  negotiability. 
To  supersede  the  conflict  by  a  general  rule  the  provision  of  the  Negotiable 
Instruments  statute  quoted  was  incorporated  therein."     P.   127.  —  C] 


80  FORM  REQUIRED.  [ART.    II. 

rate  of   ten  per  cent.,  after  maturity,  and  ten  per  cent,   attorney's 
fees." 

It  is  claimeil  that  llio  court  erred  in  overruling  tlie  defendants' 
demurrer  to  the  complaint.  Tlie  entire  argunu-nt  on  the  point  is  in 
these  words:  "The  complaint  is  not  sufficient  in  this,  it  is  not 
detinite  and  certain,  and  the  copy  of  the  note  shows  that  the  agree- 
ment (is)  to  pay  ten  per  ccMit.  altoi'ney's  fees,  which  we  insist  is 
void,  and  that,  therefoiv.  tlie  note  is  usurious  as  to  that  amount,  aiul 
siiould  be  held  void,  aiul  the  judgment  reversed." 

If  the  stipulation  for  attorney's  fees  were  conceded  to  be  void 
the  validity  of  the  note  would  not  be  otherwise  affected,  and  conse- 
quently the  demurrer  was  properly  overruled. 

Judgment  affirmed,  with  costs.^ 


-  Tliere  are  three  views  as  to  the  validity  of  the  stipulation  as  to  attorney's 
fep'^:  (1)  The  stipulation  is  valid.  liorne  v.  Hall,  G!1  Md.  433;  Dorsey  v.  Wolff, 
142  III.  5S9.  (2)  The  stipulation  is  void.  nuUock  v.  Taylor,  30  Mich.  137; 
Rixey  v.  I'carre,  89  Va.  113;  Security  Co.  v.  Eycr,  3fi  Neb.  507;  Witherspoonv. 
Mussclmon,  14  Bush  (Ky. ),  214.  (3)  The  stipulation  to  pay  such  fees  as  the 
court  adjudgos  reasonable,  is  valid,  but  a  stipulation  for  a. specific  sum  is  void. 
T,evens  v.  Brigps.  21  Ore.  333.  Most  courts  hold  that  the  amount  stipulated  is 
not  conclusive,  but  there  miist  be  proof  of  the  actual  value  of  the  services. 
First  Xat.  Bank  v.  Larson,  60  Wis.  206;  Uoss  v.  Botcen,  104  Ind.  207. 

There  are  four  distinct  holdings  as  to  the  result  upon  the  negotiability  of  a 
bill  or  note  of  the  insertion  of  a  stipulation  as  to  j)ayment  of  attorney's  fees: 
(1)  The  stipulation  is  valid  and  enforceable,  and  does  not  afifect  the  negotia- 
bility of  the  instrument.  Dorsey  v.  Wolff,  142  III.  .58!).  (2)  The  stipulation 
is  valid  and  enforceable,  but  it  destroys  the  negotiability  of  the  instrument. 
Jones  V.  Radatz,  27  Minn.  240;  Johnston  Harvester  Co.  v.  Clark,  30  Minn.  308; 
First  yat.  Bk.  v.  Ijorsen.  60  Wis.  206.  (3)  The  stipulation  is  void,  and  as  it 
may  therefore  be  disregarded,  it  does  not  affect  the  negotiability  of  the  instru- 
ment. Gilmore  v.  Hirst,  56  Kaus.  626;  Chandler  v.  Kennedy,  8  S.  Dak.  56. 
(4)  The  stii)ulation  is  void,  but  nevertheless  it  destroys  the  negotiability  of 
the  instrument.  Bnlloek  v.  Taylor.  30  Mich.  137;  Aliman  v.  Rittershofer,  68 
Mich.  287;  Tinsley  v.  JJoskins.  Ill  N.  C.  340;  Xew  Windsor  First  Nat.  Bk.  v. 
Bynum,  84  N.  C.  24.     It  is  difficult  to  support  this  view  upon  principle.  —  H. 

[A  note  contained  a  provision  to  paj'  "  ten  per  centum  attorney's  fees  in 
case  of  collection  by  suit."  Held,  the  note  was  negotial)le  but  the  provision 
unenforceable  as  being  a  penalty.  Fields  v.  Fields,  105  Va.  714,  citing  Rixey 
v.  Pearre  Bros,  and  Co.,  89  Va.  113. 

In  Elmore  v.  Rugely.  107  S.  W.  (Te.\.  Ct.  Civ.  App.)  151,  it  was  held  that 
such  a  ])rovision  is  a  contract  of  indemnity  and  not  for  li(|uidated  damages,  so 
that  the  maker  is  only  liable  to  the  holder  for  the  amount  of  attorney's  fees 
actually  contracted  for,  or,  in  the  absence  of  a  special  contract  for  fees,  for 
the  reasonable  value  of  the  services  rendered. 

In  a  note  to  the  Fields  case  in  7  Col.  Law  Rev.  67,  it  is  said:  "The  two 
grounds  for  holding  the  stipulation  invalid  are  usury  and  penalty.  .  .  .  The 
N.  Y.  Negotiable  Instruments  Law.  while  declaring  that  siich  a  note  is 
negotiable,  §  21,  is  silent  as  to  the  validity  of  such  a  stipulation."  —  C] 


ii.  0.]  must  be  to  pay  money.  81 

5.    Must  Be  Payable  in  Money;  But  Particular  Kind  May  be 

Designated. 

(a)   Payment  must  be  in  money. 

§  20  FIKST  XATJOXAL  BANK  OF  BROOKLYN  v.  SLETTE. 
67  Minnesota,  425.  — 1897. 

Action  on  an  instrument  set  out  in  the  opinion.  Verdict  for 
plriintiff.     From  nn  order  denying  a  new  trial,  defendants  appeal. 

Start.  C".  .1.  —  This  action  is  based  upon  an  obligation,  which  is 
substantially  in  these  words: 
$l.r.73.  Halstad.  Minn..  July  2G.  1894. 

For  value  received,  we  promise  to  pay  to  the  order  of  tiie  John  (Jood  Cordage 
and  Machine  (  ouipany  the  sum  of  .si.vteeii  hundred  and  seventy-three  dollars, 
a<  follows:  Payable  by  Nixv  York  or  Chicago  exchange.  $560.  Nov.  loth,  1894; 
!?5fi().  Dec.  l-t."l894;  $5r.O.  Dec.  15th,  1804.  Without  interest,  if  paid  as  due; 
if  not.  then  legal  rate  from  date  until  paid. 

The  niiiy  (piestion  on  this  appeal  is  whether  this  is  a  negotiable 
instrument  under  the  hnv  merchant.  It  is  absolutely  essential,  in 
order  to  constitute  a  promissory  note  under  the  law  merchant,  that 
the  promise  be  to  pay  in  money.  If  this  intrument  can  be  con- 
strued as  an  absolute  promise  to  pay  in  money  $1,673,  with  exchange, 
it  is  negotiable:  otherwise,  not.  {Hastings  v.  Thompson,  54  Minn. 
184,  r.5  .\.  W.  9(J8.)  The  case  of  Bradley  v.  LiU  (4  Biss.  473,  Fed. 
Cas.  No.  1,783),  is  the  only  one  to  which  our  attention  has  been 
called,  where  the  language  of  the  instrument  was  similar  to  the  one 
under  consideration.  In  the  case  referred  to  the  note  was  made 
in  Chicago,  and  was  payal)le  at  New  York,  "in"  e.vchange;  and  it 
was  held  that  the  note  was  negotiable,  upon  the  ground  that  the 
jjromisc  was  to  |)ay  llic  sum  named  in  the  note,  "with"  exchange, 
which  was  a  mcie  incident  to  the  debt.  In  the  case  at  bar  the  note 
is  not  payable  at  any  particular  place,  and  the  promise  is,  not  to  pay 
ft  givf'ii  number  of  dollars  in  money  "with"  —  that  is,  plus  —  the 
current  rale  of  exchange,  but  it  is  to  pay  the  sum  named  in  the  note 
by  New  "^'ork  or  Chicago  exchange.  The  holder  of  this  instrument 
cannot  demand  in  payment  thereof  $1,073  in  money,  plus  the  cost 
of  exchange;  for  the  maker  is  not  bound  to  discharge  liis  obligation 
except  bv  means  of  inland  bills  on  New  York  or  Chicago.  _  Nor  can 
the  maker  tender  "i  r,;,riiii.T.(  .*i  n^r?  in  money,  wilh  flie  f'0'--t  of 
change ;  for  his  p  m  i\  tiient  l)y  Inlaii'l  lull-,  \Hii(_ 

Tk^  nui3T  jTiircliase  in  the  '"■'^'l-V-t .  I  be  instrument,  then,  is  not  pny- 
'JlMlf  tfl '  in/llll'y.  f!fll1  ll<, 'Ifieretore,  not  n  promissory  note,  within  the 
law  merchant.  (Ensfnn  v.  Hyflr.  13  Minn.  90  (Cil.  83):  Jones  v. 
Fnlea.  4  Mass.  '^45;  Irrinr  v.  Lowry.  14  Pet.  203:  1  Daniel.  Neg.  Inst., 
§§  55,  56;  Tied.  Com.   Paper,  §29;  1   Rand.  Com.  Paper,  §   90). 

HEOOT.  1NBTRDMENT8  —  6 


-/  .u 


S2  FOUM  REQUIRED,  [aKP.    H. 

lu  reaching  this  coucliision  wo  liavc  not  hot'ii  uniniiKlful  of  tii«;  fact 
that,  iu  commercial  usage,  bills  of  i\rh:iiij,a'  -aw  regarded  as  substi- 
tutes for  money;  but  this  usage  cannot  make  them  sucli. 

Order  reversed,  and  a  uew  trial  granted.' 


ik^  i 


at  constitules  current  money* 

LAIRD  V.  STATE. 
61  Maryland,  309.  —  1883. 


Robinson,  J.,  delivered  the  opinion  of  the  Court 

The  plaintiff  in  error  was  indicted  for  forging  and  uttering  a  bill 
of  exchange,  which  is  set  out  in  the  indictment  as  follows: 

Staunton,  Va.,  September  4,  1882. 

Aiifrusta  National  Bank,  pay  to  J.  Edwin  Laird  or  bearer,  the  sum  of 
sevonty-five  dollars    (.$75)    current  funds.  G.  G.  Goocn. 

Correct,  W  .  P.  Tarns,  Cashier. 
[And  endorsed]  J.  Edwin  Laird. 

A  demurrer  was  filed  to  the  indictment,  which  was  overruled,  and 
the  prisoner  was  tried  before  the  court  and  found  guilty. 

Motions  for  new  trial,  and  to  quash  the  indictment  were  made,  and 
both  overruled,  and  the  prisoner  was  sentenced  to  the  penitentiary 
for  five  years.  The  record  comes  before  us  on  petition  setting  forth 
the  points  and  questions,  by  the  decision  of  which  the  plaintiff  in 
error  feels  aggrieved.     *     *     * 

In  the  next  place  it  is  argued,  that  the  paper  writing  set  forth  in 
the  indictment,  is  not  a  bill  of  exchange  because  it  is  payable  "  in 
current  funds."  Bills  of  exchange  pass  by  delivery  or  indorsement, 
and  it  is  essential  that  the  instrument  purporting  to  be  one,  should 
be  payable  in  money.  A  direction  to  pay  out  of  certain  funds,  or 
notes  of  a  particular  hank,  or  the  currency  of  a  particular  place  or 
state,  have  been  held  to  destroy  its  negotiability,  because  the  medium  of 
payment  is  flii^it'Titinfr  nml  vinr-ertain.  The  many  and  conflicting 
decisions  on  This  subject,  willbe^Trnmd  collected  in  1  Daniel  on  Neg. 
Inst.,  sees.  Ol-.S,  and  note.     All  the  cases,  however,  agree,  if  the  in- 


»  "A  B  has  deposited  in  this  bank  .$2,180  in  cks..  payable  to  the  order  of  him- 
,  eelf,  on  the  return  of  this  certificate  properly  indorsed,"  is  not  negotiable 
because  it  does  not  appear  that  the  bank  promises  to  pay  in  money.  — /''ir.s< 
yational  Rank  of  Farmersville  v.  Greenville  National  Rank.  84  Tex.  40.  An 
order  "  to  pay  rents  as  they  become  due  "  is  not  a  bill  of  exchange  because 
(1)  it  is  payable  out  of  a  particular  fund,  and  (2)  it  is  not  payable  in  money 
on  its  face.  "  It  is  to  pay  rents,  which  may  be  due  in  wheat,  fowls,  or  ser- 
vices, as  well  as  money." —  Morton  v.  Xnylor.  1  Hill  (N.  Y.),583  (1841).  —  H. 

*  See  NejT.  Tnst.  L..  §  2.5.  subsect.  .5.  —  H. 

[See  note  in  125  Am.  St.  Rep.  at  p.  197.  —  C.J 


II.    5.]  HUST  BE  TO  PAt   MONEY.  83 

strument  be  payable  in  current  money,  it  is  sufficient,  because  legal 
tender  money  will  be  -pTeSumed  to  be  intended.  The  words  "  cur- 
rent funds,"  as  used  in  the  paper  before  us,  mean  nothing  more  or 
less  than  "  current  money,"  and  so  construed  the  instrument  was 
negotiable.     *    *     *  Q  i    ^tJb    '^^^       ^----^     ^ 

^^^^^^^^^j.        u,     /-^  Judgment  affirmed. 

§  25     Mil.  jT^^mcEFiEi*  in  BULL  v.  BANK  OF  KASSON. 
123  United  States,  105,  112. —  1887. 

The  certificate  of  division  of  opinion  presents  to  us  only  one  ques- 
tion, and  yet,  to  answer  that  correctly,  we  must  consider  whether 
the  negotiability  of  the  instruments  in  suit  was  affected  by  the  fact 
that  they  were  payable  "  in  current  funds."  Undoubtedly  it  is  the 
law,  that  to  be  negotiableT-S^bill,  promissory  note  or  check,  must 
be  payable  in  money,  or  whatever  is  current  as  such  by  the  law  of 
the  countr^^TTTiere  the  instrument  is  drawn  or  payable.  There  are 
numerous  cases  where  a  designation  of  the  payment  of  such  instru- 
ments in  notes  of  particular  banks  or  associations,  or  in  paper  not  cur- 
rent as  money,  has  l)een  held  to  destroy  their  negotiability.  (Irvine 
V.  Lowry,  14  Pet.  293;  Miller  v.  Ansten,  13  How.  218,  228).  But 
within  a  few  years,  commencing  with  the  first  issue  in  this  country 
of  notes  declared  to  have  the  quality  of  legal  tender,  it  has  been  a  ,  ^ 
common    practice    of    drawers    of    bills    of    exchange    or    checks,    or  — • 

makers  of  promissory  notes,  to  indicate  whether  the  same  are  to  be  ; 
paid    in  gold   or  silver,   or   in   such   notes;   and    the   term   "current^       '^^X, 
funds"  has  been  used  to  designate  any  of  these,  all  being  current <-, 
and   declared,    by   positive   enactment,    to   be    legal    tender.      It   was        ^^ 
intended   to   cover   wliatovor   was   receivable   aTTtlrurrent   by    law   as-  * 

money,  whether  in  the  form  of  notes  or  coin.  Thus  construed,  we 
do  not  think  the  negotiability  of  tlie  pajier  in  fjuestion  was  impaired 
by  the  in.sertion  of  these  words.'"  .,  , 


5  f'tRBF.NT  FfNDH.  —  Tn  till'  follf)\vin<;  oasos  "  current  funds"  was  held  the 
p(Hiival('nt  of  "money:"  />«'.(/  v.  Holbrook,  4  Ala.  88;  I'hncnix  Inn.  Co.  v. 
Alien,  11  Mich.  501:  «.  r.,  13  Mich.  101;  ^Vhit<^  v.  Rirhmnnd.  10  Oli.  0; 
Citizens'  Sat.  lik.  v.  Brown.  45  Oh.  St.  30;  Telford  v.  I'nUon.  144  III.  fill.  In 
the  folinwirif/  cascH  "current  fun<l«  "  was  held  not  the  ecpiivalent  of  "  money:" 
Lafayette  Itnnk  v.  Ifiufiel,  51  Ind.  393;  Johnnon  v.  Henderson,  70  N.  Car.  227; 
Wrifiht  V.  Ilnrt.  44  Pa.  St.  454;  Texan  Land,  ele.,  Co.  v.  Cnrrnll,  03  'l*ex.  48; 
I'lntt  V.  Hauk  Co.  Hank,  17  Wis.  230. 

('i;bren<'Y.  In  tlie  followinj;  cases  "currency"  was  held  the  eqiiivrih-nt  of 
money:  Siiuft  v.  Whitue,,,  20  III.  144;  Phelp.s  v.  Town,  14  Mich.  374;  Mitchell 
V.  Hewitt,  13  Miss.  301;  Puf/au  v.  Cfimpl)ell,  1  Oh.  115;  Hoire  v.  Ilartne.s.i,  II 
Oh.  St.  449;  Hutler  v.  I'nine,  8  Minn.  324;  Frank  v.  We.t.neh.  04  N.  Y.  155 
("paper  oiirreney,"  when  there  is  a  leyal  tender  [lafier  currency);  h'lnubrr  v. 
Biggerataff,  47  VVis.  551;   Wright  v.  Morgan  (Tex.),  37  S.  VV.  627.     In  the  fol- 


84  FOUM   KE(^U1KED.  [aRT.   II. 

§  25  MiLLKR.  J.,  IN  PAKDIOE  v.  FISH. 

(W  Nkw  Vokk.  2i\ri.  -  -  1H75. 

It  is  further  urged  that  the  iustrumeut  iu  question  is  not  com- 
mercial paper  for  the  reason  that  it  is  made  payable  in  current  bank 
mjt*»»-instead  of  money.  The  authorities  in  this  state,  I  tliink,  are 
adverse  to  this  position,  in  Keith  v.  Jones  (9  Johns.  1)30),  the  note 
upon  which  the  action  was  brought  was  declared  to  be  payable  in 
"  York  State  bills  or  specie,"  and  it  was  said  that  it  "  is  the  same 
thing  as  being  made  payable  in  lawful  current  money  of  the  state, 
for  the  hills  mentioned  mean  bank  paper,  which  is  here  in  con- 
formity with  common  usage  and  common  understanding  regarded  as 
cash."  In  Judah  v.  Harris  (19  Johns.  144),  a  promissory  note 
payable  "  in  hank  notes  current  in  the  city  of  New  York,"  was  held 
to  be  a  negotiable  note  within  the  statute.  It  is  said  that  these 
\  /  decisions  were  placed  upon  "the  ground  that  the  court  could  take 
judicial  notice  that  such  bills  are  equivalent  to  specie.  The  same 
rule  may  well  apply  here,  as  "  current  bank"Tiotes  "  are  notes  or  bills 
V  used   in   general   circulation   as   money,   and   constituted   the  general 

^  ^  currency   of  the  country   recognized   by   law  at   the   time   and   place 

■where  payment  was  to  be  made  and  demanded.  These  notes  which 
/were  in  circulation  when  the  certificate  was  given  and  payment 
y  j^  demanded,  were  almost  entirely  of  one  kind  authorized  by  the  gov- 
ernment as  currency.  They  thus  being  lawful  money  of  the  United 
States,  the  courts  were  bound  to  take  judicial  notice  of  that  fact.  The 
cases  of  Lieher  v.  Goodrich  (5  Cow.  18G),  and  Thompson  v.  Sloan  (23 
Wend.  77),  are  not  in  conflict  with  Heath  v.  Jones  and  Judah  v.  Har- 
ris (supra).  Although  the  doctrine  of  the  latter  was  doubted  in  3 
Kent's  Commentaries,  pp.  75-76,  and  in  some  of  the  state  courts  it 
is  held  that  a  note  payable  in  current  funds  is  not  negotiable,  it  is  safe 

f^Jt^  t^  follow  the  adjudications  in  this  state  as  settling  the  law  upon  the 
subject.      Even    although   a   demand   was   necessary   upon    the   bank 


r 


< 'lowing  cases  "currency"  was  held  not  the  equivalent  of  "money:"  Mobile 
Bank  v.  Brown.  42  Ala.  108;   DUlard  v.  Evans.  4  Ark.   175;   Rindskoff  v.  Bar- 

I  reti,  11  Iowa,  172;  Base  v.  Hamblin,  29  Iowa,  501;  Chaniber.s  v.  George,  5 
Litt.  (Ky.)  .335;  (otherwise  of  "Kentucky  currency,"  Lamplnn  v.  Ilapf/ard,  3 
Monr.  (Ky.)  14!))  ;  FanrpJl  v.  Krnnett,  7  Mo.  595;  Uicklin  v.  Tvcker,  2  Yerg. 
(Tenn.)   448;   Ford  v.  Mitchell,  15  Wis.  334.  —  H. 

["  We  are  aware  that  many  courts  have  held  that  .such  a  clause  [payable 
'  in  current  funds  '1  does  not  require  payment  in  money,  and  destroys  the 
negotiability  of  the  instrument.  The  cases  so  holding  are  either  cases  arising 
at  a  time  when  many  forms  of  bank  notes  and  bills  were  in  use.  varying  in 
their  values,  or  cases  decided  upon  the  authority  of  that  class  without  regard 
to  changed  conditions.  With  regard  to  existing  conditions,  we  tliink  the 
Supreme  T'ourt  of  the  T'nited  States  has  declared  the  law  correctly  in  Bull  v. 
Bank  of  Kasson."  Irvine,  C,  in  Kirkwood  v.  First  Nat.  Bank,  40  Neb.  484, 
»t  p.  492. —  C] 


II.    5.]  MUST  BE  TO  PAY  MONEY.  85 

before  an  action  could  be  brought  against  it  on  the  instrument,  thus 
distinguishing  the  case  from  that  of  a  promissory  note,  where  the 
maker  may  be  cmfi   uMti^rM^j  oTiy  riorr^r^pj    |    Hn  nr>t. jj^mk  that  tlus 


fact"ta."kes   UU'iiy   ihe   negotiable   charactep-  of  the   instrument   unclei" 
the  decisions  cited,  and  it  must,  therefore,  be  considered  as  possess 
ing  all  the  features  of  a  negotiable  promissory  note.^  | 


§  25  CHRYSLER  v.  RENOIS. 

43  New  York,  209.  —  1870. 

Action  by  indorsee  on  a  draft  for  1,205  gold  dollars.  Judgment 
for  plaintiff. 

Allen,   J. —  fSTter   disposing  of  another   matter].     The   bill    in       ^ 
suit  was  drawn  in  Jlontrcal  on  a  business  firm  at  Whitehall  in  this     -'^-^ 
state,  payable  in  New  York  in  dollars,  the  money  of  account  of  the       ^^Jr- 
state,  and  in  gold  dollars,  a  coin  authorized  by  Congress,  and  made 
a  legal  tender  in  the  payment  of  debt.     It  was,  therefore,  negotiable!  ^ 
as  a  bill  of  exchange.     ({  K.  8.,  fill,  §  1 ;  9  U.  S.  Stat,  at  Large,  397.)/    -^yJL  t^ 

It  is  enough  that^it  is  for  the  payment  of  money  and  money  only,  la-     / 
cash  and  not  something  Ihnt  niny  differ  in  value  from  cash.      (Leiber      '**^  '*^-s/-\. 
V.  Goodrich,  5  Cow.   180.)      It  is  agreed  that  bills  payable  in  mer-         I  '  i 
chandise  or  anything  but  money  are  not  good  ])ills  of  exchange,  but     '   ^   ^^\^ 
the  cases  are  not  agreed  in  all  respects  as  to  what  shall  be  deemed  ' 

money.  In  this  state  it  is  held  that  a  promissory  note,  payable  "  in 
bank  notes  current  in  the  city  of  New  York  "  or  "  in  New  York  state 
bills  or  specie,"  are  negotiable  notes  within  the  statutes  (Keith 
V.  Jovrs,  9  Johns.  120;  Jiid'tli  v.  Harris,  19  Johns.  144),  while  a  note 
payable  "in  Canada  money  "  is  jiot_ji_iie^tiable  note.  (Thompson 
V.  Sloan,  23  Wend.  71.)  The  first  cases  were  decided  upon  the 
ground  that  the  court  might  take  judicial  notice  that  bank  notes, 
current  in   the  city  of  New   York,   were  customarily  considered   and 

«  Bank  Notks.  TIip  following  wore  lifld  P(|uiviilpnt  to  "  money :"  "  The  bank 
nrtift  furrr-nf  in  the  cify  of  New  York."  Judnhv.  Ilatrift.  19.Tolins.  (N.  Y.)  14^. 
"  riirrent  hank  notes. "  I'nnlcr  v.  Fish,  siijtrrt ;  /■'Icniivq  v.  A'rr//.  1  Tex.  24fi. 
"  Current  hank  notes  of  ('iricinii;i(  i."  Morris  v.  lUhranls,  1  Oh.  1  H!l ;  Sirrcllanil 
V.  frrif/h,   Ifj  Oil.   IIH. 

'flif  folldwiii^r  were  hehl  nf)t  ecpiivalent  to  "money."  "Current  hank  i)af»er." 
('nmphell  V.  WrxHlrr,  1  I.itf.  (Ky.)  30.  "  Note«  reeeivahle  in  hank."  Hrrrkin 
ridqe.  v.  liaUn.  4  Monr.  (Ky.)  S.'J.I.  "  Current  notes  of  North  Carolina." 
Warren  v.  liroirn,  M  N.  Car.  381.  "Current  hank  note.s."  dray  v.  Dmuihor, 
i  Watts.  (F'a.)  400;  (lamhlr  v.  Ilallon,  I'eck  (Tenn.),  130;  Kirkpairirk  v. 
MrCullnufih.  3  Humph.  (Tenn.)  171;  MrDoirrU  v.  Krllrr,  4  Cohhv.  (Tenn.) 
25M.     "Current  Itills."     (IoIHuh  v.  Linrahi.  11   Vt.  2(18.  —  H. 

[See  note  in  4  .\.  &  E.  Ann.  Caa.  at  ji.  «)32  on  "  negotiability  of  note  payable 
in  bank  notes."- — ('.] 


66  I'HUiiM   liKcjUlliKlK  [aKT.    11. 

treated  as  equivalent  to  inoiiev.  which  could  no£  be  predicated  of  a 
note  payable  in  Canada  money,  (.'oiii  current  in  Clanada  might  not 
be  current  in  this  state,  and  I'oreign  bills  are  not  regarded  as  money. 
(Jones  V.  Fales,  4  Mass.  -M').)  In  other  states  a  diU'ereut  rule  pre- 
vails; and  bills  payable  in  hank  bills,  even  of  the  state  where  pay- 
able, are  held  not  negotiable.  {McCormick  v.  Trotter,  10  Serg.  &  R. 
1)4. )  In  this  action^he  bill  is  for  1,205  gold  dollars,  that  is  $1,205 
in  gold  coin,  and,  as  is  claimed,  in  coin  of  a  [)articular  denomination; 
but  it  is  nevertheless,  payable  in  a  coin  known  and  recognized  as  a 
^^^>^^  part  of  the  currency  of  the  country,  coined  by  authority  of  Congress 
and  made  receivable  in  all  payments  (9  Stat,  at  Large,  397).  If  the 
bill  had  called  for  $1,205  without  specifying  the  coin  or  currency  it 
t\^/t^^  would  have  been  payable  in  any  lawful  currency,  and  the  acceptors 

might  have  discharged  their  obligations  by  tendering  payment  in 
"  gold  dollars."  The  tender  would  have  been  in  money ;  but  if 
"  gold  dollars  "  are  but  an  article  of  merchandize,  a  commercial  com- 
modityniS'"Plaimed,  a  tender  of  these  in  satisfaction  of  an  obligation 
for  the  payment  of  money  would  not  be  good,  and  a  debtor  could 
not  by  such  tender  relieve  himself  from  his  obligation.  The  laws 
have  not  been  repealed  which  declare  the  money  value  of  the  gold 
and  silver  coin  of  the  United  States  and  make  them  a  legal  tender 
in  the  payment  of  djibts.  Xije  bill  has  all  the  qualities  of  a  nego- 
tiable bill  of  exchange :  it  is^payabie  alli'^"^"^'^^"y '  &nd"Tn"Tnbney,  and 
R6i  out  oTaparticular  fund. 

There  are  two  descrTptlDns  of  lawful  money  in  use  under  acts  otj 
Congress  (assuming  the  validity  of  the  "legal  tender"  acts,  so  called, 
as  applicable  to  any  contract  calling  for  money),  and  it  does  not 
destroy  the  negotiability  of  commercial  paper  or  change  its  character, 
that  it  is  in  terms  made  payalde  in  any  description  of  money  that 
is  recognized  and  known  as  money  current  in  business,  and  which  is 
made  a  legal  tender  in  payment  of  debts.  {Butler  v.  Horwitz,  7 
Wall.  258;  Bronson  v.  Rodes,  7  Wall.  229.)  Bills  of  exchange  are 
favored  as  valuable  instruments  in  commerce,  and  merchants  must 
be  permitted  to  make  them  payal)le  in  any  money  lawful  and  current 
in  the  place  where  payable;  and  if  more  than  one  description  of 
money  is  recognized  by  the  law  of  the  place,  to  select  that  which  is 
most  convenient  to  the  parties,  without  changing  the  character  and 
legal  incidents  of  the  instruments  and  destroying  their  negotiability. 
But  the  referee  has  found,  as  a  question  of  fact,  that  the  contents 
of  the  said  bill  of  exchange  or  draft  were  expressed  in  the  money 
of  account  and  currency  of  the  province  of  Canada,  and  has  awarded 
damages  for  non-payment  upon  that  theory,  that  is,  has  given  Judg- 
ment for  the  value  of  the  amount  called  for  in  Canada  coin  in 
Montreal  on  the  day  the  bill  matured.  Tn  this  the  referee  erred. 
The   contract,   interpreted   by   the   law   of   the   place   where   payable, 


I 


II-  5.]  MUST  bh  to  pay  money.  87 

called  for  payment  in  money  there  current  and  the  construction  of 
the  contract  was  one  of  law  not  of  fact. 

The  error  of  the  referee  w"?h*-4iarried  into  the  judgment  in  the 
assessment  of  the  damages. 

Upon  this  construction  of  the  contract,  and  an  allegation  in  the 
complaint,  that  the  value  in  New  York  of  a  draft  on  Montreal  for 
$1,205  was  at  the  time  of  the  default  in  payment,  $l,83L60,_jiot 
flenied  by  the  answer,  the  referee  reported  in.  f av^F-o?-trke~pla i n t i ff 
for  that  amount,  with  iiiicn'-f  fo  tlic  date  of  the  report,  and  the 
"[plaintiff  Jiiid^jmlgmeiit  :in ordiiii^jy.  Tlic  plaintiff  was  entitled  to  a 
'judgment  followiiiL'^  the  ((nitnu  t.  and  payable  in  coin  for  the  amount 
to  which  the  law  entitled  him  upon  the  dishonor  of  the  bill.     X]iat 

j^    wflc;    fj^p   sum    sneeified    in    thp    bill,    wif,}i    jnfprpgf    thprpnr^,    ^t    thp    rntT/ 
gllnwpf^y  law.  '^^  / 

Tner^T^TfTVarrant  for  an  allowance  of  damages  for  the  non-pay- 
ment of  money  beyond  the  interest. given  by  statute,  neither  can  the 
courts  compel  a  party,  who  has  stipulated  for  the  receipt  of  money 
in  coin,  to  accept  of  an  equivalent  in  depreciated  currency.  So 
long  as  the  inferior  currency,  which  is  excluded  from  the  operation 
of  the  contract,  and  cannot  be  paid,  or  tendered  in  satisfaction, 
fluctuates  in  value,  absolute  justice  cannot  be  done  to  the  parties  by 
adjudging  payment  in  the  depreciated  currency  of  a  debt  due  in 
coin,  with  an  addition  for  the  difference  in  value. 

The  only  way  in  which  effect  can  be  given  to  the  contract,  is  by  a 
judgment  in  terms  payable  in  the  better  currency  to  which  the 
creditor  is  entitled,  and  an  execution  following  the  judgment,  and  so 
long  as  the  law  recognizes  the  two  currencies  of  dillerent  values, 
judgments  upon  contracts  for  the  payment  in  the  better  currency, 
must  of  necessity,  be  given  in  this  form,  or  the  distinction  between 
the  two  kinds  of  money  as  affecting  the  rights  of  parties,  vanislies 
when  the  contract  is  merged  in  the  judgment,  and  tjie  rights  of  a 
creditor  under  a  contract  for  payment  in  coin  are  of  no  value.  This 
form  of  judgment  is  sanctioned  by  precedent,  and  has  the  warrant  of 
the  Supreme  Court  of  the  United  States.  {Hromon  v.  Rodes,  7  Wall. 
229;  (niP'inykre  v.  Uniipd  Sfnlrs.  .T  Td.  320.) 

The  judgment  must  be  modified,  mid  reduced  to  the  aiiioiinf  to 
which  the  plaintiff  was  entitled,  jiayable  in  coin,  with  costs  of  the 
court  below,  payal)ie  in  ciirreiK  y,  without  costs  to  either  yiarty  upon 
the  appeal. 

All  the  judges  concurring,  judgment  modilied  in  accordance  with 
the  opinion  of  Allen,  J. 

\  .^  -^ 


88  FORM  UE(jUlKED.  [ABT.    II. 

§25  IIOCJL'E  V.  WILLIAMSON. 

86  Tkxas,  553.  —  1893. 

Gaines,  AssoriAi'K  .Iistum:.  —  Tliis  is  a  question  certified  to  ua 
for  dftcrminiitioii  1)Y  the  Court  of  Civil  A|)i)('iils  for  the  Third  Su- 
preme .lii(liii:il  Distiicl.     The  eertilieate  is  as  foHows  : 

"The  plaiiuill',  llouuc.  Iirouuht  suit  airaiiist  defendant,  William- 
son,   upon   a    uriltrn   oltligation,    wliiiii    reads   as    follows: 

Sai.tii.lo,  lanuary  25,  1888. 

Oti  or  before  May   I,  1SS8.  J   pioiiiise  to  pay  I  •  t^'-  llogue,  or  order,  one  thou- 
sand Mexican  silver  lioliars. 
$1,000,  Mex.  Heo.  S.  VViij-iamson, 

The  petition  alleges  Uiat  on  May  1,  L'^88,  Mexican  dollars  were 
each  worth  85  cents  in  '  American  '  coin,  and  plaintiff  asks  judgment 
for  $850.  He  states  in  Ins  petition  that  the  note  is  payable  in  Mexi- 
can silver  dollars. 

The  defendant  filed  a  general  denial,  and  also  averred  in  his 
answer,  under  oath,  that  the  note  sued  on  was  given  for  money 
which   the  plaintiff  had    won    from   defendant   in  a   game  of  cards, 

and  was  therefore  illegal  and  void.  ■ 

Upon  the  trial  in  the  court  below,  the  plaintiff  put  in  evidence  the 
written  obligation  sued  on,  and  proved  that  on  May  1,  1888,  Mexican 
silver  dollars  were  worth  80  cents  each.     The  plaintiff  then   rested 

and  the  defendant  introduced  no  testimony. 

The  court  instructed  the  jury  to  return  a  verdict  for  defendant, 
which  was  done,  and  judgment  entered  accordingly.      ^^_^ 

If  the  instrument  sued  on  was  a  promissory  note,  thi^TS  in  error. 
(Newton  v.  Neivton,  77  Texas,  511.) 

With  this  explanation,  the  Court  of  Civil  Appeals  for  the  Third 
Supreme  Judicial  District  certifies  and  submits  to  the  Supreme  Court, 
for  decision  as  a  part  of  the  law  of  this  case,  as  a  new  or  novel 
question,  the  following  proposition : 

Was  the  burden  of  proof  on  the  plaintiff,  after  the  introduction  of 
the  instrument  sued  on,  to  show  non-performance  of  its  ol)ligations 
by  defendant?  Tn  other  words,  is  the  written  obligation  sued  on  a 
promissory  note,  obligating  its  maker  to  pay  a  certain  sum  of  money; 
or  is  it  an  ordinary  contract  for  the  delivery  of  a  certain  commodity; 
and  must  the  plaintiff,  by  affirmative  testimony,  show  a  breach  of 
the  contract  ?  " 

We  are  of  the  opinion  that  the  instrument  in  question  is  a  promis- 
sory note.  It  is  such  in  form  and  substance,  unless  the  fact  that  the 
sum  payable  is  expressed  in  Mexican  silver  dollars  should  make  a 
difference.  Speaking  of  the  sum  for  which  a  bill  of  exchange  must 
be  drawn,  Mr.  Chitty  says:  "It  may  be  the  money  of  any  country." 
{Chitty  on  Bills,  160).  Judge  Story  says:  "But  provided  the  note 
be  for  the  payment  of  money  only,  it  is  wholly  immaterial  in  the  cur- 
rency or  money  of  what  country  it  may  be  payable.    It  may  be  payable 


II.    5.]  MUST  BE  TO  PAY  MONET.  89 

in  the  money  or  currency  of  England,  or  France,  or  Spain,  or  Hol- 
lajid,  or  Italy,  or  any  other  country.  It  may  be  payable  in  coins, 
such  as  pounds  sterling,  livres,  tomnosis,  francs,  florins,  etc.,  for 
in  all  these  and  the  like  cases  the  sum  of  money  to  be  paid  is 
fixed  by  the  par  of  exchange,  or  the  known  denomination  of  the 
currency  with  reference  to  the  par."  (Story  on  Prom.  Notes,  §  17.) 
The  same  rule  is  distinctly  laid  down  in  1  Daniel  on  Neg.  Inst.,  §  .58, 
and  in  Tiedeman  on  Com.  Paper.  §  29^.  In  view  of  the  opinion  of 
these  eminent  text-writers,  it  is  remarkable  that  we  have  found  but 
two  cases  in  which  the  f^uestion  is  discussed  or  decided. 

In  Black  v.  Ward  (27  Mich.  191).  it  is  held,  that  a  note  made  in 
Michigan,  payable  in  Canada  in  "  Canada  currency,"  is  payable  in 
money,  and  is  therefore  negotiable.  But  in  Thompson  v.  Sloan  (23 
Wendell,  71),  a  note  made  in  New  York  and  payable  there  in  "  Canada 
currency"  was  held  not  negotiable.  The  court,  however,  say; 
"  This  view  of  the  case  is  not  incompatible  with  a  Ijill  or  note  payable 
in  money  of  a  foreign  denomination,  or  any  other  denomination, 
being  negotiable,  for  it  can  be  paid  in  our  own  coin  of  c(|uivalont 
value,  to  which  it  is  always  reduced  by  a  recovery.  A  note  payable 
in  pounds,  shillings,  and  pence,  made  in  any  country,  is  but  another 
mode  of  expressing  the  amount  in  dollars  and  cents,  and  is  so  under- 
stood judicially.  The  course  therefore  in  an  action  on  such  instru- 
mpnt  is  to  aver  and  prove  the  value  of  the  sum  expressed  in  our 
own  tenderable  coin." 

This  docision  was  made  in  L^IO.  and  it  is  to  bo  infnrrod  that  ai 
thai  liiMi'  Ihf  dollar  wa^  not  a  denominntinn  "f  tb"  ll"'fnl  m'T"  *i 
C^n^rdrr  \\p  also  infer,  that  wVien  the  "Michigan  case  arose,  this  hafl 
^  npf>n  changed  and  the  denomination  of  Canada  monev  correspondeil 
with  that  of  the  United  States.  Upon  this  theory,  it  would  seem 
that  the  cases  may  be  reconriled.  The  language  quoted  from  the 
opinion  in  Thompson  v.  Sloan,  supra,  indicates  clearly,  tlint  if  the 
money  named  in  the  note  had  beon  the  denomination  of  Canada 
nionny,  the  ruling  would  have  been  different,  unless,  perchance,  the 
word  "currency"  would  have  affected  the  question.  The  note  we 
have  under  consideration  is  for  Mexican  silver  dollars  —  coins  recog- 
niKcd  by  the  laws  of  the  United  States  as  money  of  the  IJopiiblic  of 
Mexico.     (T".  S.  Kev.  Stats.,  §  3.5fi7.) 

\Vc  conclude  that  the  note  sued  upon  in  this  case  was  a  negotiable 
promissory  note,  and  that  when  the  plaintiff  offered  it  in  evidence, 
and  proved  the  valno  of  the  Mexican  dollar  at  the  time  of  its  maturity, 
he  had  mado  a  prima  facie  case,  and  our  opinion  will  bo  certific'd 
accordingly.^ 


T  A  nofp  payahlo  in  Now  Rninswick  in  "  U.  S.  nirrcncy  "  is  nPRotialiln.  "  It 
is  not  nfOCBsnry  that  i\\v  nioruy  [)nyahlc  by  a  note  ehouirl  be  current  in  the 
place  of  payment  or  whf-re  the  bill  is  drawn;   it  may  be  in  the  money  of  any 


90  FORM  REQUIRED.  [ART.    II. 

6.  Must  not  Cont.\in  an  Owdkr  or  Promise  to  do  Any  Act  in 

Addition  to   I'aymicnt  ok   Money. 

(a)   Effect  of  additional  stipulations. 

§24  DAVIES  V.  WILKINSON. 

10  Adolphus  &  Ellis   (Q.  B.)  98.  —  1839. 

On  the  trial  tlio  plaintiff  gave  in  evidence  the  following;  documeni: 

"  I  agree  to  pay  to  Mr.  Charles  Davios,  or  liis  order,  the  sum  of  095^,  at  four 
instalments!,  vi/.,  the  first  instalment  to  lie  paid  on  Monday  next,  June  10th, 
18."{3,  being  200/.;  the  second  on  the  settling  day  at  Doncaster  after  the  St. 
Leger.  being  150/.;  the  third  on  the  settling  day  at  Doncaster,  after  Epsom, 
1834,  being  150/.;  and  the  fourth  on  the  settling  day  at  Doncaster,  after  the  St. 
Loger.  1S34,  being  100/.;  the  remainder,  95/.,  to  go  as  a  setoff  for  an  order  of 
Mr.  Reynolds  to  Mr.  Thompson,  and  the  remainder  of  his  debt  owing  from 
C.  Davies  to  him.     (Signed)  James  Wilkinson." 

The  defendant's  counsel  objected  that  the  instrument  was  a  promis- 
sory note,  and  should  have  been  stamped  accordingly^ 

Lord  Dexman,  C.  J.  —  The  first  objection  is,  that  this  instrument 
was  improperly  received  in  evidence,  being  a  promissory  note  not 
duly  stamped.  It  is  a  note,  up  to  a  certain  point  but  it  ends,  "  95/. 
to  go  as  a  seW)ff  for  an  order  of  Mr.  Reynolds  to  Mr.  Thompson, 
and  the  remainder  of  his  debt  owing  from  C.  Davies  to  him."  I 
think  that  takes  from  it  the  character  of  a  promissory  note,  and  makes 
it  an  agreement,  and  that  it  was  properly  received.^     - 

country  whatever.  .  .  .  And  may  it  not  be  assumed  that  '  United  States 
currency'  means  the  money  of  the  United  States,  and  that  the  note  is  for  the 
payment  of  three  hundred  and  seventy-one  dollars  of  the  Ignited  States.  [Citing 
statute  recognizing  United  States  coinage.]  This  is  a  legislative  recognition 
that  the  eagle  of  the  United  States  and  the  divisions  thereof  are  coins;  or, 
in  other  words,  the  currency  of  that  country."  —  St.  Stephen  Branch  Ry.  Co. 
V.  Black,  2  Hanney   (N.  B.)',  139   (1870).  — H. 

[".A  note  payable  in  pounds  sterling  or  British  sovereigns  is  payable  in 
'  money  '  just  as  much  and  as  certainly  as  if  it  was  payable  in  dollars.  The 
case  is  different  from  a  note  payable  in  'currency,'  which  may  be  '  money  '  only 
conventionally,  but  not  legally.  But  where  a  note  is  made  payable  in  a  par- 
ticular denomination  of  foreign  money,  as  pounds  sterling,  it  is  payable  in 
money  the  same  as  if  it  was  payable  in  a  denomination  of  domestic  money." 
Deady,  D.  J.,  in  King  v.  Hamilton,  12  Fed.  Rep.  478,  479.  —  C] 

8  .^n  order  directing  the  drawee  to  pay  $400,  and  take  up  the  drawer's  note 
given  to  A  B,  is  not  a  bill.  "  The  essential  qualities  of  a  bill  or  note  are 
(1)  that  it  be  payable  at  all  events;  not  dependent  on  any  contingency,  nor 
payable  out  of  any  particular  fund;  and  (2)  that  it  be  for  the  payment  of 
monev  only,  and  not  for  the  performance  of  some  other  act,  or  in  the  alter- 
native."—  Cook  v.  Hattcrlcc,  6  Cow.  (X.  Y.)  108.  Accord:  Killam  v.  Schoeps, 
26  Kans.  310;  Bunker  v.  Atheam,  35  Me.  364,  —  H. 


11.    6.]  MUST  NOT  PROMISE  ADDITIONAL  ACT.  91 


§  24  LEONARD  v.  MASON. 

1  Wendell  (N.  Y.)  522.—  1828. 

Error  from  the  Onondaga  Common  Pleas.  A.  Leonard  sued 
Mason  in  a  Justice's  Court,  on  an  order  for  the  pavnient  of  money 
accepted  by  Mason.  The  plaintiff  held  a  promissory  note  against 
one  N.  Leonard  lor  '^io4^S,  underneath  which  was  written  an  order 
or  bill  of  exchange,  in  these  words:  "Levi  ]\Iason,  Esq.,  please  pay 
the  above  note,  and  hold  it  against  me  in  our  settlement.  .N.  Tjconard." 
The  justice  gave  judgment  for  the  defendant,  and  the  plaintiff  ap- 
pealed to  the  Onondaga  Common  Pleas.  On  the  trial  in  that  court, 
the  note,  with  the  order  written  thereunder,  were  produced,  and 
a  presentment  to,  and  a  parol  acceptance  and  promise  to  pay  by, 
the  drawee  proved.  The  Common  Pleas  nonsuited  the  plaintiff,  hold- 
ing the  promise  of  the  defendant  to  be  within  tTTe"  stafuTe  of  frauds. 

Bif  the  Court,  Savagk.  Ch.  J.  —  The  only  question  is,  whether  the 
order  which  the  defendant  accepted  is  a  good  bill  of  exchange: 
if  so,  a  parol  acceptance  is  good."  It  is  supposed  that  this  case 
depends  on  the  same  principled "gs  the  case  of  Coohe  v.  Satterlee  & 
Satlprlpe  (6  Cowen,  lOS).  The  rule  there  recognized  is,  that  a  bill 
of  exchange  must  be  for  the  payment  of  money,  and  nothing  else. 
Fn  that  case,  the  drawees  were  required  to  pay  a  certain  sum  of 
money,  arid  take  up  a  note  given  by  the  drawer  to  a  third  person. 
Here  it  is  to  pay  a  note,  which  is  referred  to  merely  to  ascertain 
the  amount:  andTlTFTetaining  the  note  as  a  voucher  is  no  more  the'\.-0 
performance  of  another-ftrf^side  the  payment  of  the  money  than 
the  retaining  the  order  itself  for  the  same  purpose.  "Xi,^ 

The  court  erred.     The  judgment  must  be   reversed,  and  a  venire  ' 

de  novo  is  awarded  to  Onondaga  Common  Pleas.  OvCCI,_j 


(h)    Ejrrptwns:    (1)    Avihonztnfj  ftaU   of  coUateral. 

§24  VALLKV  XATIOXAL  BANK  v.  CPOWELL. 

148  Pennsylvania  State.  284. —  1892. 

Actions  on  promissory  notes. 

The  defense  set  up  by  the  afTidavit  was  that  there  was  no  teehnical 
liability  as  indf)rsers  on  the  part  of  defendants,  because  of  the  non- 
negotiability  of  the  notes  RijrrHTn.  These  notes  contained,  in  addition 
to  the  ordinary  form  of  note7THe~cTau6e  which  is  quoted  in  the  opinion 
of  the  Supreme  Court.  i  ,  I  r  i  .  1  Anl-A 
L ^\  "^^^ ^Atv-N^   /^^AY^^^    \ 

»  But  Bee  Negotiable  Iniitruments  Law.  §  220.  —  H. 


92  FORM  REQUIRED.  [ART.    II. 

The  court  below.  Sadler,  P.  J.,  of  tlio  Ninth  judicial  district, 
specially  prcsidin-;-,  made  llu'  iiiirs  ahsdiiitc  in  hotli  cases,  and  de- 
fendants appealed. 

Errors  assiij^iicd  were  iuakin<,'  tlic  rule  absolute  and  entering  judg- 
ment. 

Per  ('(•inA:^i.  Mar.  t>S.  1893: 

The  only  question  in  this  case  was  whether  the  note  in  controversy 
was  ne>xotial)le.  It  is  in  the  usual  form  of  nefjotiablo  paper,  but  it 
is  contended  that  its  ne<2:otiaI)ility  is  destroyed  by  reason  of  the 
following  provision  contained  therein  : 

"  Having  dcpositpd  lierewitli  a  like  an)ount  of  CrovvplI  Company  niortgaRe 
bonds  as  collateral  security,  which  we  authorize  the  holder  of  this  note,  upon 
the  noil  |)crfonnance  of  this  promise  at  maturity,  to  sell  either  at  the  broker's 
board,  or  at  public  or  private  sale,  without  (leniauding  payment  of  tliis  note  or 
the  debt  due  thereon,  and  without  further  notice,  and  apply  proceeds,  or  as 
much  thereof  as  may  be  necessary,  to  the  payment  of  this  note  and  all  necessary 
charges,  hobiing  us,  as  makers  and  indorsers,  responsible  for  any  deficiency." 

We  find  nothing  in  this  to  destroy  the  negotiability  of  the  note. 
While   it   has   been   truly   said   that   a   promissory   note   is   a  courier 
without    luggage,    we   find    nothing   in    the    language   quoted    beyond 
L  t.liat  the  note  isaccompanied   with   certfyu-eol+rtteral. 
ting  of  collaterapjeclirity  with  a  proTTfissory  note  ^oes 
its  negotiability^     l^Lrnold  v.  Rork  River  Valley~TTiiion 
,  x^.   ...,  ^   ^'uef7~382 ;   Towne  v.   Rice,   122   Mass.   67.)      In    Woods  v. 
\J^^^^  \  North   (84  Pa.  407)  ;  Johnston  v.  Speer  (92  Pa.  227),  the  amount  of 
the  note  was  held  to  be  uncertain.     In  Ba7ik  v.  Poillct  (126  Pa.  195), 
»                the  court  refused  to  hold  the  indorser  liable,  because  the  time  of  pay- 
ment was  not  fixed,  and  in  Bank  v.  McCord  (139  Pa.  52),  the  pay- 
-f  ,-•               ment  was  made  dependent  upon  certain  conditions.     In  the  case  in 
hand,  the  amount  of  the  note  is  not  uncertain,  nor  is  there  any  ques- 
tion about  the  time  of  payment.     And  the  payment  isnot  made  de- 
pendent upon  any  condi^trm-wliatcver.  ~~— ^ ' 

^  J     The  agreement,  that  if  the  collateral  proves  insufficient  for  the  pay- 

r\      ■'^  ment  of  the  note,  and  all  necessary  expenses  and  charges,  the  makers 

1^  will  l)e  responsible  for  any  deficiency,  neither  increases  nor  decreases 

\  tlie   responsibility   of   the   makers.      Tt   merely   requires   them   to   do 

what  the  law  would  compel  them  to  do  without  such  an  agreement.' 

We  are  of  the  opinion   that   the  affidavit  of  defense   was   insuffi- 

V.V  cient,  and  the  judgment  properly  entered. 

Judgment  affirmed. 

1  See  especially,  Arnold  v.  R.  R.,  5  Duer  (N.  Y.),  207.  — H. 


n.    6.]  MUST  NOT  PROMISE  ADDITIONAL  ACT.  93 

(6)   Exceptions:  (2)   Authorizing  confession  of  judgment. 

§  24  OSBORN  V.  HAWLEY. 

19  Ohio,  130.—  1850. 

Caldwell,  J.  —  The  action  in  the  court  helow  was  assumpsit. 
The  pUiintiH'  dechired  as  indorsee  of  a  promissory  note  made  by 
defendant  for  $80.00.  The  declaration  also  contained  the  common 
counts.  The  case  being  at  issue,  the  plaintiff  offered  the  note  in 
evidence,  whieli  was  ruled  out  by  the  court,  and  the  plaintiff  non- 

/  suited.     The  icfusal   by  the  court  to  pt^rmit  tJiejote  to  go  in  JvUi 
dence   is  assigned   lor  error.      Nu  argument  is  presented   on   eitherK  .     j 
sule,  alld    till   bill  of  I'.iiLL'ptions  only   shows   that   the  court   dccidea 
that  the  note  was  not  proper  evidence  in  the  cause.  / 

On  e.xamination  of  the  record,  we  do  not  see  any  objection  to  the 
note  being  in  evidence,  and  we  think  the  court  erred  in  ruling 
it  out.  The  note  has  attached  to  it,  and  forming  a  part  of  the  instru- 
ment, a  power  of  attorney  to  confess  a  judgment,  and  we  presume 
the  court  may  have  held  that  that  fact  would  prevent  its  negotia- 
bility^And  on  that  prosumptinn.  we  would  merely  remark  that  the 
power  o7~littorney,  being  added  to  the  note,  does  not  in  any  way  . 
change  the  legaj.  character  of  the  note,  except  that  it  rrjvps  a  mnrfi  h 
\  summary  proceeding  for  its  collection.     It  is  still  a  promissory  notel    '      ^vv-V 

and  heing  payablc_LJlj:'T'?^?'T*'~^Trnw'^^^       bv  indorsement.      I'he  powef^^  (_^. 
/of  attorney  is  not  negotiable,  and  when  Ibe  l^gal   title  lo  the  note  is  u^^ 

'  transferred,   the   power   of   attorney   becomes   invalid,   and    no   power    i i^^L. 
whatever  can  be  exercised  under  it.   for  tlie  benefit  of  llie  indorsee;    '        p"^^ 
iitifl  he  holds  the  note  as  if  no  such  power  bad  ever  been  attached  to  it. j,        -^^^ 

The  judgment  of  the  Court  of  Common  Pleas  will  be  reversed,  and  y"^"^ 
the  cause  remanded  for  further  proceedtTws^  .  i  » 

1 — -^-  --:  r."]  y^^  V 

2  Contra:  Overton  v.  TyJrr.  3  P.jirr.    (Pa.)    .?4r..  —  TT.  '  *^      l-^CC<->*^^ 

["It  is  qriitf  certain  fliat  tlio  imf*'  was  not   ii(<;<>(ialil(\  brcnuso  hj'  thp  power 
of  attorney  which  if  contained,  juHpniont  conlH  he  entererl  upon  it  at  any  time 
after  its  date,  whether  due  or  not.     Thus  the  time  of  payment  <lepends  upon      \ 
the  whim  or  caprice  f)f  the  holder,  and  ix  al)solutely  nneertain.     'I'his  deprives       I  (^ 
the  note  of   its  nepotiahilily.      .      .      .     Ch.   ^^T^^^.   F.aws  of    18!l!)    ( tlie   Nej;otial.le       ;       •        . 
Instrument    Law),    provides    that    the    nepotiai)le   character    of    ,in    in'^trument 
is    not   affected    by    a    provision    authori/.inp   a    confession    of    judgment    if    the       j 
instrument  is  not  paid  nt  vinlurilif.     Sec.  107.'}  5,  suhd.  2  fN.  \.,  S  24,  Hubd.2|. 
I'pon    familiar    principh-s    rtf    statutory    construction    this    jirovision    nuikea    a       I 
note    like    the    pre-ent    non  negot  iahle."      WiNsrx)W,    J.,    In    Wisconsin    Yearly       ! 
Meeting  v.  linblvr,  11.5  Wis.  289,  202. —  C]  «<  '    ,   w^- 


94  FOUM  UEQUlliED.  [ABT.    II. 

{b)  Exceptions:  (3)   Waiving  exemptions. 

^24  ZIMMERMAN  v.  ANDERSON. 

G7  Pk-nnsyiaanta  State,  421.  —  1871. 

Tn  an  action  on  a  note  the  court  cliarged  that  "  the  note  offered  in 
cviileni'e  not  heing  negotiable  has  been  rejected,  and  consequently 
there  is  no  evidence  to  sustain  the  action,  and  you  will  find  for 
defendant."     Judgment  for  defendant  and  plaintiff  appeals. 

h*i£.\D.  J.  —  The  paper  in  this  case  comes  within  all  the  definitions 
of  the  best  text-writers  of  a  promissory  note,  for  it  is  a  written 
promise  by  the  defendant  to  pay  E.  W.  Lowe  or  order  one  hundred 
and  twenty-five  dollars,  six  months  after  date,  for  value  received  with 
interest,  absolutely  and  at  all  events.  But  it  is  urged  that  the  words 
"  waiving  the  right  of  appeal,  and  of  all  valuation,  appraisements, 
stay  and  exemption  laws,"  destroy  its  negotiability.  In  what  way? 
They  do  not  contain  any  condition  or  contingency,  but  after  the  note 
falls  due  and  is  unpaid,  and  the  maker  is  sued,  facilitate  the  collection 
by  waiving  certain  rights  which  he  might  exercise  to  delay  or  impede 
it.  Instead  of  clogging_jts  negotiability  it  adds  to  it,  and  gives  addi- 
tional value  to  the  pote.^^    -  ~~"""~- — —     ' 

Judgment  reversed  ^nd  new  trial  ordered. 


\>^i^ 


(b)  Exceptions:     (4)  Election  to  require  something  in  lipu  of  money. 

§  24  HODGES  v.  SHIJLER. 

22  New  York.  114.—  1860. 

The  action  was  against  the  defendants  as  indorsers  of  the  follow- 
ing instrument  or  note: 

Rutland  and  Buklinc.ton  Railroad  Company. 
No.  25.3.  $1,000. 

Boston,  April  1,  18.50. 
Tn  four  years  from  date,  for  value  received,  the  Rutland  and  Burlington 
Railroad  Pompany  promises  to  pay  in  Boston,  to  ATessrs.  W.  S.  &  D.  W.  Shuler, 
or  ordfT,  $1,000.  with  interest  thereon,  payable  semi-annually,  as  per  interest 
warrants  hereto  attached,  as  the  same  sliall  become  due;  or  upon  the  surrender 
of  this  note,  togetlicr  with  the  interest  warrants,  not  due,  to  the  treasurer,  at 
any  time  'jt"  "'^  m"r*^^'^  "^  '^'^  mnfurii.v.  he  shall  issue  to  the  holder  thereof 
ten  shares  in  the  capital  stock  in  said  company  in  exchanf;e  therefor,  in  which 
case  interest  shall  be  paid  to  the  date  to  which  a  dividend  of  profits  shall  have 
been  previously  declared,  the  holder  not  being  entitled  to  both  interest  and 
accruing  profits  during  the  same  period. 

T.    Follett,    President. 
Sam.  HEifSHAW,  Treaturer. 


II.    6.]  MUST  NOT  PROMISE  ADDITIONAL  ACT.  95 

The  court  decided  that  the  plaintiff  was  entitled  to  recover  against 
the  defendants,  and  gave  judgment  accordingly.^- — 

Wright,  J.  —  The  single  question  is,  whether  the  defendants  can 
be  held  as  indorsers.  It  is  insisted  that  they  cannot,  for  the  reasons: 
1st.  That  the  instrument  set  out  in  the  complaint,  is  neither  in  terms 
nor  legal  effect  a  negotiable  promissory  note,  but  a  mere  agreement ; 
the  indorsement  in  blank^oTtlie  defendants,  operating,  if  at  all,  only 
as  a  mere  transfer,  and  not  as  an  engagemnet  to  fulfill  the  contract 
of  the  railroad  company  in^asel)f  its  default;  and  2nd.  That  if  it 
be  a  note,  the  notice  of  its  dishonor  was  insufficient  to  charge  the 
defendants  as  indorsers.  _*     *     * 

The  instrument  on  which  the  action  was  brought  has  all  the 
essential  qualities  of  a  negotiable  promissory  note.  It  is  for  the 
unconditional  payment  of  a  certain  sum  of  money,  at  a  specified 
time,  to  the  payee's  order.  It  is  not  an  agreement  in  the  alterna- 
tive, to  pay  in  money  or  railroad  stock.  It  was  not  optional  with 
the  makers  to  pay  in  money  or  stock,  and  thus  fulfill  their  promise 
in  either  of  two  specified  ways;  in  such  case,  the  promise  would  have 
been  in  the  alternative.  The  possibility  seems  to  have  been  con- 
templated that  the  owner  of  the  note  might,  before  its  maturity, 
surrender  it  in  exchange  for  stock,  thus  canceling  it  and  its  money 
promise;  but  that  promise  was  nevertheless  absolute  and  uncon- 
ditional, and  was  as  lasting  as  the  note  itself.  In  no  event  could  the 
holder  require  money  and  stock.  It  was  only  upon  a  surrender  of 
the  note  that  he  was  to  receive  stock ;  and  the  money  payment  did 
not  mature  until  six  months  after  the  holder's  right  to  exchange  the 
note  for  stock  had  expired.  We  are  of  the  opinion  that  the  instru- 
ment wants  none  of  the  essential  requisites  of  a  negotiable  promis- 
sory note.  It  was  an  absolute  and  unconditional  engagement  io  pay 
money  on  a  day  fixed  :  and  although  an  election  was  given  to  the 
promisees,  upon  a  surrender  of  the  instrument  six  months  before  its 
maturity,  to  exchange  it  for  stock,  this  did  not  alter  its  character, 
or  make  the  promise  in  the  alternative,  in  the  s^nso  in  which  that 
word  is  used  respecting  promises  to  pay.  T}^^  i>r\<rf\(Tn'mo]]t  of— tUf- 
railrond  company  was  to  pay  the  sum  of  $1.000  \j}  four  vtiars  from! 
date,  and  its  promisp  could  iiiily -heTiilfiTTed  by  the  payment  of  the| 
money,  at  the  day  namedT  .     /)  /TYK 

[Omitting  the  question  of  notice.]         •     ''  ^^       (/  ^ 

I  «m  of  the  opinion  that  the  action  was  well  brought  against/Ahe      ^'^-'^v*, 
defendants   as    indorsers   of   a    negotiable   promissory    note,   and    that  /" 

the  notice  of  its  dishonor  was  sufficient. 

The  judgment  of  the  Supreme  Court  should  be  affirmed. 

All  the  judges  agreed  that  the  instrument  in  suit  was  a  promissory 
note;   Denio  and   Wellks,   JJ.,   dissented   on   the   ground    that   the 


1)6  FORM  REQUIRED.  (  ART.    11. 

notice  of  non-payment  was  insufficient  in  omitting  the  number  upon 

'liL'  uiaigin  i)f  tlic  uok'.'' 

Jud^iiK'nt  allirmed.* 


i 


III.  Payable  on  demand  or  at  a  determinable  future  time. 

1.  When   P-vyablic  on  Demand. 
§26  (a)    Pnijahle  at  sight.^ 


(b)   No  lime  for  paymenl  expressed. 

§26  HERRICK  v.  BENNETT. 

8  Johnson  (N.  Y.)  374.— 1811. 

Assumpsit  on  a  promissory  noto.  The  first  count  of  the  plaintiff's 
declaration  stated,  that  the  defendant,  on  May  '?5,  1809,  at,  etc., 
made  his  certain  promissory  note  in  writincr,  siil)scribed,  etc.,  and 
then  and  there  delivered  the  same  to  the  plaintiff,  by  wliich  said  note 
the  defendant  promised  to  |)ay  to  the  plaintiff,  or  order,  $112.53;  by 
reason  whereof,  etc.  There  was  a  demurrer  to  this  count  of  the 
declaration,  which  was  submittetl  to  the  court  j|viiiiant  argument. 

Per  Curtam.  It  is  to  be  presumed  that  the  plaintifT  has  stated 
the  note  in  his  declaration,  according  to  the  terms  of  it,  and  that  is 
sufficient.  The  cnnHusion  of  t1ie_law  is,  i_1i'i<  \Axlixo  nn  fimn  nf  pny- 
ment  is  specified  in  a~Trote.  itTspavnMc  imnu'dinlch'.  '^hv  fir^f  count, 
then,  shows  acause  of  action,  and  the  plaintifT  is  entitled  to  jiulgment. 
V .        ,  y  .  Judgnicnt^_£ai:—tlix;_p  lain  tiff." 


3  5Vp  5§  Ifi6-1G7,  po.s<.  —  IT. 

•«  "  I  pnmiise  to  pay  to  tf)e  ordrr  of  W.  $.5.5  at  iiiv  stnro  (or  in  j»oc)rls  on 
demand),"  is  a  promissory  note.  Hoftstattfr  v.  Wilson.  IW  Barl).  (N.  Y. )  .307. 
rontrn.  Dennett  v.  Goo/hrin,  .32  Mo.  44.  —  TI. 

•'• "  Piv  tho  law  morrhant  therp  are  some  rlistinetions  hetwron  instniments 
payable  on  fiemand  and  tho^e  payable  at  siplit  :  as,  for  example,  in  the  matter 
of  days  of  grace.  See  Daniel  on  Negotiable  Instrument."',  §§  fil7-fil9.  [Demand 
bills  or  notes  were  not  entitled  to  days  of  grace,  but  tlicre  was  a  conflict  of 
authority  as  to  instruments  payable  at  sigbt.  the  weight  of  nutliority  holding 
that  they  were  so  entitled.  —  C]  This  wa^  also  the  effect  of  former  statutes  in 
some  of  the  states.  Walsh  v.  Dart,  12  Wis.  fi.3.5.  The  new  statute  abolishes  all 
these   distinctions."      Crawford's   Negotiable   Instruments   Law,   3d   cd.,    p.    18. 

Days  of  grace  are  abolished  by  §  14.5  of  the  New  York  act.  —  C. 

«  Accord:  Baron  v.  Pnqr,  ]  Conn.  404:  Jones  v.  Broirn.  11  Oh.  St.  001  ;  ,1/es.s- 
more  v.  Morrison.  172  Pa.  St.  300:  Bank  v.  Priee,  .52  Iowa,  570;  Lihhy  v. 
Mikelborg,  28  Minn.  38;  Roberta  v.  Unow,  27  Neb.  425.  —  H. 


III.]  PAYABLE  AT  ASCERTAINABLE  TIME.  9t 

(c)   Issued,  accepted  or  indorsed  when  overdue. 
§26  LIGHT  V.  KINGSBURY. 

50  MissouBi,  331.— 1872. 

ADA]^r.s,  Judge.  *  *  *  But  it  is  unnecessaiy  to  review  any  of 
the  positions  nssnined  hy  counsel  in  this  case,  as  the  petition  on  its 
face  does  not  state  facts  sufficient  to  constitute  a  cause  of  action 
against  the  defendants  as  indf)rsers_of  this  note.  It  is  a  negotiable 
note,  indorsed  after  dueT  Such  indorsement  is  equivalent  to  draw- 
ing a  new  bill  at  sight,  and  the  same  diligence  in  making  demand 
and  giving  notice  is  required  to  charge  the  indorsers.  (See  Davis 
V.  Francisco,  il~]^roT572,  opinion  of  Scott,  J. ;  also  Moody  et  al  v. 
Mack,  43  Mo.  "^lO;  Berry  v.  Robinson,  9  Johns.  121;  McKinney  v. 
Crawford,  8  Serg.  &  R.  351;  Rugby  v.  DaviU^n,  2  Mills  Const.  33.'') 

The  petition  alleges  that  the  indorsement  was  made  about  the 
19th  of  April,  and  alleges  a  demand  and  refusal  on  the  3d  of  July 
following,  and  gives  no  excuse  whatever  for  the  delay.  Even  if  this 
petition  could  be  held  good  after  verdict,  there  was  nothing  in  the 
evidence  to  justify  the  delay  in  presenting  the  note  for  payment,  and 
the  indorsers  were  discharged  by  such  delay.*        ^^_ 


Judgment  affirmed.     The  other  judges  concur. 

YABLE  AT  A  I^XED  OK  DeTEKIHINABLE  PuTURE  TiME. 


2.  When  Pay. 

(a)   A  fixed  time  after  date  or  sight. 
23  SIEGEL  V.  CHICAGO,  ETC.,  CO. 

[Reported  herein  at  p.  190.] 


(b)   On  or  before  a  fixed  or  determinable  time  specified. 

§23  JORDAN  V.  TATE. 

19  Ohio  State,  580.—  1869. 

Motion  for  leave  to  file  a  petition  in  error  to  reverse  a  judgment 
of  the  District  Court  of  Montgomery  county,  affirming  the  judgment 
of  the  Court  of  Common  Pleas.  


T  "A  ne^otial))*"  inxtruiiifnt  indorscfl  after  maturity  iw  re^nrflod  as  e(|(iivalent 
to  onp  payiihlf  on  di-inaiul.  Surli  a  liill  or  noti'.  tlioiiph  ovprilue,  continues  to 
)>c  nepotinlilf.  and  i«  in  the  nature  of  a  new  hi'l  f)ayalile  on  riemnnd.  Daniel 
on  Nej?.  Inst.,  §§  Oil.  ItHfi:  Hrrr  v.  Cliftnn,  98  fal.  3'2n,  ,3.?  Par.  204."  Hart.  .1., 
in  WiU8  V.  Booth.  6  Cal.  App.  197.  201. 

"Ab  between  indnrser  and  indornee.  sueh  note  is  to  be  treated  as  a  note  on 
demand,  daterl  at  the  time  of  tiie  transfer,  ho  far  as  demand  ami  notice  are 
concerned."     Rice.  .1.,  in  GondiHn  v.  Darmport.  47  Me.  112    110. — C 

•  Accord:  HasKenhorst  v.  Wilbp,  45  Oiiio  St.  333  (delay  from  July  30  to  Nov. 
21).     See  Neg.  Inst.  L..  §  131.— II. 

REOOT.   INHTRUIfENTB  —  7 


98  FOUM  UKQUIRED,  [aKT.    II, 

By  the  Court:  The  negotiable  eliaiaiter  of  a  promissory  note 
is  not  all'eeted  by  the  fact  that  it  is  made  payable  by  its  terms  on  or 
before  a  future  day  therein  named.  Though  the  maker  has  a  right 
to  pay  such  note  at  any  time  after  its  date,  yet  for  all  purposes  of 
negotiation  it  is  to  be  regarded  as  a  note  payable  solely  on  the  day 

therein  named.  . 

Motion  overruled.' 


§  23  RIKER  V.  SPRAGUE  MFG.  CO. 

[Reported  herein  at  p.  68.^ 


§  23      FIRST  NATIONAL  BANK  OF  POMEROY,  IOWA, 

V.  BUTTERY. 
17  NoBTH  Dakota,  326.  —  1908. 

Judgment  for  defendant,  and  plaintiff  appeals. 

Spalding.  —  This  is  an  action  on  a  promissory  note.  The  note 
was  sued  on  by  the  indorsee  for  value  he  fore  maturity,  and  the  court 
found  that  there  was  a  failure  of  consideration,  and  that  the  contract 
was  not  a  negotiable  note,  and  entered  judgment  for  the  dismissal  nf 
the  action.  Only  one  question  requires  consideration.  If  the  instru- 
ment in  question  is  a  negotiable  promissory  note,  the  judgment  should 
be  reversed  ;  otherwise,  it  should  be  affirmed. — 

The  note  was  made  in  this  state,  and  is  payable  at  Sioux  City,  Iowm. 
and  the  clause  which  the  trial  court  held  rendered  it  non-negotiable 
reads:  "The  makers  and  indorsers  herein,  severally  waive  present- 
ment of  payment  and  notice  of  protest,  and  consent  that  the  time  of 
payment  may  be  extended  without  notice."  There  is  an  apparent 
conflict  of  authorities  as  to  wheth^p-ilTis  or  similar  agreements  render 
the  note  non-negotiable.  The  note  is,  by  its  terms,  made  payable  on  or 
before  the  1st  of  October,  1903.  Without  the  paragraph  complained 
of,  it  would  unquestionably  be  a  negotiable  instrument,  and  the 
indorsers  would  be  released  by  any  extension  of  time  of  payment  with- 
out their  assent.  We  are  of  the  opinion  that  this  provision  does  not 
extend  the  time  of  payment  indefinitely  or  render  it  uncertain.  The 
time  of  payment  is  already  fixed. 

It  is  strenuously  argued  that  the  use  of  the  word  "makers"  in  the 
waiver  admits  of  an  extension  being  made  at  any  time  on  the  part  of 
the  holder,  bv  a  mere  secret  mental   process,  unknown  to  any  other 


•  Accord:    Mattison  v.   Marks,  31  Mich.  421.     Contra:   Stulta  v.  Silva,  119 
Mass.  137. —  H.     [Accord:  Leader  v.  Plante,  95  Me.  339.  —  C] 


Ill]  (payable  at  ascertainable  '^;im£^  99 

party.  This  may  be  true  ns  a  psychological  fact,  but  we  do  not  deem 
it  so  as  a  matter  of  practice  in  commerce  and  banking.  To  us  it  is 
clear  that  it  has  the  same  effect  as  though  the  note  read  "on  the  1st 
day  of  October,  ]9();}.  or  thereafter  on  demand."  in  which  case  there 
would  be  no  question  of  its  ni'irotiiil)i1ity.  Holders  of  notes  do  not  by 
a  secret  mental  pnx;e£si.jttaj<e  an  extension^f  the  Time  of  payment, 
nui  such  exrensioii.  if  made  al  ;ill.  is  made  by  an  agreement  between 
tKeprillClfial  TTrTifor  ;iii(l  the  holder  of  the  paper,  either  with  or  with- 
ouT~the  crm^fiif  nf  I  III'  iiiilorseis.  This  provision  seems  to  us  to  have 
been  inserted  tu  protett  the  iiolder  against  any  release  of  indorsers  or 
others,  by  an  extension  without  their  assent,  and  the  word  "makers" 
is  evidently  included  to  prevent  any  misunderstanding  or  miscon- 
struction of  the  contract  or  failure  to  distinguish  between  makers, 
indorsers,  sureties,  and  any  other  parties  who  might  be  or  become 
liable  thereon  under_„cer^am_  contingencies  as  makers.  7  Cyc.  614. 
This  phrase  does  not  express  an  agreement  to  extend  time,  but  leaves 
the  matter  of  extension  optional  with  the  holder,  and  not  obligatory 
upon  him,  and  the  note  on  its  face  fixes  the  time  when  it  becomes 
due.  In  this  respect  it  must  be  distinguished  from  a  provision  to  the 
effect  that  the  time  of  payment  shall  be  extended  indefinitely,  in  which 
case  the  uncertainty  of  the  time  renders  the  instrument  non-negotialde. 
We  feel  that  the  reasoning  in  the  Nniioiial  Banh  of  Commerce  v. 
Kenney,  OH  Tex.  2f);j,  s;3  S.  W.  368,  is  not  only  satisfactory,  but  con- 
clusive of  this  point  The  note  involved  in  that  case  contained  this 
provision:  "The  makers  and  indorsers  hereof  hereby  severally  waive 
protest,  demand,  and  notice  of  protest  and  non-payment  in  case  this 
note  is  not  paid  at  maturity.',  and  ,igre(;  to  all  extensions  and  pnrtial 
payments  before  qr.>fle.r  r,iata-rity;,.  withouT.  prejudice  to  the  holder." 
In  holding  tbat  this  provision  did  not  render  <-h<?  note  non-negotiable, 
the  Texas -coirrt  says:  "  If,  as  is  argued,  the -eflCe'cj- of  the  stipulation 
is  to  give  the  right  to  the  maker,  without  the  co'uM.'nt  of  the  holder, 
or  to  the  holder  without  the  consent,  of  the  roAker  to  appoint  another 
date  of  payment,  and  thereby  e.vrend  the  tin»e.'  it  may  be  that  it  would 
render  the  instrument  non-negf)tiablc.  J{ii|  we  do  not  think  it  capable 
of  that  construction.  It  does  not  say  that  either  the  holder  or  the 
maker  may  extend  the  note.  I(  simply  triakes  a  provision  in  case  the 
time  of  payment  may  be  exteiuled.  How  e\l('n(le<l  ?  |(  soonis  to  us 
that  the  extension  meant  is  that  which  lakes  [dace  when  the  debtor 
and  creditor  make  an  agreement  upon  a  vahi;d)le  consideration  for 
the  payment  of  the  debt  on  some  day  subsequent  lo  that  previously 
stipulated.  The  ol)vious  purpose  i»f  the  stipulation  taken  as  a  whole 
was  merely  to  relieve  the  holder  of  the  piiper  from  (he  burdens  made 
necessary  by  the  rigid  re(|nirements  of  the  mercantile  law  in  order  to 
secure  the  continued  liability  of  the  indorsers  ;ind  sureties  on  \Y\e 
paper.     Therefore  what  was  meant  liy  the  stipulation  as  to  extension 


100 


FORM   HKgUIRF.D. 


[art.  II. 


of  time  was  simply  flini  in  caso  tlio  liokler  and  maker  slioiild  agree 
upon  an  extension  the  sureties  and  indorsers  should  not  be  discharged. 
The  holder  and  maker  of  a  note  may  at  any  time  agree  upon  an 
extension  ;  therefore,  the  fact  that  they  have  that  right  does  not  aifect 
the  negotiability  of  the  paper.  It  is  usually  said  that,  in  order  to 
make  an  instnnnent  negotiable  under  the  law  merchant,  the  time  of 
payment  must  l)e  certain.  But  a  note  payable  on  or  before  a  certain 
date  is  negotiable.  The  maker  of  such  a  note  has  the  right  to  pay 
before  the  date  named,  but  the  holder  cannot  demand  payment  before 
that  date.  So,  in  this  case,  the  time  at  which  the  maker  may  elect  to 
pay  is  uncertain,  but  the  time  at  which  the  holder  may  demand  pay- 
ment is  certain.  Jt  follows  that  if  the  holder  has  the  absolute  right 
to  demand  payment  at  a  certain  date,  the  note  is  negotiable.  This 
is  but  an  illustration  of  what  we  understand  to  be  the  general  rule. 
There  being  nothing  in  the  stipulation  under  consideration,  which 
gave  any  one  the  right  to  demand  of  the  holder  of  the  note  an  extension 
of  the  time  of  payment,  we  think  the  time  at  which  he  could 
demand  payment  was  fixed,  and  that,  therefore,  it  was  a  negotiable 
note."     *     *     * 

[After  discussing  Jacobs  v.  Gibson,  77  Mo.  App.  344,  Banlc  v.  Com- 
mission Co..  93  Mo.  App.  123,  and  Farmer  v.  Banh,  130  Iowa,  467, 
the  court  continues:] 

We  are,  however,  of  the  opinion  that,  under  the  plain  terms  of  the 
negotiable  instruments  act  of  this  state,  this  note  is  negotiable,  with- 
out reference  to  other  authority. 

Section  6486,^  Rev.  Codes  1905,  defines  a  negotiai)le  promissory  note 

as  follows:  "A  negotiable  promissory   note   within   the  meaning  of 

this  chapter  is  an  unconditionaf  promise'  in  \i^riting,  made  by  one 

person  to  another,  signed  ny  the  maker,  engaging  "to  pqy  on  demand, 

or  at  a  fixed  or  a  determinal)le  future  time,  a  certain  sum  of  money, 

to  order  or  to  bearer."    Section  6309  ^  provides  that  an  ins^tniment  is 

P     "payment  on  demand.-  *     *     *     3.  In  which  no  time  for  payment 

.  I  ^'is  expressed."     Section   6423  ^  provides  how  such   an   instrument   is 

"discharged  against  a  person  secondarily  liable  thereon."     Paragraph 

6  thereof  provides  that  it  is  discharged  by  any  agreement  binding  upon 

*'"^        the  holder  to  extend  time  of  payment,  or  to  postpone  the  holder's  right 

to  enforce  the  instrument,  unless  made  with  the  assent  of  the  party 

-^       secondarily  liable,  or  unless  the  right  to  recourse  against  such  party 

^  is  expressly  reserved. 

■b  If,  as  is  contended  by  the  respondent  in  the  case  at  bar,  this  instru- 

ment, taken  as  a  whole,  expresses  no  time  for  payment,  then,  under 
section  6309,  it  is  an  instrument  payable  on  demand,  and  according  to 


><jNuf-*-^' 


-vv 


,C^ 


IN.  Y.,S320.  — C. 
»N.  Y.,  §2G.  —  C. 
«N.  v.,  §201.  — C. 


III.]  PAYABLE  AT  ASCERTAINABLE  TIME.  101 

section  6486  the  negotiability  of  a  promissory  note  is  not  destroyed 
by  its  being  made  payable  on  demand.  On  the  other  hand,  if  it  does 
express  a  time  for  payment,  the  1st  day  of  October,  1903,  is  a  fixed 
and  determinable  future  time  as  required  by  section  6486,  supra.  This 
note  was  executed  and  dated  within  this  state,  and  we  are  satisfied 
that  the  paragraph  complained  of  as  rendering  it  non-negotiable  was 
drawn  for  the  express  purpose  of  protecting  it  within  the  terms  of 
paragraph  6,  §  6422,  above  quoted,  and  in  accordance  with  other 
statutory  provisions  providing  for  waiver  of  presentment,  notice  of 
dishonor,  and  protest.  Notes  containing  clauses  similar  to  the  one 
in  question  have  been  in  almost  universal  use  in  this  state  for  years, 
and  the  identical  waiver  complained  of  has  been  in  common  use,  and 
the  instruments  containing  them  have  been  regarded  and  treated  by 
the  trade  and  bankers  as  negotiable. 

For  the   reasons  slated,   the  judgment  of  the   District   Court  la,  ^ 
reversed.  ^_  ^ 

Pollock,  District  Judge,  concurs.  -  -c^ 

FiSK,  J.,  disqualified ;  Hon.  Chas.  A.  Pollock,  judge  of  the  Third 
Judicial  District,  sitting  by  request. 

Morgan,  C.  J.  (dissenting).  I  am  unable  to  concur  in  the  con- 
clusion reached  by  my  associates  in  this  case.  My  reasons  for  reach- 
ing an  opposite  conclusion  may  be  briefly  stated. 

The  statute  in  express  terms  requires  that  the  time  of  payment 
must  be  definitely  stated  in  the  note  or  that  it  can  be  definitely  deter- 
mined therefrom  when  it  becomes  payable,  or  it  Avill  be  rendered  non- 
negotiable.  From  the  face  of  the  note,  it  seems  to  me  conclusive  that 
it  does  not  show  when  the  note  may  become  due  and  payable  in  view 
of  the  fact  also  stated  therein  that  an  extension  may  become  operative 
and  binding.  It  does  not  seem  to  me  to  he  a  soimd  conclusion  to  say 
that  the  note  states  a  fixed  day  of  payment  when  it  also  states  that  the 
day  stated  may  not  represent  the  dale  of  payment  if  the  stipulation 
as  to  an  extension  that  follows  is  put  into  effect.  The  note  cannot  be 
said  to  be  a  demand  note,  as  by  its  very  terms  it  is  not  such.  It  fixes 
day  of  payment,  sid)ject  to  extensions.  So  far  as  having  no  fixed  day 
of  payment  is  concerned,  the  time  is  rendered  as  uncertain  bv  reason 
of  possible  extensions  as  it  would  Ije  if  it  provided  for  extensions  in- 
definitely, and  is  therefore  fairly  within  the  principles  of  the  Iowa 
cases  cited  in  the  opinif)n.  In  Tiatih  v.  Gunlcr,  67  Kan.  237,  the  note 
contained  this  stipulation  :  "  The  makers  and  indorsers  hereby  severally 
*  *  *  agree  to  all  extensions  *  *  *  before  or  after  maturity 
without  prejudice  to  the  holder,"  and  in  reference  to  the  effect  thereof 
upon  the  negotiability  of  the  note,  the  court  said:  "  Tn  the  note  in 
question,  payment  is  first  fixed  at  182  days  after  the  date,  but  as  will 
be  observed,  a  later  provision  mnkeq  tlu'  time  indefinite  by  stipulating 
that  it  may  be  ehnntred  and  extended  either  before  or  after  maturity. 
If  the  time  is  to  remain  fixed  until  maturity,  when  another  time  is  to 


102 


FORM   UEliUlIIED. 


[akt.   II. 


■tr^ll 


f 


^aJC^^ 


'n 


be  fixed  by  the  parties,  or  if  piiyineiit  is  made  to  depend  upon  events 
wiiic'h  iK'oessarily  must  oeeur,  luul  (lie  time  of  payment  is  ultimately 
certain,  other  considerations  would  arise;  but  here  payment  is  not 
ultinuitely  certain,  for  the  time  stated  in  the  paper  is  subject  to  change 
at  any  time  at  the  volition  of  some  of  the  parties  to  the  action." 

In  Coffin  V.  SpciH-er  (C.  C.)  39  Fed.  262,  the  court  said  in  reference 
to  a  similar  stipulation :  "  Every  successive  taker  of  the  paper  is,  of 
course,  bound  to  take  notice  of  the  stipulation,  and,  instead  of  looking 
only  to  the  face  of  the  instrument  for  the  time  of  its  maturity,  as  in 
case  of  commercial  paper  he  must,  ^s  put  upon  inquiry  whether  or  not 
any  agreement  for  a  renewal  or  exl^ension  of  time  has  been  made  by 
his  proposed  assignor  or  by  any  previous  holder." 

In  Oyler  v.  McMurray,  7  Ind.  App,  645,  the  court  said  in  speaking 
of  a  like  stipulation :  "  The  holder  was  not  bound  by  the  stipulation 
in  either  case  to  extend  the  time  of  payment.  The  material  and  con- 
trolling fact  is  that  the  holder  had  the  option,  at  any  time  before  as 
well  as  after  the  time  of  payment  stated  in  the  note,  to  extend  to  the 
drawers  and  indorsers,  or  either  of  them,  the  time  of  payment." 

The  following  authorities  specifically  hold  that  stipulations  like  the 
one  contained  in  the  note  in  suit  render  the  note  non-negotiable:  7 
Cyc.  600,  and  cases  cited;  Daniel  on  Neg.  Inst.  (5th  ed.)  p.  49; 
Eaton  &  Gilbert  on  Commercial  Paper,  p.  220;  Smith  v.  Van  Blarcom, 
45  ^fich.  371 ;  Wooclbiiry  v.  Roberts,  59  Iowa,  348;  Hodge  v.  Farmers' 
Bank  of  Franl-fort,  7  Ind.  App.  94 ;  Oyler  v.  McMurray,  7  Ind.  App. 
645;  Glidden  v.  Henry,  104  Ind.  278;  Rosenthal  v.  Rambo,  28  Ind. 
App.  265;  Id.,  165  Ind.  584;  Evans  v.  Odem.,  30  Ind.  App.  207; 
Second  National  Bank  v.  Wheeler,  75  Mich.  546;  Lamb  v.  Story,  45 
I  Mich.  488 ;  Oyler  v.  McMurray,  7  Ind.  App.  645 ;  Citizens'  Nat.  Bank 
I  V.  Piotlrt,  12G  Pa.  194. 

On  principle  and  authority,  tlie  note  should  be  held  non-negotiable.^ 


V  (c)   On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event. 


§23 


SHAW  V.  CAMP. 
160  Illinois,  425. —  1896. 


WV^ 

Y^^ 


C^" 


Mr.  Justice  Cartwrigiit  delivered  the  opinion  of  the  court: 
Appellee  filed  a  claim  in  the  County  Court  of  Piatt  county,  against 
the  estate  of  Edward  Swaney,  deceased,  and  the  claim  was  rejected. 
In  the  Circuit  Court,  on  appeal,  there  was  a  trial  by  a  jury  and  a 
verdict  for  the  claimant  for  $852.50,  upon  which  judgment  was 
entered.  The  judgment  was  aflRrmed  by  the  Appellate  Court  and  a 
certificate  of  importance  granted,  under  which  the  case  is  brought 


1  See  note  to  this  case  entitled  "  Effect  on  nepotiahility  of  promissory  note  of 
rirovi'-ion  yxTmittin!/  extension  of  time,"  in  16  L.  N.  S.  878.  See  also  note  in 
125  Am.  St.  Rep.  201.  — C. 


tA 


III.]  PAYABLE  AT  ASCERTAINABLE  TIME. 


103 


to   this   court.      On   the   trial   the   claimant   offered   in   evidence   the 
instrument  upon  which  his  claim  was  founded,  together  with  proof 
of  the  signature  of  the  deceased.     The  instrument  was  as  follows: 
$750.00  Bement,  III.,  Dec.  27,  1890. 

After  my  death  date  I  promise  to  pay  E.  Hanson  Camp,  or  order,  the  sum  of 
$750,  without  interest  at        per  cent,  per  annum  from  date,  value  received. 

Following  the  above  there  was  a  power  of  attorney,  in  the  usual 
form,  to  confess  judgment,  and  the  signature  of  Edward  Swaney. 
To  the  introduction  of  this  instrument  objection  was  made  and 
overruled,  and  it  is  insisted  that  the  ruling  was  wrong,  for  the  reason 
that  the  instrument  was  not  a  promissory  note.  It  is  conceded  that 
a  promissory  note  may  be  made  payable  on  the  death  of  a  certain 
person,  or  at  a  fixed  time  thereafter,  or  on  demand  after  such  death ; 
but  it  is  claimed  that  this  instrument  was  not  payable  at  a  time  fixed, 
and  that  the  words  "  after  my  death  date "  should  be  construed  to 
mean  some  uncertain  time  after  that  event.  We  do  not  regard  the 
instrument  as  subject  to  the  objection  made.  It  did  not  become  due 
until  the  death  of  the  maker,  which  was  an  event  certain  to  occur, 
but  by  its  terms  it  became  due  at  once  after  the  occurrence  of  that 
event.  There  is  nothing  in  the  language  to  indicate  that  the  money 
was  to  be  paid  at  some  uncertain  time  after  the  maker's  death.  The 
objection  was  properly  overruled.^  ^ 


/"hen  Patabl 


ON  A  Contingency.^ 


§23  KELLEY  v.  HEMMIXGWAY. 

13  Illinois,  604. —  1852. 

Treat,  C.  J.  This  was  an  action  brought  by  Ilcminingway  against 
Kelley  before  a  justice  of  the  peace,  and  taken  by  appeal  to  the  Circuit 
Court.    On  the  trial  in  the  latter  court,  the  plaintiff  offered  in  evidence 

an  instrument  in  these  words: 

Castleto.n,  April  27,  lS-14. 
DiK-    Henry   D.   Kelley    fifty  three  dollars,  when  he   is  twenty-one  years  old, 

with  interest. 

David  Kelley. 

[On  thp  bark  of  irhirh  irait  thin  inflorsrmml] 

liocKTON,  May  1.  1K40. 
Signed  the  within,  payahle  to  Moses  Ileniniingway. 

Henry  Kei.ley. 


2  A  bill  or  note  payable  ho  many  dnyrt  after  the  death  of  a  party  is  certain  as 
to  time,  beeause  the  time  is  sure  to  arrive.  Colchnn  v.  (Utokv.,  Willes,  303; 
affirmed  2  Rtr.  1217;  Kristol  v.  Warner,  19  ("onn.  7,  post;  Conn  v.  Thornton,  46 
Ala.  5H7;  Prirr.  v.  JonrH,  lOf)  Ind.  54:i;  Carnv^if/ht  v.  Grai/,  127  N.  Y.  92; 
Heffcman  v.  Motm,  131  N.  Y.  462;  ante,  p.  41;  Martin  v.  Stone,  67  N.  H. 
367.  —  H. 

«See  note  in  125  Am.  St.  lUp.  202.  —  C. 


104  FORM  UKQUIREI).  [aRT.    II. 

Tlio  plaintiff  provod  that  the  payee  lieeamo  of  ago  in  Auj^ust^  1849. 
The  derendant  objoc'ted  to  llie  i'iincHluction  of  the  instrument  because 
it  was  not  negotiable,  but  the  eoiirt  admitted  it  in  evidence  and  ren- 
dered judgment   for  the  pb.iintitt". 

Our  statute  makes  promissory  notes' assignable  by  indorsement  in 
writing,  so  as  absolutely  to  vest  the  legal  interest  in  the  assignee. 
Was  the  instrument  in  question  a  promissory  note?  To  constitute 
a  promissory  note,  the  money  must  be  certainly  payable,  not  dependent 
on  any  contingency,  either  as  to  event,  or  the  fund  out  of  which  pay- 
ment is  to  be  made,  or  the  parties  by  or  to  whom  payment  is  to  be 
made.  If  the  terms  of  an  instrument  leave  it  uncertain  whether 
the  money  will  ever  become  payable,  it  cannot  be  considered  as  a 
promissory  note.~(Chitty  on  Bills,  134.)  Thus,  a  promise  in  writ- 
ing to  pay  a  sum  of  money  when  a  particular  person  shall  be  married 
is  not  a  promissory  note,  because  it  is  not  certain  that  he  will  ever 
be  married,-,  (Pearson  v.  Ganet,  4  Mod.  242;  Beardesley  v.  Baldwin, 
2  Strange,  1151.)  So  of  a  promise  to  pay  when  a  particular  ship 
shall  return  from  sea,  for  it  is  not  certain  that  she  will  ever  return. 
{Palmer  v.  Pratt,  2  Bing.  185;  Cuolidge  v.  Buggies,  15  Mass.  387.) 
In  all  such  cases,  the  promise  is  to  pay  on  a  contingency  that  may 
never  happen.  But  if  the  event  on  which  the  money  is  to  become 
payable  must  inevitably  take  place,  it  is  a  matter  of  no  importance 
how  long  the  payment  may  be  suspended.  A  promise  to  pay  a  sum 
of  money  on  the  death  of  a  particular  individual  is  a  good  promis- 
sory note,  for  the  event  on  which  the  payment  is  made  to  depend 
will  certainly  transpire.  (Colehan  v,  Coohe,  Willes,  393;  s.  c.  2 
Strange,  1217.) 

In  this  ease,  the  payment  was  to  be  made  when  the  payee  should 
attain  his  majority  —  an  event  that  might  or  might  not  take  place. 
The  contingency  might  never  happen,  and  therefore  the  money  was 
not  certainly  and  at  all  events  payable.  The  instrument  lacked  one 
of  the  essential  ingredients  of  a  promissory  note,  and  consequently 
was  not  negotiable  under  the  statute.  The  fact  that  the  payee  lived 
till  he  was  twenty-one  years  of  age  makes  no  difference.  It  was 
not  a  promissory  note  when  made,  and  it  could  not  become  such  by 
matter  ex  post  facto. -^-^he  plaintiff  has  not  the  legal  title  to  the 
instrument.  If  it  presents  a  cause  of  action  against  the  maker,  the 
suit  must  be  brought  in  the  name  of  the  payee.  The  case  of  Goss 
V.  Nelson,  (1  Burr,  22G),  is  clearly  distinguishable  from  the  present. 
There,  the  note  was  made  payable  to  an  infant  when  he  should  arrive 
at  age,  and  the  day  when  that  was  to  be  was  specified.  The  court 
held  the  instrument  to  be  a  good  promissory  noto,  but  expressly  on 
the  ground  that  the  money  was  at  all  events  payable  on  the  day 
named,  whether  the  payee  should  live  till  that  time,  or  die  in  the 
interim ;  and  it  was  distinctly  intimated,  that  the  case  would  be  very 


III.]  PAYABLE  AT  ASCEBTAINABLE  TIME.  105 

different  had  the  day  not  been  stated  in  the  note.    It  was  regarded 
as  an  absolute  promise  to  pay  on  the  day  specified,  and  no  eflect 
was  given  to  the  words  that  the  payee  would  then  become  of  age. 
The  judgment  must  be  reversed. 

Judgment  reversed.* 


§23  Sackett  v.  Palmier,  25  Barbour  (N.  Y.),  179.  — 1857. 
Action  on  a  note  payable  "  ninety  days  after  the  dissolution  of  the 
partnership  between  A.  B.  and  C.  D.,  and  the  settling  of  the  books  -/ 
of  said  firm."  Johnson,  J.  The  instrument  on  which  the  action  is  j/'^  a 
b'-ought  is  not  a  promissory  note.  It  is  payable  ninety  days  after  the  / 
happening  of  two  events,  one  of  which  may  never  happen.  The  general 
rule  is,  that  an  instrument  payable  only  in  money,  is  not  a  promissory 
note,  unless  it  is  payable  at  all  events,  not  depending  on  any  con- 
lingency.  Though  if  the  event  on  which  the  instrument  is  to  become 
payable  must  inevitably  happen,  it  is  no  objection  that  it  is  uncertain 
when  it  will  happen ;  nor  is  it  of  any  importance  how  long  the  pay- 
ment may  be  in  suspense ;  it  will  still  be  regarded  as  a  promissory  note. 
{Chit  on  Bills  [Sth  Am.  ed.],  155,  156.)  It  is  not  shown  by  the 
evidence  how  long  the  partnership  was  to  continue  by  the  agreement 
of  the  partners.  It  was  certain,  however,  that  there  would  at  some 
time  be  a  dissolution,  by  the  death  of  one  of  the  partners,  if  not  other- 
wise. That  event  was  sufficiently  certain.  But  the  settling  of  the 
books  of  the  firm  was  an  event  wliieh  might  never  happen.  It  would 
not  inevitably  happen.  H  niiglil,twtl  probably  Avould,  after  a  disso- 
lution, in  due  course  of  law.  But  that  is  not  enough  ;  if  it  might  not 
happen  the  instrument  is  nat-a  promissory  note. 

§23         AMERICAN  NATIONAL  BANK  v.  SPRAGUE.  ^ 

14  Rhode  I.sland.  410. —  1884. 

Action  against  indorsers  on  an  instrument  similar  to  the  one  in 
Riler  v.  Spragve  Mfg.  Co.,  (ante,  p.  68),  except  that  it  was  indorsed 
as  follows: 

♦  A  nnto  rpnrlinp  "  T'pon  mnfirmnlion  hy  fho  Conprrss  of  (hr  Unitrd  Statoa 
of  the  rrrtain  latul  prant  known  an  ...  1  proniiso  to  pay,"  otr.,  ticld  non- 
nflpotiahlc  Hinco  it  was  not  certainly  aii<l  at  all  rvcnts  payable;  it  no(  heinp 
certain  tliat  (he  prnnt  wonld  ever  be  confirmed  by  f'onpress,  or  tbroiipli  its 
instrnmentalities.  "  It  is  no  answer  ...  to  show  that  the  prant  in  qnes- 
tion  has,  as  a  mattor  of  fact,  been  confirmed  by  the  court  of  private  land 
claims.     .  The  question  is.  What  were  the  conrlitions  when   the  contract 

was  made?  Nepotiability  is  to  lie  jndped  by  the  front  sipht,  not  by  the  back 
sipht.  The  moral  ceitainty  must  be  present  at  the  time  of  its  execution  and 
not  be  a  matter  of  relation  accriiinp  by  reason  of  subsequent  events.     If  it  b« 


106  FOHM  KKgnitKn.  [art.  ii. 

"Issued  as  collateral  to  A.  .!c.  W.  Spra^uo  TVffg.  Co.'s  draft  accepted 

by  lluvt,  kSpiaguos  »!i:  Co.,  ^o.  (J80G." 

TiLLiNGiiAST,  J.  *  *  *  It  will  at  oncG  be  seen  that  these  notes 
differ  very  nialerially  fioiu  tliut^o  deeiared  on  in  the  former  case,  and 
also  that  under  ti;e  rule  tiiercin  adopted  they  are  clearly  not  negotiable. 
Tliey  were  i?su^d  as  collateral  to  certain  drafts  therein  specifically 
designated,  and  obviously  are  not  payable  at  all  events;  it  being  evident 
that  the  pp.yiurnt  of  the  drafts  would  at  once  discharge  both  the 
malcers  and  iudorsers  of  the  notes,  and  render  said  notes  null  and 
void.  So  also  a  partial  payment  on  the  drafts  would  at  once  reduce 
the  amount  collcctiblo  on  the  notes  pro  tnnto. 

The  undertaking  of  the  defendants,  therefore,  was  at  most  a  con- 
tingent one,  and  the  sum  which  might  become  due  at  the  expiration 
of  the  notes  was  uncertain.     *     *     * 

Without  considering  the  other  ])oints  raised  by  the  petition,  we 
must,  therefore,  grant  a  new  trial. 

Petition  granted.* 


rv.  Payable  to  order  or  to  bearer. 

1.  Must  be  Payable  to  Order  or  Bearer  to  be  Negotiable.' 
§  20  WETTLAUFER  v.  BAXTER. 

[Reported  herein  at  p.  l-f/o.] 

not  a  bill  or  note  ah  Initio,  no  subsequent  event  can  make  it  so."  Pope,  ,T.,  in 
Joseph  V.  Catron,  13  N.  ^L  202,  22.3.  See  tbis  case  reported  with  note  in 
1  L.  N.  S.  1120. 

See  also  to  the  sajne  effect  Eldrcd  v.  Malloy,  2  ('olo.  320.  —  C. 

5  In  Citizens'  Kat.  Bank  v.  Piollet,  126  Pa.  St.  194,  a  note  containing  a 
memorandum  tliat  "  This  nnt(>  i.s  r/ivi-u  for  ndv.'inc—rruts  and  it  is  tli"  rtider- 
standinir  it  will  not  be  renewed  at  maturity"  was  held  non-nep^otiable.  "The 
statement  that  it  is  piven  for  advancements  does  not  atTect  the  certainty  of  the 
note,  and  it  could  easily  be  regarded  as  a  mere  memorandum  not  changing 
the  contract  and  therefore  not  mnterial.  F.ut  tlie  remainder  of  the  writing  is 
an  agreement  that  the  note  will  be  renewed  at  maturity.  As  the  bank  is  the 
holder  and  discounted  the  note  when  it  was  given,  it  .  .  .  must  be  con- 
sidered as  having  agreed  to  renew  the  note  at  its  maturity.  This  being  so, 
the  obligation  of  the  note  is  not  an  absolute,  unconditional  contract  to  pay  the 
money  at  maturity.  It  is  a  q\uilified  obligation  to  pay,  with  a  condition  that, 
instead  of  paying,  the  holder  may  give  another  note  in  its  place  which  the 
bank  would  be  bound  to  accept  instead  of  money.  This  being  so,  the  case  comes 
within  the  rule  that  commercial  paper,  to  be  negotiable,  must  be  certain, 
unconditional,  and  not  contingent."     Oreen,  J.,  at  p.  197.  —  C. 

6  It  is  to  be  observed  that  the  Neg.  Inst.  Law  applies  only  to  instruments 
containing  words  of  neffotiability.  An  instrument  not  containing  words  of' 
negotiability  may  be  a  bill  or  note,  but  it  is  not  covered  by  this  Act.  The 
English  Bills  of  Exchange  Act  makes  negfitiable  any  bill  or  note  wliich  does 
not  contain  words  prohibiting  transfer:  but  this  changes  the  law.  Chalmers, 
Bills  of  Exchange  Act   (5th  ed.),  p.  2.5.  — II. 


rv.]  payable  to  order  or  to  bearer.  107 

2.  Payable  to  the  Order  of  a  Specified  Person. 
(n.)   Payee  must  be  certain. 

§27     GOEDOx  c.  la::six(j  state  savings  bank. 

i:.?)  .Mil.  HK.A.N,   143.  —  1903. 

Judgment  for  plaintiff,  find  defendant  brings  error. 
Moore,  J.  —  Thi?  case  wa-;  tried   bv  the  Circuit  judge  without  a 
jury.     At  the  request  of  tlie  defendant,  he  made  a  finding  of  facts, 
which  is  as  follows :  ...^ 

"Monday  morning,  December  9.  1901,  at  about  nine  o'clock,  there 
was  presented  at  the  bank  of  defendant  at  the  city  of  Lansing  for 
payment  the  following  check,  made  upon  the  printed  form  of  check 
supplied  by  defendant  to  its  patrons,  and  signed  by  plaintiff,  viz. : 

"  '  Lan.sing,  Mich.,  190  iS'o. 

"  '  LANSING  STATE  SAVINGS  RANK   OF  LANSING. 

"  '  Pay  to  the  order  of nine  hundred  and  seventy 

dollars   ($970.00). 

"  '  Jno.  R.  Gordon.' 

"  The  check  was  indorsed  by  Charles  P.  Downey,  and  was  presented 
by  an  employee  of  '^\r.  Downey,  and  cash  was  paid  at  the  time  of  pre- 
sentation. The  plaintiff  had  been  a  depositor  at  defendant's  bank  at 
periods  for  three  or  four  years,  and  at  the  openimr  of  the  bank  on  the 
morning  of  December  9,  1901,  his  balance  or  credit  upon  the  books  of 
the  bank  was  $3.40,  but  during  the  day  $2,997. ."iO  was  added  to  plain- 
tiff's credit*..  The  day  defendant  cashed  the  check  plaintiff  was  at  the 
bank,  and  was  informed  that  the  cheek  for  $970  had  been  cashed  by 
payment  to  Mr.  Downey,  and  he  then  notified  defendant  he  would  not 
accept  the  check  as  a  voucher  for^the  money  paid.  December  14,  1901, 
plaintiff  prepared  and  presented  to  dcfenda^it  his  check,  payable  to 
himself,  fur  $970,  being  the  amount  he  claimed  to  then  have  on  deposit 
in  the  bank.  Paymeul  on  this  check  was  refused  by  defendant  upon 
the  ground  that  plaintiff  had  no  funds  in  the  bank."- — 

The  Circuit  judge  rendered  a  judgment  in  favor  of  the  plaintiff 
for  $970  and  interest.     The  ca.se  is  brought  here  by  writ  of  error.  ~ 

Two  questions  are  discussed  by  counsel:  First,  the  effect  of  not 
dating  the  chfck  :  serond.  has  tlie  cheek  a  payee?  Wo  do  not  deem  it  (LtJCu 
noeessar}-  to  discuss  the  first  qurstifTnT  A5~fti-4he  second  fpieslion,  it 
will  be  noticed  the  drawer  of  the  clicck  did  not  name  a  [)avee  therein, 
nor  did  he  leave  a  blank  space  where  the  name  of  a  payee  mitrht  be 
inserted,  nor  did  he  name  an  impersonal  payee.  Tn  the  ease  of  M(  Jnin<<h 
v.  Lytle,  26  Minn.  .336.*  the  court  used  the  following  language:     "  A 


COtJ 


•  Tn  this  riisc  the  instrinnent  sued  on  read  br  follows: 
"  ^-^^^-  St.  Paiti.,  Minn..  Jan.  22.  1870. 

Dnw^on  A   fn  ,  RnnkfTs:     Vn\   to  the  or«ier  of.  on  sight,  two  hundred  dollari, 
in  current  funds, 

E.   LVTLE."  — C, 


lOS  FORM  REQUIRED.  [aRT.    II. 

check  must  name  or  indicate  a  payoc.  Checks  drawn  payable  to  an 
iinjii  rsoiial  payee,  as  lu  '  ]>ills  Tayalik'  "  or  order,  or  to  a  nmnber  (jr 
onler,  are  iield  to  be  payable  to  bearer,  on  the  ground  that  the  use  of 
the  words  'or  order'  imiiiate  an  intention  tliat  the  paper  shall  be 
negotiable;  anct^the  mention  of  an  iiniKisoniil  payee,  rendering  an 
indorsement  by  the  payee  impossible,  indicates  an  intention  that  it 
(shall  be  negotiable  without  J ndorscment  —  that  is,  that  it  shall  1)0 
payable  to  bearer.  So,  when  a  bill  or  note  or  check  is  made  payable 
to  a  blank  or  order,  and  actually  delivered  to  take  efTect  as  com- 
mercial paper,  the  person  to  whom  delivered  may  insert  his  name  in 
the  blank  space  as  payee,  and  a  hn^w  fde  holder  may  then  recover  on 
it.  These  cases  difTer  essentially  from  the  one^aJLhaj".  Tn  the  latter 
case  the  person  to  whom  delivered  is  presumed,  in  favor  of  a  hn-na  fide 
holder,  to  have  had  authority  to  insert  a  name  as  payee.  In  the  former 
case  the  instrument  is,  when  it  passes  from  the  hands  of  the  maker, 
complete,  in  just  the  form  the  parties  intend.  But  in  this  case  there 
is  neither  a  blank  space  for  the  name  of  the  payee,  indicating  authority 
to  insert  the  payee's  name,  nor  is  the  instrument  made  payable  to 
an  impersonal  payee,  indicating  a  fully  completed  instrument.  It  is 
claimed  that  the  words  '  on  sight '  are  such  impersonal  payee.  They 
were  inserted,  however,  for  another  purpose  —  to  fix  the  time  of  pay- 
ment, and  not  to  indi(!ate  the  payee.  It  is  clearly  the  case  of  an  inad- 
vertent failure  to  complete  the  instrument  intended  l)y  the  ])arties. 
The  drawer  undoul)tedly  meant  to  draw  a  check,  but,  having  left  out 
the  payee's  name,  without  inserting  in  lieu  thereof  words  indicating 
the  bearer  as  a  pa3'ee,  it  is  as  fatally  defective  as  it  would  be  if  the 
drawee's  name  were  omitted." 

vSee,  also,  Rush  rf  al.  v.  Haggird.  fiS  Tex.  fi74  ;  Prrwiff  v.  Chapman, 
P,  Ala.  86;  Brown  v.  Gilman  ei  al..  13  Mass.  IfiO;  Rich  at  nl.  v.  8tar- 
hnrl-.  51  Tnd.  87:  Norton,  Bills  Sc  ^Wes  (3d  ed.)  p.  59,  and  notes; 
DnnipJs,  N^eg-  Tnst.  (4th  ed.)   §  102. 

The  case  ditTers  from  the  one  at  bar  in  some  respects,  but  the 
important  part  of  the  decision  is  that  a  payee  is  necessary  to  make  a 
complete  instrument,  and,  even  though  the  maker  of  the  check  may 
have  intended  to  name  a  payee,  if  he  has  not  in  fact  done  so  the  check 
is  incomplete.  In  the  case  at  V)ar  the  failure  to  name  a  payee  was  not 
an  oversight,  if  we  may  judge  from  what  ]\Ir.  Gordon  did,  as  will 
appear  more  in  detail  later. 

Our  attention  has  been  called  to  Crutchly  v.  Mann,  5  Taunton  K. 
529.  In  this  case  the  bill  of  exchange  was  made  payable  to  the  order 
of The  court  found  that  under  the  facts  shown  the  con- 
clusion was  irresistible  that  the  name  was  filled  in  with  the  consent  of 
the  drawer.  The  same  case  was  previously  reported  in  2  Maule  & 
Selw.  no,  where,  as  the  ease  then  stood,  it  appeared  the  bill  of  exchange 
had  been  sent  out,  the  defendant  leaving  a  blank  for  the  name  of  the 


-I 


rv.]  PAYABLE  TO  ORDER  OR  TO  BEAKER.  109 

payee.  One  of  the  juclges  was  of  the  opinion  that  the  defendant,  by 
leaving  the  blank,  undertook  to  be  answerable  for  it,  when  filled  up  in 
the  shape  of  a  bill  of  exchange;  another  judge  was  of  the  opinion  that 
it  was  as  though  the  defendant  had  made  the  bill  paj'able  to  bearer; 
while  the  third  judge  was  of  the  opinion  that  the  issuing  of  the  bill 
in  blank  without  the  name  of  the  payee  was  an  authority  to  a  })ona  fde 
holder  to  insert  the  name. 

In  the  case  of  Harding  v.  The  State,  54  Ind.  359,  a  promissory  note^  Z» 
was  drawn  leaving  a  blank  space  for  the  name  of  the  payee,  and  it  was  '^*>•~^-^ 
held :  "  So  the  name  of  the  payee  may  be  left  blank,  and  this  will 
authorize  any  bona  fide  holder  to  insert  his  own  name."     In  the  case  ^ 
of  Brummel  et  al.  v.  Enders  et  al.,  18  Grat.  873,  promissory  notes,       '^^ 
blank  as  to  the  names  of  the  payees,  had  been  put  in  the  hands  of  an 
agent  to  be  sold  for  the  benefit  of  the  makers.    The  agent  sold  them, 
at  a  greater  discount  than  the  legal  rate  of  interest,  to  purchasers  who 
did  not  know  they  were  sold  for  the  benefit  of  the  makers.     At  the 
time  of  the  sale  the  name  of  the  purchasers  was  inserted,  either  by  the 
purchasers  or  by  the  agent,  in  the  blank  left  for  the  payee.    WTien  the  ■  . 
notes  were  sued,  the  makers  pleaded  usury.    The  court,  following  the        '^ 
cases  already  cited,  held  that  any  bona  fide  holder  of  a  bill  or  note 
which  is  blank  as  to  the  name  of  the  payee  may  insert  his  own  name, 
and  thus  acquire  all  the  rights  of  the  payee. 

It  will  be  observed  that  the  case  at  bar  differs  from  all  of  these  cases. 
As  before  stated,  not  only  did  Mr.  Gordon  fail  to  insert  the  name  of  a 
payee,  or  to  leave  a  blank  where  the  name  of  the  payee  might  be  in- 
serted, but  ho  (lifl  more.  He  drew  a  line  through  the  blank  spare, 
making  it  impossible  for  any  one  else  to  insert  therein  a  name,  indi- 
cating very  clearly  thnt  he  not  only  declined  to  name  a  payee,  but 
intended  to  make  it  impossiblo  for  anv  one  else  to  do  so.  Had  Mr. 
Gordon  issued  a  check  otberwiso  perfect,  but  with  the  blank  space  for 
the  amount  of  the  check  unfilled,  and  delivered  it  to  a  third  person, 
it  would  be  presumed  the  third  person  was  given  authority  to  fill  the 
blank  space.  But  had  he,  instead  of  leaving  the  space  a  blank,  filled 
it  by  drawing  a  line  throuerh  it,  would  any  one  say  the  third  person 
might  then  insert  a  sum  of  money  in  that  space?  If  not,  upon  what 
principle  may  the  name  of  a  payee  he  inserted  when  the  space  was^ 
filled  in  the  same  way,  or  upon  what  theory  may  it  be  presumed  there  V 
wa.s  an  impersonal  payee  when  the  maker  has  not  made  the  check  pay- 
able to  cash,  or  some  other  impersonal  payee.  In  order  to  con-  Y. 
strue  the  check  as  a  complete  instrument,  we  must  read  into  it  an 
intention  not  only  not  expressed  by  its  language,  but  contrary  to  the 
\act  of  the  maker.  The  check,  as  it  appears  to-day,  is  without  any 
Vnyee.  The  record  js^gilenHmrrt^laiioD^itLlvhani  it  was  delivered,  or 
whether  the  person  who  presented  it  nt  the  bank  or  the  person  whose 
indorsemenl  it  bears  was  a  bovn  fide  holder.  f^^ 

I  -^        B  \  Judgment  is  affirmed.  /T*' 


110  FdHM   KKQUIRED.  [aRT.    II. 

Montgomery,  J.,  did  not  sit.  Hooker,  C.  J.,  concurred  with 
Moore,  J. 

Cakpentkr,  J.  T  ivirrot  thai  1  cannot  concur  in  the  opinion  of  my 
Brother  Moore.  I  a^ree  ^ith  liim  that  the  check  in  (juestion  is  not 
governed  by  the  authorities  which  hohl  that,  where  a  blank  is  h^ft  for 
the  insertion  of  the  name  of  a  payee,  the  instrument  is  to  1)0  treated  as 
payable  to  bearer.  1  cannot  agree,  however,  that  the  case  of  Mcintosh 
V.  Lijtle,  26  Minn.  33(5,  is  controlling.  That  case  resembles  this  in 
many  particulars.  There  is,  however,  a  diil'erence,  which,  in  my  judg- 
ment, renders  the  reasoning  of  that  case  inapplicable.  The  fact  that 
the  plaintiff  in  the  case  at  bar  used  the  ordinary  blank,  and  drew  a  line 
through  the  space  intended  for  the  name  of  the  payee,  prevents  our 
assuming,  as  did  the  court  there  —  and  its  decision  was  based  on  this 
assumption  —  that  it  is  "the  case  of  an  inadvertent  failure  to  com- 
plete the  instrument  intended  by  the  parties."  The  instrument  under 
consideration  is  obviously  complete,  in  just  the  form  the  maker  in- 
tended. 

In  my  judgment,  the  authorities  w^hich  hold  a  check  payable  to  the 
order  of  an  impersonal  payee  to  be  valid  and  negotiable  control  this 
case.  I  quote  from  the  case  of  Willets  v.  The  Phoenix  Bank,  2  Duer 
(N.  Y.)  at  page  129 :  "  One  of  the  checks  was  payable  to  the  order  of 
1658,  the  other  three  to  the  order  of  bills  payable;  and,  as  the  required 
order  could  not  in  either  case  possibly  be  given,  the  checks,  unless 
transferable  by  delivery,  were  payable  to  no  one,  and  were  void  upon 
their  face.  The  law  is  well  settled  that  a  draft  payable  to  the  order 
of  a  fictitious  person,  inasmuch  as  a  title  cannot  be  given  by  an  in- 
dorsement, is,  in  judgment  of  law,  payable  to  bearer.  Vere  v.  Lewis, 
3  Term  R.  183 ;  Minet  v.  Gibson,  Id.  481 ;  Gibson  v.  Minet,  1  IT.  Black. 
\'  569,  affirmed  in  the  House  of  Lords.  And  it  seems  to  us  quite  mani- 
fest that  in  principle  these  decisions  embrace  the  present  case.  At  any 
rate,  the  bank,  by  certifying  the  checks  as  good,  is  estopped  from  deny- 
ing tliat  they  were  valid  as  drafts  upon  the  funds  of  the  maker,  and, 
consequently,  were  payable  to  bearer.  The  giving  of  such  a  certificate, 
if  otherwi.se  construed,  would  be  a  positive  fraud.-^ 

Fn  Mechanics'  Bank  v.  Siraiton,  3  Abb.  Dec.  (N.  Y.)  269,  a  check 
payable  to  bills  payable  or  order  was  held  payable  to  bearer,  the  court 
saying:  "By  naming  the  persons  to  whose  order  the  instrument  is 
payable,  the  maker  manifests  his  intention  to  limit  its  negotiability  by 
imposing  the  condition  of  indorsement  upon  its  first  transfer.  But  no 
such  condition  is  indicated  by  the  designation  of  a  fictitious  or  im- 
personal pavee.  for  indorsemf^nt,  under  such  circumstances,  is  mani- 
festly impossible;  and  words  of  negotiability,  when  used  in  connection 
with  such  designations,  are  capable  of  no  reasonable  interpretation, 
except  as  expressive  of  an  intention  that  the  bill  shall  be  negotiable 
without  indorsement  —  i.  p.,  in  the  same  manner  as  if  it  had  been 
made  payable  to  bearer."    


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  Ill 

We  must  decide  that  the  check  in  the  case  at  bar,  like  those  in  the 
cases  cited,  is  either  altogether  void,  or  is  transferable  by  delivery.  I 
submit  that  we  should  follow  those  cases,  and  decide  that  it  is  trans- 
ferable by  delivery.  To  quote  the  language  of  Lord  Ellenborough,  in 
Cruchley  v.  Clarance,  2  Maule  &  Sehv.  90:  "As  the  defendant  has 
chosen  to  send  the  bill  [cheek]  into  the  world  in  this  form,  the  world 
ought  not  to  be  deceived  by  his  acts." 

This  view  of  the  case  compels  me  to  notice  the  fact  that  the  check 
under  consideration  is  not  dated.  According  to  the  weight  of  author- 
ity, this  omission  does  not  invalidate  it.  See  Zane  on  Banks  £  Bank- 
ing, §  152;  Daniels  on  Negotiable  Instruments,  §  1577;  Norton  on 
Bills  tf-  Notes,  p.  405.  note. 

I  think  the  Judgment  of  the  court  below  should  be  reversed,  and  a 
judgment  entered  in  this  court  for  the  defendant. 

Grant,  J.,  concurrd  with  Carpenter,  J.''  ■  1 1^  />    . 

UJJ  ^-^-^  .sr,  /^^ 

§27         \\  SHAW  V.  SMITH.  .    ^ 

'  150  Massachusetts,  166. —  1889.  \ 

Contract  by  the  administrator  de  bonis  non  ol  the  estate  of  Fred- 
erick B.  Bridgman,  against  the  administrator  of  the  estate  of  Eugene 
BridgmanTuTTrm-the  following  instrument: 
.$126.00  Bei.ciiertown,  Jnhj  19,  1873. 

For  value  received,  1  promise  to  pay  F.  B.  Rridfrman's  estate,  or  order,  one 
hundred  and  twenty-six  dollars  on  demand,  with  interest  annually. 

Eugene  Bbidgman. 

Witness,  A.  Bbidoman. 

Writ  dated  March  1.3,  ISSfi.  The  answer  set  up,  among  other 
defenses,  the  statute  of  limitations.  . 

The  judge  ruled  that  (lie  instrument  was  not  a  witnessed  promis- 
sory note,  within  the  meaning  of  the  statute,  and  was  therefore 
barred  by  the  statute  of  limitations,  and  found  for  the  defendant; 
and  the  plaintiff  alleged  exceptions"^ 

C.  Allicn,  J.  After  providing  that  the  ordinary  limitation  of 
actions  of  contract  shall  be  six  years,  it  is  enacted  in  the  Pub.  Sts. 
(c.  107,  §  fi),  that  "none  of  tbe  foregoing  provisions  shall  apply 
to  an  action  brought  upon  a  promissory  note  signed  in  the  presence  of 
an  attesting  witness,  if  the  action  is  brought  by  the  original  payee, 
or  by  his  exeeutor  fir  administrator;  "  and  by  §  7,  sueh  an  aetion  may 
be  brought  within  twenty  years.  The  defendant  contends  that  the 
instniment  sued  on  is  not  a  promissory  note,  for  want  of  a  sulTiciently 
definite  payee,  and  he  cites  two  decisions  which  sustain  him  in  this 

1  It  shotild  be  observed  that  the  judgment  below  was  aflirmed  by  an  evenly 
divided  court.  —  C. 


w 


\12  KOUM    IJKQUIKKI).  I  ART.    II. 

oontpntion.  {Lyon  v.  Marshall,  II  Barb.  241;  Title  v.  Thomas,  30 
Miss.  V22.) 

I^ut  this  would  be  too  strict  an  application  of  tbo  doctrine  that  the 
person  to  whom  a  note  is  payable  must  be  clear] j  expressed.  It  is  an 
equally  general  rule,  that  it  is  sutficient  if  there  is  in  fact  a  payee,  who 
i^sp  designated  that  he  can  be  ascertained.  (Story  on  Notes,  §  3fi.) 
The  illustraflons  of  the  manner  in  which  this  nde  has  been  applied 
are  numerous.  Thus,  written  promises  have  been  held  to  be  valid 
notes  or  bills  of  exchane^e.  though  made  payable  to  bearer,  (Grant  v. 
.i^Yfivfjhav.  3  Burr.  151fi)  ;  or  to  persons  desif]^nated  simply  by  their 
office,  without  namincr  them,  e.  g.  the  treasurer  of  the  First  Parish 
in  H.  or  his  successor  in  said  oilice,  (Buck  v.  Merrick,  8  Allen,  123)  ; 
the  trustees  of  a  particular  church,  (Noxon  v.  Smith,  127  Mass.  485; 
Holmes  v.  Faques,  L.  R.  1  Q.  B.  376)  ;  the  manager  of  the  Provincial 
Bank  of  England,  (Robertson  v.  Sheward.  1  Man.  &  G.  511)  ;  the 
treasurer-general  of  the  Royal  treasury  of  Portugal,  (Soares  v.  Glyn, 
8  Q.  B.  24)  ;  the  executors  of  the  late  W.  B.,  (Hamilton  v.  Aston,  1 
C.  &  K.  079)  ;  the  administrators  of  a  particular  estate,  (Moody  v. 
Thrclkold,  13  Ga.  55;  Adams  v.  King,  16  III.  169)  ;  the  trustees  act- 
ing under  the  will  of  the  late  Mr.  W.  B.,  (Mcgginson  v.  Harper,  2  Cr. 
&  M.  322).  Also  to  the  heirs  of  a  particular  person,  even  though 
that  person  was  living  at  the  time,  (Bacon  v.  Fitch,  1  Root,  181 ; 
Lockwood  V.  Jesnp,  9  Conn.  272  ;  Cox  v.  BeUzhoover,  11  Miss.  142)  ; 
to  a  business  name  adopted  by  the  person  in  interest,  (Bryant  v.  Easi- 
m-an,  7  Cush.  Ill ;  Brown  v.  Parker,  7  Allen  337)  ;  and  to  the  steam- 
boat Juda  and  owners,  (Moore  v.  Anderson,  8  Ind.  18).  So,  a  bill 
which  was  indorsed  to  a  person  who  was  already  deceased  was  held 
valid  in  the  hands  of  his  legal  representatives.  (Murray  v.  East  India 
Co.,  5  B.  &  Aid.  204.)  More  literally  in  point  in  the  present  case, 
and  directly  opposed  to  the  two  decisions  relied  on  by  the  defendant, 
are  Peltier  v.  Bahillion,  (45  Mich.  384),  where  a  written  promise 
payable  to  the  order  of  J.  V.  Mehling  estate  was  held  to  be  a  good 
note,  and  McKinney  v.  Harter,  (7  Blackf.  385),  which  was  substan- 
tiallv  similar.  Sec  also  Storm  v.  Stirling,  (3  El.  &  Bl.  832;  s.  c.  sub. 
nom.  Coirie  v.  Stirling,  6  El.  &  Bl.  333)  ;  Yates  v.  Nash  (8  C.  B.  N.  S. 
581 )  :  where  a  promise  to  the  officer  for  the  time  being  of  a  society 
was  held  too  indefinite,  though  the  general  rule  as  applied  in  other 
cases  was  recognized. 

In  the  case  before  us,  the  promise  was  to  pay  to  F.  B.  Bridgman's 
estate,  or  order.  lie  was  dead,  and  administrators  liad  been  appointed. 
There  could  be  no  doubt  that  the  promise  was  intended  to  be  one  of 
which  the  administrators  could  avail  themselves.  They  were  in  exist- 
ence, and  were  ascertainable.  If  the  administrators  of  his  estate  had 
been  made  the  payees,  without  naming  them,  there  can  be  no  shadow 
of  question  that  it  would  nave  been  sufficient.     It  savors  of  too  much 


IV.]  PAYABLE  TO  OEDEK  OR  TO  BEAEEB.  113 

refinement  to  hold  that  the  instrument  was  not  a  valid  promissory 
note  for  want  of- -a-^suffi©ie»tly-TteftTrife  payee.  ~  ^ 

Tfcs-Js-the  only  qubytlon  presented  by  the  bill  of  exceptions. 

Exceptions  sustained.^ 


(6)   Payee  may  he  (1)  one  not  maker,  drawer  or  drawee. 

[This  is  the  normal  case  and  calls  for  no  special  illustration.] 

(6)   Payee  may  he  (2)  the  drawer  or  the  maher. 

§27.  Commonwealth  v.  Butterick,  100  Mass.  12.— 1868.  "Three 
months  after  date  pay  to  the  order  of  myself  eight  hundred  and  fifty 
dollars,  value  received,  and  charge  the  same  to  the  account  of  your 
obedient  servant,  J.  S^^utterick.  To  J.  S.  Butterick,  Sterling,  Mass." 
fOn  the  face]  :  "  Payable  at  the  Lancaster  N.  Bank,  J.  S.  Butterick." 
[Indorsed]  :  "J.  S.  Butterick."  "J.  M.  Stevenson."  Indictment  for 
forging  the  name  of  J.  M.  Stevenson  to  a  bill  of  exchange. 

Foster,  J.  —  "  Upon  principle,  as  well  as  by  the  authorities  cited 
by  the  attorney-general,  we  entertain  no  doubt  that  an  order  for 
the  payment  of  money,  drawn  by  one  in  his  own  favor  on  himself, 
and  by  himself  accepted  and  indorsed,  may  be  treated  as  a  bill  of 


1  A  promi.ssory  note  payable  "  to  the  order  of  the  estate  of  A.."  is  payable  to 
a  fictitious  payee  where  there  is  no  such  legal  entity  as  the  "  E.state  of  A.,"  and 
if  nppotiat<'d  by  the  maker  is  to  Ije  treated  as  a  note  payable  to  bearer. 
Lewiaohn  v.  Kent  d  Stanley  Co.,  87  Hun  (N.  Y.),  257.  See  No<t.  Inst.  L., 
§  28,  subsec.  3.  —  H.  [See  criticism  of  this  case  by  Mr.  McKeehan  (41  Am. 
Law  Reg.,  N.  S.,  p.  451)  and  bv  Mr.  Crawford  (Neg.  Inst.  Law,  .Id  ed., 
p.  21).  — C] 

fin  Adams  v.  Kinff,  10  III.  HiO,  a  note  payable  "to  tiie  administrators  of 
Abner  Chase,  deceasod,"  was  lield  negotiable  on  demurrer.  "The  general  rule 
in  relation  to  bills  of  exchange'  and  promissory  notes  requires  that  the  person 
to  whom  they  are  made  itayable.  shall  be  specified.  (Chit,  on  I?ills.  15(i). 
But  this  may  l)e  done  without  inserting  the  nam<';  for  that  is  certain,  which 
may  be  rendered  certain;  and  if  the  payee  be  so  certainly  described  or  referred 
to,  as  to  be  easily  aseertained  by  allegnlions  and  proofs,  (he  |)roniise  will  l)e 
valid.  The  declaration  avers  that  plaintiffs  were  'administrators  of  Abner 
Chase,  deceased,'  at  the  time  tlies*-  promises  were  made;  and  tiiat  tliey  were 
made  to  them  [lersonally,  by  that  designation  and  deseriid ion.  These  are 
traver-^able  allegations,  and  must  be  denied  under  oath,  l.y  our  statute  as 
settled  in  Fri/e  v.  Mrnkins  (15  III.  XiU).  .  .  .  They  have  not  sued  as 
administrators,  and  it  was  therefore  unnecessary  to  aver  that  they  were 
administrators  at  the  time  this  action  was  c<unmenced.  The  demurrer  admits 
the  promise  to  b*-  to  defenflants  [H'rs(mallv,  bv  a  descriptive  phraseology." 
ScATK.s,  .1.,  at  p.  170.  —  C.l 

A  check  drawn  payable  to  a  deceased  person  is  void.  U.  H.  v.  First  Nat, 
BK.,  82  Fed.  H.  410.  —  H. 

KBOOT.  IN8TRUMENTB  —  8 


114  FOK.M   UIH^UIUKU.  [AUT.    II. 

exchange,  and  so  described  in  an  indictment.  Such  instniments  are 
^voll  known  in  conmuMvo ;  especially  in  the  case  of  mercantile  iirms 
wliiih  have  branches  in  diU'crcnt  cities,  all  conii)osed  of  the  same 
partners.  Perliaps  snch  a  hill  may  also  be  declared  upon  as  a  promis- 
Bory  note.  But  we  agree  with  ihc  court  of  Queen's  liench  in  the 
latest  English  case  on  the  (|Utstion.  dcciilcd  in  IST)-.',  that  'it  is  not 
unjust  to  presume  tliat  it  was  drawn  in  this  form  for  the  purpose  of 
suing  upon  it  either  as  a  proniissdi-y  imte  (ir  a  bill  of  exchange.' 
{Lloyd  V.  Oliver,  18  Q.  B.  4T1.)  It  is  suJlicient  that  the  instrument 
was  in  the  form  of,  and  purpnrlei]  to  be.  a  bill  of  exchange;  and 
the  defendant  might  be  convicted  of  forging_this  indorsement,  if  all 
the  other  names  were~also  forged  or  were  those  of  fictitious  per- 
sonages." 

(6)   Payee  may  be  (3)   the  drawee. 
§27  WITTE  V.  WILLIAM. 

8  South  Carolina,  290.  —  1876. 

Action  by  indorsee  against  drawer  of  a  bill,  drawn  upon  J.  &  J. 
D.  Kirkpatrick  payable  to  the  order  of  the  said  J.  &  J.  D.  Kirk- 
patrick  and  by  them  indorscd^o^_plaiutitf.  The  trial  court  held  that 
the  instrument  was  not  a  1)111  of  exchange  and  hence  was  open  to  a 
defense  of  fraud.         >- ^ 

Moses,  C.  J.,  (after  disposing  of  another  matter).  The  presiding 
judge,  without  any  exception  to  the  report  of  the  referee  to  the 
character  of  the  instrument  sued  upon,  holds  that  one  of  them  is 
not  a  bill  of  exchange  because  drawn  on  J.  &  J.  D.  Kirkpatrick, 
requesting  the  drawees  to  pay  to  their  own  order  a  certain  sum  of 
money,  while  a  bill  of  exchange  presupposes  a  duty  on  them  to  pay 
to  some  other  than  themselves.  The  only  authority  relied  on  in 
support  of  the  position  is  found  in  Story  on  Bills,  §  35.  With  the 
accustomed  deference  that  is  due  to  so  distinguished  a  jurist  as  the 
late  Mr.  Justice  Story,  we  are  obliged  to  say  that  the  proposition  is 
not  sustainable  on  either  principle  or  authority.  We  are  the  more 
emboldened  to  say  so  because,  In  irlrc-'SSme  section,  the  learned  writer 
thus  expresses  himself :  "  Nay,  the  drawer  may  at  once  become  drawer, 
payee  and  drawee ;  as,  for  example,  if  he  should  draw  a  bill  on  himself, 
payable  to  his  own  order  at  a  particular  place,  naming  no  drawee,  and 
then  should  indorse  it  over,  the  indorsee  might  sue  him  as  acceptor  of 
the  bill  or  as  maker  of  a  promissory  note,  at  his  election."  And  in  sec- 
tion 3G,  he  says,  "the  drawee  and  the  payee'^may- be  also  one  and  the 
same  person."  But  in  Wildes  v.  Savage,  (1  Story,  29),  he  lays  down 
the  rule  in  direct  contradiction  to  his  affirmation  cited  by  the  pre- 


IV.]  PAYABLE  TO  ORDEli  Oli  TO  BEARER.  115 

siding  judge  to  sustain  his  own  conclusion.     We  quote  the  very  words 
of  Justice  Story :  "  The  argument  is  that  the  bill  is  not  a  regular  bill 
of  exchange  because  it  is  drawn  by  Kussell  &  Co.,  payable  to  Wildes  & 
Co.,  who  are  the  drawees  of  the  bill.     *     *     *     An  instrument  is 
not  the  less  a  bill  of  exchange  because  all  the  parties  to  it  in  the 
chaiiictor  of  drawers,  payees  and  drawees,  are  not  different  persons.  Ck\ 
A  l)ill  drawn  liv  a  person  payable  to  his  owU  order  has  always  been      ^v 
deemed  to  bo  a  bill  of  exchange  in  the  commercial  sense  of  the  phrase,      / 
and  it  would  not  cease  to  be  such  a  bill  if  it  should  be  indorsed  by  \\\Q/^*y 
drawer  pnynlilo  to  (he  diMwee.     Now,  such  a  bill  so  indorsed  differs     /^ 
in  nottrmo-  ?iihsT7\ii(i<iliv-  from  the  present  bill.     In  truth,  where  the    ^^, 
bill  is  ncootinbjc.  mid  contains  a  drawer,  a  payee  and  a  drawee,  it  is,     '■.  . 
in  a  commi'iciiil  «cnse.  a  bill  of  exchange,  although  one  or  more  of 
the  parties  sbnll  fill  a  double  character." 

^r.  Chitty,  in  his  work  on  Bills    (page  25),  says:     "  Tt  is  not,  ^ 

however,  necessary  that  there  should  be  three  parties  to  a  bill;  there 
are  sometimes  only  two;  as  where  a  person  draws  on  another  payable 
to  his  own  order;  and,  indeed,  a  bill  will  be  valid  where  there  is  only  y 

one  party  to  it,  for  a  man  may  draw  on  himself  payable  to  his  own 
order.  In  such  cases,  however,  the  instrument  may  be  treated  as,  in 
legal  operation,  a  promissory  note,  and  declared  on  accordingly,  but 
in  practijEeJJ_ia_aisualto  declare  upon  the  instrument  as  if  it  were  fi)  ^^ 
hill  not  admitting  thc~mentity  of  dr.TWf  ■  '  ■■■iwee."  The  ol)jectionl''-*d^ 
th:;s  t;il<cn  In'  lb'"  pu'.l!IM!II^"jlnlge  to-onr  -j  ito'TrHls  cannot  prevail/ 
and,  in  conformity  witli_jiujc--¥4ew9-4+^]:uaiii_eipressedj  the  judgment 
must  leseUftwlf"  nnd  the  r  a-o  rrMiiandcd  to  the  Circuit  Court  for  a 
nev/  trial.     Tt  is  ^'n  iiccn.'diii'Mv  ordered. 


/^ 


»p)(4)l7 


Uj 


lyee  may  he/ {'\)   two  or  more  paye 
§27  COKDOiV  V.  ANDERSON. 

8.3  lowA,  224.—  ISni. 

The  plaintiff,  as  assignee   for  value  and  before  maturity  of  two 
promissory    notes,    exeeiiled    by   defendants,    payable    "  to    Cliarles    R. 
AVhitese!!  rt  nl.  or  order,"  asks  judgment  thereon,  and  the  foreclosure 
of  :i    mortgage  given    by   the   defendants   to   secure   the   same.      The 
def'Tdnnts  answered  that  the  notes  and  mortgage  were  executed   for 
part   of  the   purchase   price   of  certain    real    estate   sold    to   them   liy 
Charles  I?.,   Kmily,  J.   L.,  and    IMiebe  J.,   Whitesell.  and    ff)r  which 
Charles  ]?..  J   T...  and  T^hebc  J.  executed  to  the  defendants  a  warranty  i 
deed   warranting  tlie   title  to  said   property.     The  "answer  alleges   a   ^'^'^vk 
breach  oT  fli'i^  covenants  of  warranty,  and' damages  in  the  sum  of  five  d-^^j 
hundred   dollars,   wbieli   the  defendants  ask  as  an   offset  auainst   the  ^^"^ 
notes.     The  plaintiff  demurred  to  the  answer  on  the  ground  that  the  /"^^  i 


M/-Oi-<  Ol 


u 


116  I'OUM  KEi^UlUKU.  [aKT.    II. 

damages  set  up  were  claims  against  the  j)ayee  of  the  notes,  and  no 
defense  against  the  notes,  in  his  handsriH^~hTrmg-a -purchaser  before 
maturity,  and  without  notice;  and  that  the  answer  sets  up  no  defense 
to  said  notes,  as  against  the  phuntill",  he  being  an  innocent  holder  for 
value  before  maturity.  The  demurrer  was  sustained,  and  the  defend- 
ants electing  to  stand  upon  their  answer,  and  refusing  to  plead  over, 
a  decree  was  entered   for  the  plaintilT,   from   which   the  defendants 

appeal.      " 

Given,  J.     The   discussion   is   addressed   entirely   to   the   question 
whether  the  promissory  notes  sued  upon  are  negotiable.     It  will  be 
observed  that  they  are  promises  "  to  pay  to  Charles  K.  Whitesell  ct  al. 
or  order."     The  discussion  is  as  to  the  construction  to  be  given  to 
the  words  '*  et  al.,"  and  the  effect  thereof.     The  words  as  here  used 
evidently  mean  "and  others/'     Therefore,  the  notes  are  payable  to 
Charles  K.  Whitesell  and  others  or  order,  without  designating  who 
the  others  are.     To  learn  what  qualities  are  essential  to  a  negotiable 
promissory  note,  says  Mr.  Parsons,  in  his  work  on  Notes  and  Bills, 
(page  30),  "^emust  bearjnjaind  the  ^mrpose  of  the  note,  and  of 
the  law  in  relanon~t5'1Tr'''^fhis  is  simply  that  the  note  may  repre- 
sent TnoeeyT-attd-dCall  the  work  of  money  in  business  transactions. 
For  this  purpose  the  first  requisite  —  that  thing  which  includes  all 
the  rest  —  is  certainty."     Certainty,  says  the  author,  as  to  the  person 
who  shall  receive  the  money,  the  person  or  persons  who  are  to  make 
the  payment;  the  amount  to  be  paid,  and  the  time  when  payment  is 
to  be  made.     In  Story  on  Promissory  Notes  (§  35),  it  is  said:     "In 
instruments  designed  for  circulation,  it  is  of  the  highest  importance  to 
know  to  whom  its  obligations  apply,  and  from  whom  a  title  can 
securely  be  derived."    In  Smith  v.  Marland,  (59  Iowa,  645,  649),  it  is 
said:     "The  qua1H^^°  pagpntiqljT;  n   negotiable  promissory  note  are 
that  it  shallj2fl£S£ssj?^ertainty  as  io^^^$2:^iSr;:SDSji)^^,\^^Q_^^^\., 
the, time  of  paymentT  and  the  place  of  payment."     Suc¥ls  the  rule 
uniformly  laid  dmvn  in  all  the  authorities,~TtTnl-it  does  not  require 
further  citations.     This  case  must  not  be  confounded  with  notes  pay- 
able in  the  alternative,  as  "to  A.  or  B. ; "  it  is  a  promise  to  pay  to 
Charles  R.   Whitesell   and  others  jointly.     Neither  must  it  be  con- 
founded with  notes  payable  to  bearer,  without  naming  any  payee,  nor 
with  the  cases  in  which  it  has  been  held  that  whoever  legally  owns 
such  a  note  may  recover  thereon.     These  notes  being  promises  to  pay 
Charles  P.  Whitesell  and   others  jointly,  Whitesell   could   not  alone 
transfer  them  so  as  to  convey  the  interest  of  the  other  payees  any 
more  than  if  they  had  been  named  in  the  notes.     A  note  made  to 
several  persons  not  partners  can  only  be  transferred  by  the  joint  action 
of  all  of  them.      (Eyhinrr  v.  Feickert,  92   111.   305);  "and   neither 
payee  can,  of  course,  indorse  the  names  of  the  others  without  special 
authority."     {Randolph  on  Commercial  Paper,  §  155.) 


IV.]  PAYABLE  TO  OBDEK  OR  TO  BEARER.  117 

The  appellee  contends  that  these  notes  are  in  accord  with  the  pro- 
vision of  section  2085  of  the  Code.     Turning  to  section  2082,  we  see 
that  notes  in  writing,  signed  by  the  person  promising  "  to  pay  to 
another  person  or  his  order  or  bearer,  or  to  bearer  only,  any  sura  of 
money,  are  negotiable  by  indorsement  or  delivery."     It  will  be  observed 
that  the  promise  must  be  to  anotlier  person  or  his  order  or  bearer,  and 
does  not  dispense  with  the  certainty  of  which  we  have  been  speaking 
as  to  who  that  otlier  person  is.     Section  2085  is  as  follows :    "  Instru- 
ments by  which  the  maker  promises  to  pay  a  sum  of  money  in  property 
or  labor,   or  to  pay  or   deliver   property   or  labor,   or  acknowledges 
property  or  labor  or  money  to  be  due  to  another,  are  negotiable  instru- 
ments, with  all  the  incidents  of  negotiability,  whenever  it  is  manifest 
from  their  terms  that  such  was  the  intent  of  the  maker;  but  the  use 
of  the  technical  words^  order'  or  ^bearer'  alone  will  not  manifest 
such  intent."    Here,  againVniFpTrmrisp  must  be  to  another,  and  there  *' 
is  nothing  in  the  section  to  modify  the  rule  requiring  certainty  as  to 
who  that  other  is.    It  is  true,  as  contended,  that  negotiable  instruments  t, 
may  be  transferred  by  indorsement  or  delivery;  but  that  does  not  aid 
us  in  determining  whether  these  particular  instruments  are  negotiable.  ^"Ct^ 
It  is  said  that  Charles  R.  Whitesell  is  tlie  only  payee  nained.     That 
is  true,  but  the  notes  show  that  he  is  not  the  only  person  to  whom      ~V^ 
payment  is  to  be  made.^_J_f  it  be  true,  as  alleged  in  the  answer,  that  /      ;^" 
the  other  persons  named,  together  with  Charles  E.,  are  in  fact  payees  ^^^C^ 
of  the  notes,  then,  surely,  Cluirles  R.  is  not  the  only  payee,  and  could  .  i, 
not  alone  transfer  tUejilp^Authoritios  are  cited  in  support  of  tlie  claim 
that,  if  any  words  are  used  which  indicate  that  the  maker  intended 
that  the  notes  should  be  negotiable,  the  law  will  give  effect  to  that 
intention,  as  against  him.     It  is  a  sufficient  answer  to  sny  that,  in 
view  of  the  law  wlijclwr^^uircs^  certainty  in  negotiable  instruments  as    ( 
to  who  the  payee  is,  the  fact  that  it  is  left  uncertain,  rather  indicate^.     '  ^"^ 
an  intention  that  the  instrument  should  not  be  negotiable.  m^  ^ 

The  appellee  relies  upon  Moore  v.  Andrrfton,  8  Ind.  18.    That  notey    c,  t 
was  payable  to  steamboat  .Tuda  and  owners,  and  the  court  lield   that    X],. 
the  word  "owners,"  as  it  occnrred  in  the  note,  suflicientlv  indicated  a'      J^'' 
person,  within  the  intent  of  the  law.     It  is  a  familiar  rule  that,  when 
a  persftn   is  designated  as  payee,  and  a  question  arises  as  to  who  of 
several  persons  bearing  the  same  designation  was  meant,  evidence  is 
admissible  to  show  which  is  tlu!  payee.      (Parsons  on  Mercantile  Law, 
.S8.)      Under  this  rule  it  was  admissible  to  show  who  was  the  owner 
of  the  steamboat,  and  hence  the  designation  was  sufficient.    In  (iraut  v. 
Vaiighan  (3  Burrows,  15ir>),  it  is  held  that  a  note  payable  "to  ship 
Fortune  or  bearer  is  negotiable,  under  the  rule  that,  if  the  name  of 
payee  be  not  the  name  of  a  person,  as  if  it  he  the  name  of  a  ship,  the 
instrument  is  payable  to  bearer."     (See,  also,  Parsons  on  Mercantile 
Law.  80.)     In  eaeh  of  these  eases  a  person  was  designated  as  payee  — 
in  the  one  as  the  owner  of  the  steamboat  Juda ;  and  in  the  other  as 


118  KOKM   UKl^LIURD.  [aKT.    II. 

boarcr.  Those  notes  are  payable  to  (Jba£les  K.  Wliilesell  and  others  or 
onler.  The  others  are  not  designated  by  name  or  otlierwise,  and,  tliere- 
fore,  it  is  uneertaiii  "as  to  the  persons  who  shall  receive  the  money," 
uneertain  "  to  wluuu  its  ohlii^atiims  apply,  and  from  whom  a  title  can 
seenrely  be  deriveil." 

We  think  the  Distriet  Court  erred  in  sustaining  the  demurrer  to 
the  answer.  y     ^^ 

"^  Reversed. 

(b)   Pa)/ee  may  he  (5)  one  or  some  of  several  payees. 

§27  MUSSELMAN  v.  OAKES. 

19  Illinois,  81.—  1857. 

Demurrer  to  declaration  overruled,  and  Judgment  for  plaintiff. 

Caton,  C.  J.  The  declaration  in  this  case  was  upon  an  instru- 
ment purporting  to  be  a  promissory  note,  payable  to  "  Olive  Fletcher 
or  K.  H.  Oakes,"  in  an  action  brought  by  Oakes.  The  declaration  was 
demurred  to,  tiie  demurrer  overruled,  and  judgment  rendered  in  favor 
of  the  plaintiil'  below.  This  was  erroneous.  The  instrument  sued  on 
was  ])ayabk'  in  the  alternative  to  one  or  two  persons,  and  for  that 
reason  is  not  a  promissory  note,  and  could  not  be_su£iL-o«"'a^'^ucli. 
It  is  indispensable  to  a  ]iromissory  note  that  it  not  only  must  be  for  a 
sum  certain,  and  payable  at  a  certain  time,  and  without  condition, 
but  it  must  also  be  payable  to  a  certain  person,  cither  specified  on 
the  face  of  the  note,  or  wlio  may  !>(>  certainly  idcMitified  by  extrinsic 
proof,  not  inconsistent  with  the  face  of  the  note,  iis  assignee  or  bearer. 
Here  the  promise  was  to  pay  Fletcher  or  Oalces,  but  which,  is  uncer- 
tain;  which  of  them  had  Ibe  right  to  receive  the  pay  is  not  specincd. 
and  the  legal  right  to  the  money  is  not  vested  in  either.  But  this 
is  a  question  of  law  too  well  settled  by  the  books  to  require  disqussion, 
and  I  will  only  refer  to  Story  on  Prom.  Notes  (p.  40).  The  peculiarity 
of  the  note  aued  on  was  no  doubt  overlooked  by  the  Circuit  Court. 

^   ViV-"  "  \  Judgment  reversed^ 

e  judgT]\ent  must  be  reversed.  ■'    "'---■ — '" 


2  "  Mr.  Crawford  illustrates  the  meaning  of  tliis  subdivision  by  the  follow- 
ing example:  'A  draft  payable  to  A,  H,  and  C,  or  eitber  of  tlieni  or  any  two 
of  them.'  Crawford,  p.  20.  If  this  illustration  correctly  interprets  the  mean- 
ing of  this  subdivision  —  and  Mr.  Crawford's  construction  is  entitled  to  great 
consideration  —  the  existing  law  has  been  changed  because  the  statute  recog- 
nizes an  instrument  payable  to  two  payees  in  tlie  alternative  as  negotiable 
whereas,  under  the  law  merchant  an  instrument  payable  to  two  persons  in  the 
alternative  is  not- negotiable.  Musselman  v.  Oakes,  19  III.  81;  Carpenter  v. 
Farnsuorth,  lOfi  Mass.  'yCA  :  Walrud  v.  I'etrie,  4  Wend.  575;  lilanch<nhatjrn 
V.  RlundelU  2  P..  &  Aid.  417.  But  see  Watson  v.  Evans,  1  Hurl.  &  Colt.  G6.3; 
Bpauldinq  v.  Evans,  2  McLean,  139,  Fed.  Cas.  1.3. 21G;  Record  v.  Chisum,  25 
Tex.  348."     Bunker's  Neg.  Inst.  Law,  p.  48.  —  C. 


iv.j  Payable  to  okder  or  To  beareb.  119 

§  27        WATSON,  SOUTHERN  AND  MAYER  v.  EVANS. 

1     HUKLSTO.NE    &    COLTMAN     (EXCH.)     G62. —  1863. 

Declaration.  That  the  defendant  and  William  Patrick  Evans  and 
George  Thomas  Evans,  on,  etc.,  made  their  joint  and  several  promis- 
sory note  in  the  words,  letters,  and  figures,  following,  and  as  follows, 
that  is  to  say :  — 

£100.  Leamington,  Dec.  2d,  1858. 

On  demand,  we  jointly  and  severally  promise  to  pay  Messrs.  Joseph  Watson, 
Thomas  Southern,  and  Daniel  Mayer,  or  to  their  order,  or  the  major  part  of 
tliem,  the  sum  of  one  hundred  pounds,  with  lawful  interest,  for  value  received. 

George  Evans. 

William   Patrick  Evans. 

George  Thomas  Evans.  - 

That  the  said  makers,  by  the  said  names  following  in  the  said  note 
contained,  that  is  to  say,  Joseph  Watson,  Thomas  Southern,  and 
Daniel  Mayer,  meant  the  plaintiflFs;  but  the  defendant  and  the  said 
other  makers  did  not,  nor  did  either  of  them,  pay  the  said  note. 

Demurrer,  and  joinder  therein." 

Hayes  Serjt.  (C.  E.  Coleridge  with  him),  in  support  of  the  demurrer. 
The  document  is  void  for  uncertainty.  Is  the  money  to  be  paid  to  the 
three  payees,  or  any  two  of  them?  Again,  do  the  words  "  or  the  major 
part  of  them  "  refer  to  the  payment  or  the  indorsement,  or  to  both? 
[Pollock,  C.  B.  —  Is  it  not  a  promise  to  pay  to  the  three  persons  or 
their  order,  or  the  order  of  the  nuijor  part  of  them?]  Suppose  two 
of  them  said  "  pay  to  us ; "  and  the  other  said  "  pay  all  three."  If  two 
alone  sued,  could  the  maker  plead  in  abatement  the  non-joinder  of  the 
third?  Assuming  that  the  promise  is  to  pay  all  three  provided  they 
agree,  if  not  to  pay  any  two  of  them,  suppose  they  all  disagree,  and 
each  says,  "Do  not  pay  to  the  other."  [Martin,  B.  —  Payment  to 
one  of  several  joint  creditors  is  a  payment  to  all.]  The  general  rule 
of  law  is  qualified  by  the  express  words  of  the  contract.  In  Bayley  on 
Bills,  (p.  34,  5th  ed.),  it  is  laid  down  that  "uncertainty  as  to  the 
person  to  whom  the  payment  shall  he  made  will  prevent  the  document 
from  being  a  bill  or  note;  as  making  it  payable  to  A.  or  B."  The 
authority  there  cited  is  Hhnrkevli(u/eri  v.  BInndell,  (2  B.  &  Aid.  11?). 
where  Abbott,  C).  J.,  and  Holroyd,  J.,  agreed  that  such  a  document 
rannot  be  a  promissory  note  within  the  statute  3  and  4  Anne,  c.  9, 
the  promise  being  conditional,  to  pay  A.  only  if  the  maker  bad  not 
paid  li.  [Martin.  B. —  Here  the  three  payers  are  suing,  which  dis- 
tinguishes the  case  from  Blnnckenhngen  v.  BJiindell.]  Who  is  to  in- 
dorse the  notes,  the  three  or  any  two  of  them?  [Martin,  B.  —  The 
words  "or  to  their  order,  or  the  major  part  of  them,"  mean  the  order 
of  all  three  or  of  any  two  of  Ihcni.  Tbt!  words  "or  the  major  part  of 
them,"  must  refer  to  the  last  antecedent  order.    Wilue,  B.  —  It  is  "  I 


120  i-'OUAl  liDi^UlKIiD.  [aUT.    II. 

pioiuiso  to  pay  to  all  tluvo  or  tluir  ordor,  but  I  allow  any  two  to  sign 
for  llicni  all. "J  U'  the  indorsement  may  be  made  by  the  three,  or  any 
two  of  them,  Blanckenhagcn  v.  Blundell  is  an  autliorily  that  the  docu- 
ment is  not  a  promissory  note  within  the  statute  o  and  4  Anne,  c.  I). 
[Maktin,  B.  —  There  cannot  be  any  doubt  in  this  case,  as  the  three 
payees  are  sning.  In  the  Author's  Life,  prefixed  to  the  9th  edition 
of  Xoy's  Maxims  by  Bythewood,  p.  viii.,  the  following  anecdote  is 
related :  "  Three  glaziers  at  a  fair  left  their  money  with  their  hostess 
while  they  went  to  market ;  one  of  them  returned,  received  the  money 
and  absconded  ;  the  other  two  sued  the  woman  for  delivering  what  she 
received  from  the  three  before  they  all  came  to  demand  it  together.  The 
cause  was  clearly  against  the  woman,  and  judgment  was  ready  to  be 
pronounced  when  Mr.  Noy,  not  being  employed  in  the  cause,  desired 
the  woman  to  give  him  a  fee,  as  he  could  not  plead  in  her  behalf 
unless  he  was  employed  ;  and,  having  received  it,  he  moved  in  arrest 
of  judgment  that  he  was  retained  by  the  defendant,  and  that  the  case 
was  this:  the  defendant  had  received  the  money  from  the  three  to- 
gether, and  was  not  to  deliver  it  until  the  same  three  demanded  it;  that 
the  money  was  ready  to  be  paid  whenever  the  three  should  demand  it 
together.    This  motion  altered  the  whole  proceedings."] 

Mellish   appeared   for   the   plaintiffs   but   was   not  called    upon   to 
argue. 

Per  Curiam.     There  must  be  judgment  for  the  plaintiffs. 

Judgment  for  the  plaintiffs. 


-^^1^_^ /Vll-^ 


§27  NoxoN  V.  Smith,  127  Mass.  485.  —  1S79.  Soule,  J.  The 
instrument  sued  on  is  properly  described  as  a  promissory  note.  Though 
it  purports  to  be  payable  to  "the  trustees  of  the  Methodist  Episcopal 
Church  or_their_ collector,"  the  payee  is  not  therefore  uncertain,  and 
the  instrument  does  not  come  within  the  class  of  cases  in  which  instru- 
ments otherwise  in  the  form  of  promissory  notes  are  held  not  to  be 
promissory  notes  because  made  payable  in  the  alternative  to  eitlier  of 
two  persons  named.  {Osgood  v.  Pearsons,  4  liraypfSS.)  That  rule 
applies  to  cases  in  which,  so  far  as  the  instrument  shows,  the  two 
persons  named  as  alternative  payees  are  strangers  to  each  other.  It 
does  not  apply  when  the  instrument  discloses  the  fact  that  one  of  the 
two  persons  named  is  named  as  agent  for  the  other  to  receive  the 
money.  (Holmes  v.  Jarjues,  L.  R.  1  Q.  B.  376.)  In  the  case  at  bar, 
it  is  evident  that  "  their  collector  "  is  merely  a  person  authorized  by 
the  payee  to  receive  the  money  in  its  behalf.' 

3  A  note  payablf  "  to  M.  K.  or  heirs."  is  sufficiently  definite  as  to  the  payee. 
Knight  v.  Jones.  21  Mich.  ICl.  But  not  one  payable  "  to  C.  W.  et  al."  Gordon 
V.  Anderson,  83  la.  224;  ante,  p.  115.  — H. 


IV.]  PAYABLE  TO  ORDEB  OB  TO  BEABEB.  121 

(6)  Payee  may  he  (6)  the  holder  of  an  office  for  the  time  being. 

§  27  DAVIS  V.  GAER. 

6  New  Yobk,  124. —  1851. 

Action  on  promissory  notes  payable  to  "  Joseph  M.  White,  Charles 
A.  Davis,  and  Louis  McLane,  trustees  of  the  Apalachicola  Land  Com- 
pany, or  their  successors  in  office,  or  order."    Judgment  for  plaintiffs. 

Gardiner,  J.  The  first" Ob jPCtio'iT'presented  by  the  pleadings  on 
the  part  of  the  defendants  is,  that  the  written  instruments  set  forth 
in  the  declaration  are  payable  to  the  tr:u^ tees  therein  named  or  their 
successoi;s_in  office,  jjid-that  the  uncertainty  as  lo' which  of  the  two 
the  payment  is  to  be  made  invalidates  them  as  promissory  notes,  ^ 
though  not  as  agreements.  -  ^    .  ^^^^^^     ,  ,^^     ^^^        >- 

1  am  unable  to  perceive  any  sucn  contingency  m  the  contr^ts.  tLv,^ 
If  the  plaintiffs  are  to  be  considered  as  the  representatives  of  a  cor- 
poration, and  the  suit  instituted  for  the  benefit  of  their  principal, 
the  payment  must  be  made  to  them,  as  trusees.  ^Ji.  their  term  ol 
office  expired  before  the  commencement  of  the  suit,  then,  and  jn  t]}gj 
event_on|yj^woula  a  right  'oT'actTorfeniirr  fo  flicir  successors.     Therl 


f 


never  was  a  tTiiie,  cuiise(|uel'lU.V,   wl'iyil  the  maker  of  the  notes  could  i^j^ 
discharge  himself  by  a  payment  made  at  his  election,  to  these  plaintiffs,  i  / 
or  their  successors.  ^-\ 

The  term  successors,  implies  one  who  takes  a  place  that  anothebiA>-^<^ 
has  left. 

It  might  be  as  reasonably  contended,  that  the  payee  was  contin- 
gent, where  a  note  was  made  payable  to  A.  or  his  executors,  or 
administrators,  etc. 

It  has  been  determined  that  an  undertaking  to  pay  C.  or  D.,  or  his 
or  tbeir  order,  is  not  a  promissory  note,  because  payable  to  either  of 
the  payees,  and  tliat  only  on  the  contingency  of  its  not  being  paid  to 
the  other.  {Story  on  Prom.  Notes,  §  37;  4  Wend.  575;  2  B.  &  Aid. 
417.)  The  distinction  between  those  cases  (even  if  the  floctrinc 
thereby  established  is  sound)  iind  tbo  present,  is,  that  the  contingency 
in  them  was  apparent  on  tlio  face  of  the  instrument.  Here  there  wasj 
no  uncertainty  in  (be  contract,  when  the  notes  were  made,  or  became  Vj 
payable;  the  ambiguity,  if  any,  would  arise  from  a  change  of  trustees 
after  the  note  took  f^ocf  as  a  perfected  contract.  '       ~  " 

Secondly.  If  fbe  plaintiffs  were  not  tbe  representatives  of  a  cor- 
poration, as  the  defendant  insists,  they  could  sustain  the  action  in 
their  own  name;  the  word  "trustees,"  would  be  merely  a  designa- 
tion of  the  pprsons,  and  tlie  pliraso  "their  successors,"  may  be 
rejected  as  surplu.sage.  It  has  been  derided  that  a  note  pavable  to  a 
trustee,  or  agent,  or  executor,  will  maintain  a  siiit  in  the  name  of  the 
person  mentioned.  (.3  Harrington,  H8,') ;  .3  Mass.  K.  103;  2  Hng. 
[Ark.]  R.  .382.     And  see  9  John.  334  ;  8  Cowen,  31,  and  cases  there 


122  FOUiM  KKliUlKKl).  [aKT.    11. 

cited.  1  think,  theroforo,  that  tlii'so  contracts  are  promissory  notes, 
and  eonsciiucntly  iicg(>tial)lc. 

A  majority  of  the  court  concurred  in  tlie  foregoing  opinion. 

Foot.  J.,  dissented,  on  the  ground  that  the  instruments  declared 
upon  were  not  promissory  notes,  there  ))eing  a  contingency  as  to  tlic 
persons  to  whom  payment  was  to  he  made. 


f  WvJ">^- 


Judgment  affirmed. 


3.  Payable  to  Bearer. 

(a)   Payable  to  person  named  or  bearer. 
§  28  PUTNAM  V.  CRYMES. 

1  McMiTLLAN's  Law  (S.  C.)  9.  —  1840. 

The  plaintiff  in  this  case  was  not  the  original  payee,  but  held  the 
note  by  transfejL-to-4i-imaelf-by  delivery.  The  note  was  made  payable 
to  ^fancil  Owens  or  holder ;  the  plaintiff  declared  as  holder,  and  defend- 
ants demurred  on  the  ground  that  the  holder  could  not  sue  without  a 
written  assignment.  I  regarded  holder  as  synonymous  with  bearer 
and  overruled  the  demurrer.  Appeal  by  defendants  on  the  ground 
that  the  demurrer  should  have  been  sustained. 

Curia,  per  Bittlkr,  J.  The  word  bonror  is  usually  inserted  in  a 
negotiable--n.ote,  transferable  by  delivery.  Rut  without  it,  the  maker 
of  a  note  may  make  it  transferable  by  delivery,  either  Ijy  circumlo- 
cution, or  using  a  word  of  precisely  the  same  import.  As  if  a  note 
were  made  payable  to  A.  B.  or  to  any  one  to  whom  he  may  deliver  it; 
or  to  any  one  who  might  hold  the  same  by  delivery.  In  both  cases 
the  bearer  would  be  sufficiently  meant  and  designated,  although  the 
word  was  not  used.  If  it  was  the  intention  of  the  maker  to  make  it 
payable  to  any  one  who  acquires  possession  by  delivery,  he  has  no 
right  to  complain  when  it  is  presented  to  him  without  a  written 
transfer.  Holder  is  a  word  of  the  same  import  as  bearer,  and  both 
may  acquire  a  title  by  lawful  delivery,  according  to  the  terms  of 
the  contract.  All  the  law  requires  is,  that  the  paper  must  have 
negotiable  words  on  its  face,  showing  it  to  be  the  intention  to  give 
it  a  transferable  quality  by  delivery;  otherwise  the  instruments-must 
be  transferred  by:  written  indorsement,  if  payable  to  order;  or  sued 
on  by  the  original  payee,  if  there  are  no  negotiable  words  at  all. 
The  decision  below  is  affirmed ;  the  whole  court  concurring.* 


*  A  bill  or  notp  payablp  "  to  bearpr."  or  "  to  A.  or  bparer,"  is  nppotiable  by 
delivpry  without  inriorsempnt.  Pierce  v.  Crafts,  12  Johns.  (N.  Y. )  90;  Trues- 
dell  V.  Thompson,  12  Met.  (Mass.)  565.    See  Neg.  Inst.  L.,  §  60,  post.  —  iL 


-It 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  123 

(h)  Payable  to  order  of  fctitiou-s  person. 

§  28  AEMSTEONG  v.  NATIONAL  BANK. 

46  Ohio  State,  512.  —  1889. 

Action  by  plaintiff  to  recover  $450  due  her  on  a  deposit.  She 
had  drawn  a  clieck  on  defendant  bank  payable  to  "  William  Brown," 
who  was  represented  to  her  by  one  Grip^p°  fp  t^"  ■»"  ontita-V- pr.rgnVi^ 
and  had  delivered  it  to  Grimes  who  procured  it  by  fraud.  Grimes 
indorsed  on  it  the  name  "  \\  illiam  Jirown  "  and  defendant,  after  pru- 
dent inquiry  as  to  Grimes'  identity,  paid  it.  "  William  Brown  "  was 
a  fictitious  person.  Judgment  at  Common  Pleas  for  plaintiff; 
reversed  at  Circuit.     Plaintiff  appeals  from  judgment  of  reversal.-v.  , 

MiNSHALL,  C.  J.  This  case  is  in  its  general  features  analogous 
to  that  of  Dodge  v.  The  Natiotial  Exchange  Bank,  (20  Ohio  St.  234), 
and  should,  we  think,  be  ruled  by  it.     *     *     * 

The  fact  that  the  check  was  made  payable  to  a  person  that  had 
no  existence  does  not  alter  the  rights  of  the  plaintiff  as  against  the 

bank,   for  she  suppngod    that   Brp^vn    "H'l  ll    {■"■^'■■'     '""^    UKt!<nAnA  y^ 

that   paVlIit'llt   slnTuld   be  made   to  such   person.     The  doctrine   that  ^^^^ 
tr^Trk)  g  c.hfitih  nr  bill  iiiiidc  jj&yabic  to  a  fictitious  person  as  one  made''  ^^kt, 
payable   to   bearer,   and    so   negotiable   without   indorsement,   applied    j 
only  where  it  is  so  drawn  Avith  the  knowledge  of  the  parties.     {Tat-  ' 

/ocA-  V.  Ilarrxsi.  3  T.  R.  174,  180;   Vere  v.  Lewis,  Id.  182;  Mxnet  v.  >l^ 
Gibson,  Id.   481  ;  s.   c,  in  the  House  of  T^ords  on  error,   Gibson  v.   ,■     ^ 
Minet,  1  H.  Bl.  509;  Collis  v.  I'Jmelt,  1  H.  Bl.  313;  Gibson  v.  Ilnnier,/^^ 
2  n.  Bl.  187.)     The  doctrine  that  a  bill  payable  to  a  fictitious  person 
or  order,  is  equivalent  to  one  payable  to  bearer,  had  its  origin   in  ''—t^ 
thes(!  cases,   which   all   grew  out  of  bills  drawn   by   Levisay  <fe   Co.,       /^ 
bankrupts,  payable  to  a  fictitious  person  or  order,  and  were  accepted 
by  (iil)son  &  Co.;  but  it  will  be  noticed  that  the  holding  in  each  case 
was  upon  the  express  ground,  that  the  acceptor  knew  at  the  time  of 
his  acceptance  that  the  bill  was  payable  to  a  fictitious  person;  and  but 
for  this  fact  the  fictitious  indorsement  would  have  been  held   to  be 
a  forgery  —  some  of  the  judges  exj)ressing  a  doubt  whether  it   was 
not  so,  although  its  character  was  known  to  the  acceptor.     (3  T.  R. 
181.)     These  cases  will  be  found  reviewed  in  a  note  to  Bennett  v. 
Fnrrrll  (1   Campb.  130).    J^  was  held  in  Ibis  case  that  a  bill  made 
payal)le  <o  a  fietitious  person  or  ordnr,  is  neither  payaTtle  fb~The  order  "-Vv. 
nf  the^raWn   im   lir-aii'l',  Mil  ^y{||Yip1/^nty.  ■gAtrr     But  in  an  adden-0 
dum  to  the  case   (at  page   i 80c  of  the  report).   Lord    Ellenborough/^^' 
observeB   that    this   holding   must    be    taken    with    this    qualification: 
"  unless  it  can  be  shown   that  the  rircumstanco  of  the  pavee  being  a  **^ 

fictitious   person    was   known    to   the   afcoptor."      The    rule   with    this   _   _ 
qualification  is  stated  as  the  law  in  Bylcs  on  Bills,  73.     fSee  also,  to     ^^ 
the  same  effect,  Forbes  v.  Espy,  21  Ohio  St.  483;  1  Rand.  Com.  Paper, 


124  FORM  KRQUIRED.  [ART.    II. 

§§  162.  163.  164;  3  Parsons  N.  &  B.  501,  and  note  a.)  Mr.  Daniel, 
in  his  work  tin  Xoij.  Inst.  (sec.  139),  slatos  the  rule  to  be  general, 
but,  as  shown  by  Mr.  l^andolph,  the  cases  do  not  bear  out  the  text. 
(1  Rand.  Com.  Paper,  §  164,  note  4.)  And  upon  principle  we  do 
not  see  how  the  law  could  be  held  to  be  otherwise.  For  if  the  fictitious 
character  of  the  payee  is  unknown  to  the  draw'cr,  whoever  indorses 
the  paper  in  that  name  with  intent  to  defraud,  perpetrates  a  forjiery 
and  the  indorsement  is  void,  a  general  intent  to  defraud  being  sivffi- 
cient  to  constitute  the  offense^      /  ...  '      p.^wL^^(-^  '  "^   Ch-^~.  i/lL. 

(The  court   here  discusses  ani^   distingnishels  Lane  v.   Kreklei  22    ^/^ 
Iowa.  399 ;  Phillips  v.  Im  Thurn,  18  0.  B.^N,  L  694;  Rogers  v.  Ware, 
2  Neb.  29;  Ort  v.  Fowler,  31  ICans.  478.] 

If  the  drawer  of  a  check,  acting  in  good  faith,  makes  it  payable 
to  a  certain  person  or  order,  supposing  there  is  such  a  person,  when 
in  fact  there  is  none,  no  good  reason  can  be  perceived  why  the 
banker  should  be  excused  if  he  pay  the  check  to  a  fraudulent  holder 
upon  any  less  precautions,  than  iOt^^ad  been  made  payable  to  a 
real  person  j^  inothgr  words,  why  he  should  not  be  required  to  use 
thc^same  precautionsin  the  one  case  as  in  the  other;  that  is,  deter- 
mine wjiether  the  indorsement  is  a  genuine  one  or  not.  The  fact 
that  the  payee  is  a  non-existing  person  does  not  increase  the  liability 
of  the  bank  to  be  deceived  by  the  indorsement.  The  fact  is  that 
an  ordinarily  prudent  banker  would  be  less  liable  to  be  deceived 
into  a  mistaken  payment  by  a  fictitious  indorsement  such  as  this 
was.  than  by  a  simple  forgery.^  The  determination  of  the  character 
of  any  indorsement  involves  the  ascertainment  of  two  things:  (1) 
the  identity  of  the  indorser;  and  (2)  the  genuineness  of  his  signa- 
ture; and  no  (iircfiil  hanker  would  pay  upon  the  faith  of  the  genuine- 
ness of  any  name,  until  he  had  fully  satisfied  himself  both  as  to  the 
identity  of  the  person  and  the  genuineness  of  his  signature.  Now,  a 
careful  banker  may  be  deceived  as  to  the  signature  of  a  person  with 
whose  identity  he  may  be  familiar ;  but  he  is  less  liable  to  be  deceived 
where  both  the  signature  and  the  person  whose  signature  it  purports 
to  be,  are  unknow^n  to  him.  In  making  the  inquiry  required  in  such 
case  to  warrant  him  in  acting,  he  will  either  learn  that  there  is  no 
such  person,  or  that  no  credible  information  can  be  obtained  as  to 
his  existence,  which,  with  an  ordinarily  prudent  banker,  Mould  be  the 
same  as  actual  knowledge  that  there  is  no  such  person,  and  he  would 
withhold  payment,  as  he  would  have  the  right  to  do  in  such  case. 
But  still,  if  he  should  be  deceived  as  to  the  existence  of  the  person, 
he  would,  nevertheless,  require  to  be  satisfied  as  to  the  genuineness 
of  the  signaturp.  Of  this,  however,  he  could  not  be  through  his  skill 
in  such  matters  and  on  which  bankers  ordinarily  rely,  for  he  would  be 


5  Fnllowpfl  on  this  point  by  Jordan  Marsh  Co.  v.  Jfational  Shawmut  Bank, 
201  Mass.  397,  409.  —  C. 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEArER.  125 

without  any  standard  of  comparison,  and  he  could  have  no  knowledge 
of   the   handwriting   of   the   supposed   person,   for   there   is   no   such 
person.    So  tliat,  if  lie  acts  at  all,  it  must  be  upon  the  confidence  he 
may  place  in  the  knowledge  of  some  other  person,  and  if  he  choose 
to  act  upon  this,  and  make,  instead  of  withholding,  payment,  he  acts 
at  his  peril  and  must  sustain  whatever  loss  may  ensue.     It  is  a  saying 
frequently   repeated   in   "  The   Doctor  and   Student,"   that  "  he  whb  ^^  ^ 
lov£th  peril_shall  perish^in  it,"    In  other  words,  where  a  person  has  a         / 
safe  way  andaGandonFTt  for  one  of  uncertainty,  he  can  blame  no  one     — _ 
but  himself  if  he  meets  with  misfortune. 

Judgment.~xiLlhc.  Circuit  Court  reyersed,  and  that  of  the  Common     /    > 
Pleas  affirmed.®   ^T,     T  /^         y  t  .        ^'• 

^."^.^     •/  '■"^^ '"■'**-*- 
§  28     BAXK  OF  ENGLAND  v.  VAGLIANO  BROTHERS. 
L.  R.  1891,  Appeal  Cases  (IL  L.)    107. 

Plaintiffs  carried  on  a  large  business  in  London  as  foreign  bankers. 
Vu£ina^Jj^ker  in  Odessa,  Russia,  had  had  for  twenty-nine  years 
consta-rtT  l)u^ixm*>t^-wlaiiou.s  witli^aintifFs  and  his  bills  on  tjlaintiffs 
were  each  year  numerous  and  in  the  aggregate  for  very  large  amounts. 
On  several  occasions  Vucina  had  drawn  them  to  the  order  of  C.  '^C  y 
Petrjdi  &  Co.,  a  firm  doing  business  in  Constantinople.  _     ^i-_      ^  ^^^ 

Glyka  was  one  of  plaintiffs'  clerks  and  had  charge  of  the  cor-'^  k^^ 
respondence  with  persons  residing  in  Russia.  He  forged  the  signature 
of  Xucina^^obills  purporting  to  be  drawn  on  the  plaintiffs  by  Vucina 
to  the  orderlTf  6.-  Petridi  &  Co.,  and  resembling  those  which  Vucina 
was  in  the  habit  of  drawing  on  the  plaintiffs,  and  placed  anionic  the 
plaintiffs'  correspondence  counterfeit  letters  of  advice  with  respect  to 
tbese  hills  resembling  those  ordinarily  received  from  A^ueinn  By 
these  means  Glyka  procured  the  genuine  acceptances  of  the  plaintiffs 
to  the  bills  whic-h  he  had  forpd.  He  then  forged  on  the  bills  indorse- 
ments purporting  tTTTTe  tliose  of  C.  Petridi  k  Co.,  the  payees  named 
therein,  and  was  paid  by  the  defendants  across  the  counter  the 
amounts  for  which  the  bills  were  drawn__^         f^ ^^     *i    CL^  .C^^      J. 

Section  7,  subsec.  3,  of  the  English  Bills  of  E.xcha'nge  A&  reatis 

— : .^ 

"Accord:  f^htpman  v.  Hank,  120  N.  Y.  318.     See  discussion  of  this  case  in      / 
Phillips   V.    Mrnanlilr   \at.    Rk.,    140   N.    Y.    55fi.   post,    p.    I35.        In   Jordan/'     / 
Marsh  Co.  v.  Nat.  Shawmut  Rk..  201   Mnns.  .•JPT.  it  is  said  tlu.t    "IIip  case  of  ^X_^' 
Shipmnn  v.  Rauk,   120  N.  Y.  318.   in  almost   ifientical    in   its   jpading  foatiiros         A^ 
with  tho  casr  hfforc  us.  and  the  decision  of  it  fully  covers  the  conclusion  which 
wp  have  reached."     P.  110. 

Spp  also  Rnlrs  v.  HanUnr).  201  M;is^.  Kl.'i.  and  Smhnnrd  \nf.  Rk.  v.  Rk.  nf 
Amrrira,  Ifl.T  N.  Y.  20,  repr.rte.l  in  22  L.  N.  S.  409  with  note.  Extracts  from 
this  note  will  be  found  printed  herein  at  p.    141.  — (J, 


^ 


126  FORM  REQUinET),  |  ART.    11 

"  Whore  the  payoe  is  a  fiotitioiis  or  non-existing  person  iho  hill  may 
be  troatoil  as  payable  (o  ln'arcr."  ' 

riaintifTs  now  seek  to  rt'covrf  fnun  llie  (lofeiidants  the  amounts 
/  so  jiaitl.  alleging  that  they  wwv  u  iimgfully  and  without  their  authority 
debited  to  their  account.         —— 

Case  tried  before  Ciiari-ks,  J.,  without  a  jury,  who  found  for  the 
plaintiffs.  23  Q.  B.  D.  103.  This  judgment  was  afTirmcd  by  the 
Court  of  Appeal  (23  Q.  B.  D.  243),  and  the  defendants  thereupon 
appealed  to  the  House  of  Lords. 

Lord  Hersitell.  My  Lords,  I  propose  to  deal  at  the  outset  with 
1  the  question  of  the  construction  of  the  Bills  of  p]xehange  Act,  which 
gave  rise  to  a  dilVerence  of  opinion  in  the  court  below.     *     *     * 

The  conclusion  at  which  the  majority  of  the  Court  of  Appeal 
arrived  with  reference  to  the  construction  of  the  sub-section  of  the 
Bills  of  Exchange  Act  with  which  your  Lordships  have  to  deal  is 
thus  stated:  "The  word  'fictitious'  must  in  each  case  be  inter- 
preted with  due  regard  to  the  person  against  whom  the  bill  is  sought 
to  be  enforced.  If  tlie  drawer  is  tlie  person  against  whom  the  hill 
is  to  be  treated  as  a  hill  pnyalile  to  hearer,  the  term  'fictitious'  may 
be  satisfierl  if  it  is  list  it  ions  ;is  ri^gards  himself,  or  in  other  words, 
fictitious  to  liis  kno\\lcilgo.  If  the  obligations  of  the  acceptor  are 
in  qioestion,  nml  tln'  acceptor  is  the  person  against  whom  the  hill  is 
to  be  so  treated,  'fictitious'  must  moan  fictitious  as  regards  the 
acceptor,  and  to  his  knowledge.  Such  nn  interpretation  is  based  on 
'l/.  good  sense  and  sound  commercial   principle." 

The  conclusion  thus  expressed  was  founded  upon  an  examination 
of  the  state  of  the  law  at  the  time  the  Bills  of  Exchange  Act  was 
passed.  The  prior  authorities  were  subjected  by  the  learned  judges 
who  concurred  in  this  conclusion  to  an  elaborate  review.  witli  the 
result  that  it  was  established  to  their  satisfaction  that  a  l>ill  made 
payable  to  a  fictitious  person  or  his  order  was,  as  against  the  acceptor, 
in  effect  a  l)ill  payalde  to  bearer,  only  when  the  acceptor  was  aware 
of  the  circumstance  that  the  payee  was  a  fictitious  person,  and  further, 
that  his  liability  in  that  case  depended  upon  an  application  of  the  law 
of  estoppel.  It  appeared  to  those  learned  judges  that  if  the  exception 
was  to  be  further  extended,  it  would  rest  upon  no  ))rinciple,  and  that 
they  might  well  pause  before  holding  that  sec.  7,  sub-sec.  3,  of  the 
statute  was  "intended  not  merely  to  codify  the  existing  law,  but  to 
alter  it  and  to  introduce  so  remarkable  and  unintelligible  a  change.'' 

My  Lords,  with  sincere  respect  for  the  learned  judges  who  liave 
taken  this  view.  I  cannot  bring  myself  to  think  that  this  is  the  proper 
way  to  deal  with  such  a  statute  as  the  Bills  of  Exchange  Act,  wliicli 
was  intended  to  be  a  code  of  the  law  relating  to  negotiable  instru- 
ments.    I  think  the  proper  course  is  in  the  first  instance  to  examine 


7  Notice  the  difff-rent  n-ad'ina  of  the  Xop.  Inst.  Law.  §  28,  subfl.  3.  —  C. 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  127 

the  language  of  the  statute  and  to  ask  what  is  its  natural  meaning, 
uninfluenced  by  any  considerations  derived  from  the  previous  state 
of  the  law,  and  not  to  start  with  inquiring  how  the  law  previously 
stood,  and  then,  assuming  that  it  was  probably  intended  to  leave  it 
unaltered,  to  see  if  the  words  of  the  enactment  will  bear  an  interpre- 
tation in  conformity  with  this  view. 

If  a  statute,  intended  to  embody  in  a  code  a  particular  branch  of 
the  law,  is  to  be  treated  in  this  fashion,  it  appears  to  me  that  its 
utility  will   be   almost  entirely  destroyed,   and   that  the  very  object 
with  which  it  was  enacted  will  be  frustrated.     The  purpose  of  such 
a  statute  surely  was  that  on  any  point  specifically  dealt  with  by  it, 
the   law   should   be   ascertained  by   interpreting   the   language   used 
instead  of,  as  before,  by  roaming  over  a  vast  number  of  authorities 
in  order  to  dij^rnvpr  wli«t  thr-  Inn    ili  ^    TtTfr^ing  it  ^T'''T'~fflini;i^-   i 
critical  examination  of  the  prior  decisions,  dependent  upon  a  knowl-  f   . 
edge  of  the  exact  effect  even   of  an  obsolete   proceeding  such   as  a      '^ 
demurrer  to  evidence.     I  am,  of  course,  far  from  asserting  that  resort^ 
may  never  be  had  to  the  previous  state  of  the  law  for  the  purpose  (^ij^^ 
aiding  in   the  construction   of   the   provisions  of   the  code.     If,   forT'l  ^- 
example,   a  provision  be  of  doubtful   import,   such   resort  would   be^^' 
perfectly  legitimate.     Or,  again,  if  in  a  code  of  the  law  of  negotia/^'v^ 
ble   instruments  words  be   found    wliicli   have   previously  acquired   a 
technical  meaning,  or  been  used  in  a  sense  other  than  their  ordinary 
one,  in  relation  to  such  instruments,  the  same  interpretation  might 
well  be  put  upon  them  in  the  code.     I  give  these  as  examples  merely ; 
they,  of  course,  do  not  exhaust  the  category.     What,  however,  I  am 
venturing  to   insist  upon   is,   that  the  first  step   taken  should   be  to 
interpret  the  language  of  the  statute,  and   that  an  appeal  to  earlier 
decisions  can  only  l»e  justified  on  some  special  ground. 

One  further  remark  I  have  to  make  before  I  proceed  to  consider 
the  langnage  of  the  statute.  The  Bills  of  Exchange  Act  was  cer- 
tainly not  intended  to  lie  merely  a  code  of  the  existiui,'  law.  It  is 
not  open  to  f|uestion  tii;it  il  w;is  inlenilcd  to  allcr,  and  did  \\\Wx  it  in 
certain  respects.  And  1  do  not  think  that  il  is  to  he  presumed  that 
any  particular  provision  was  infendecl  to  Ite  a  statemeni  of  the  exist- 
ing law,  rather  than  a  substituted  enactment. 

Turning  now  to  the  words  of  the  sub-section.  I  confess  they  appear 
to  me  to  })e  free  from  ambiguity.  "  Where  the  payee  is  a  fictitious 
or  non-existent  person"  means,  surely,  according  to  ordi.  ary  canons 
f)f  construction,  in  every  case  where  this  can,  as  a  matter  of  fact,  be 
predicatcfl  of  the  pavee. 

I  can  find  no  warrant  in  the  statute  itself  for  inserting  any  limita- 
tion or  condition.  I  am  putting  aside  for  the  [)resent  the  (piestion 
by  whom  a  bill  answering  the  description  of  the  sub-section  ?nay  bo 
treated  as  payable  to  bearer,  and  T  am  accepting,  too.  for  the  moment, 
the   meaning  attributed   l)y   the   majority   of  the   fVtnrl    of   Ap[)eal   to 


•^ 


128  FORM   HKQIURHD.  [aRT.    II. 

the  word  "  fictitious,"  viz.,  a  creation  of  the  imagination,  confining 
nivsolf   til  the  (|uosiion   in  wliat  cases  a  bill   purporliiig  on   llie  face 
of  it   to   be   payable  to  order  may  be  treated   as  payalile   to  bearer. 
I   find  it  ini{)ossible,  without  doing  violence  to  the  language  of  the 
statute,  to  give  any  ^^fTier  answer  than  this:  —  In  all  cases  in  which 
the   payee   is  a  fictifTous  or  non-existent   person.     The   majority   of 
the  Court  of  Appeal  read  the  section  tliuTT  Where  the  payee  is  a  fic- 
titious or  non-existent  person,  the  bill  may,  as  against  any  party  who 
had   knowledge  of  the  fact,  he  treated  as  a   bill   payable  to  bearer. 
It  seems  to  me  that  this  is  to  add  to  the  words  of  the  statute  and  to 
insert  a  limitation  which  is  TTOtTfoTe  found  m'it  or  indicated  by  it. 
^     It  is  said  that  when  the  acceptor  is  the  person  against  whom  the  bill 
//'"'^is  to  be  treated  as  payable  to  bearer,  "  '  fictitious  '  must  mean  fictitious 
'*'**'^         as  regards  the  acceptor,  and  to  his  knowledge.''     With  all  respect,  I 
i/  i        am  unable  to  see  why  it  must  mean  this.     I  confess  I  cannot  alto- 
gether follow  the  meaning  of  the  words  fictitious  "  as  regards  "  the 
•    acceptor.     I  have  a  difficulty  in  seeing  how  a  payee,  who  is  in  fact  a 
"  fictitious  "  person  in  the  sense  in  which  that  word  is  being  used, 
I  can  be  otherwise  than  fictitious  as  regards  all  the  world  —  how  such 

P^  a  payee  can  be  "  fictitious  "  as  regards  one  person  and  not  another. 
The  truth  is  the  w^ords,  "  as  regards "  the  acceptor,  are  treated  as 
equivalent  to  the  words,  "  to  the  knowledge  of "  the  acceptor.  But 
I  do  not  think  these  expressions  arc  synonymous.  It  seems  to  me 
that  to  import  into  the  statute  after  the  words  "  fictitious  person  '* 
the  words  "  as  regards "  the  acceptor  or  drawer,  as  the  case  may 
be,  and  then  to  interpret  those  words  as  meaning  "  to  the  k-nowledge 
of,"  only  tends  to  obscure  the  fact  that  the  condition  that  the  payee 
must  be  fictitious  to  the  knowledge  of  the  person  sought  to  be  charged 
as  upon  a  bill  payable  to  bearer  is  being  introduced  into  the  enactment. 
For  the  reasons  I  have  given  I  find  myself  compelled  to  the  con- 
clusion, notwithstanding  my  respect  for  iiiose  who  have  expressed 
a  contrary  view,  that  in  order  to  establish  the  right  to  treat  a  bill  as 
payable  to  bearer  it  is  enough  to  prove  that  the  payee  is  in  fact  a 
fictitious  person,  and  that  it  isliot  necessary  if  it  be  sought  to  charge 
the  acceptor  to  prove  in  a-ddition  that  he  was  cognizant  of  the  fictitious 
character  of  the  payee. 

My  Lords,  if  the  conclusion  which  I  have  indicated  as  being,  in 
my  opinion,  the  sound  one,  involved  some  absurdity  or  led  to  some 
manifestly  unjust  result,  I  might  perhaps,  even  at  the  risk  of  strain- 
ing the  language  used,  strive  to  put  some  other  interpretation  upon 
it.  But  I  cannot  see  tli at  this  is  so,  or  that  the  interpretation  I 
have  adopted  does  anyviolence~~tT7---«<wd---fiensc,  or  is  otherwise  than 
in  accordance  with  sound  commercial  principle.  I  will  assume  that 
as  the  law  stood  at  the  time  the  Bills  of  Exchange  Act  was  passed, 
a  bill  drawn  to  the  order  of  a  fictitious  payee  could  have  been  treated 


IV.]  Payable  to  order  or  to  bearer.  139 

as  a  bill  payable  to  bearer  only  as  against  a  party  who  knew  that  the 
pay^ewas  fictitious.  This  decision  even  was  arrived  at  little  more 
than  a  century  ago,  and  was  dissented  from  by  distinguished  judges, 
and  it  is  obvious  from  the  observations  of  Lord  Ellenborough  in 
friinett  V  Farnell  (1  Camp.  130.  180,  c.)  that  by  some  eminent  law- 
yer? at  least  it  was  regarded  rather  as  a  departure  from  strict  prin- 
ciple, which  ought  not  to  be  further  extended  than  as  an  embodiment 
of  sound  commercial  principle. 

But  is  it  impossible  to  take  any  step  beyond  this  without  violating 
sound  principle  and  working  injustice?  Let  me  draw  attention  for  a 
moment  to  the  relative  position  and  rights  of  the  drawer  and  acceptor 
of  a  bill  of  exchange.  A  rlrav^PA  ^h^  arpppt<^  ^  bill  <^nr[^  SO  P'thpr 
because  he  has  in  his  hanJs  moneys  of  the  drf|wer.  or  expects  to  have 
theiTT^efore  the  bill  falls  due,  or  because  he  is  willing  to  give  the 
credit  of  his  nameT?rttreTJT3^feV,  and  to  make  him  aii  .uditaiice.JjJjrprfry- 
ment  >vf_Jvjii  f^""-^^  ^*  ■"  JinmHim'TyfpTflF.o  acceptor  to  whom  the 
drawer  directs  him  to  make  payment ;  that  is  a  matter  for  the  choice 
of  the  drawer  alone.  The  acceptor  i{^  nn]\  ( mn  ciiirl  id  -cc  tliat  he 
makes  tlTe  pyVfll^ht  as  dirt^cted^  sp  as.  tabi^  able  to  cliurge  llic  ilruwer^- 
jt  Ife  in  truth  only  with_  the -drawer  that  the  acceptor  deals;  it  is  at 
nip  in.'^Tance  that  he  accepts;  it  is  on  his  behalf  that  he  pays;  and  it 
IS  to  nmi  that  he  looks  either  for  the  funds  to  pay  with,  or  for  reim- 
bursement if  he  holds  no  funds  of  the  drawer  at  the  time  "f  P^^'^^f^TI^ 

In  the  ordinary  case,  where  the  payee  designated  in  the  bill  is  a 
real  person  intended  by  the  drawer  to  receive  payment,  either  ])y 
himself  or  by  some  transferee,  the  acceptor  can  only  charge  the  drawer, 
if  he  pays  the  person  so  designated,  or  some  one  deriving  title  through 
him.  If  payment  be  made  to  any  other  person,  the  drawer's  lial)ility 
on  the  bill  is  not  discharged  by  payment;  he  will  or  may  remain 
liable  to  the  real  payee,  or  those  claiming  under  him,  and  the  acceptor 
having  paid  otherwise  than  according  to  the  directions  of  the  drawer 
cannot  jiistify  the  w^e  of  his  funds  in  making  the  payment,  or  claim 
to  be  reimbursed  by  him.  But  now  suppose  the  drawer  inserts  as 
payee  the  name  of  a  fictitious  person,  requests  the  drawee  to  accept  a 
bill  so  drawn,  indorses  the  payee's  name,  and  puts  the  bill  into  circu- 
lation, lie  ci-riaiiily  intended  it  to  obiain  curn-ncy  and  to  )>('  paid  at 
maturity,  and  lie  as  certainly  dm  noi  intend  it  to  be  \)i\\\\  uillv  *'*  ^l'** 
payee  named,  or  sonu'  one  deriving  title  tliroii'di  liim.  Nor,  as  it 
seems  to  me,  can  it  rea8onal)ly  he  said  that  lie  Intended  to  direct  the' 
drawee  to  pay  such  person  and  such  person  only. 

What  then  is  the  prtsilion  of  a  lawful  bolder  of  a  bill  so_ 
I  fTo  not  unrUi'AfATI/t  it  \\\  III'  iliiiilili'il  lliMl  (lyi'ii  [jl'fflre  flif^Mills  ^f  , 
J'yxcnange  Act  such  a  hoiJ^f  d'OilId  iiifrm^  iWTWffffTTff  thp  hill^^j^inat 
the  drawer,  /or  he  not  meiclv  knew  Tflfll'TflT^^WTW^TTesIgnafed  was  a 
fictitious  person,  but  was  birn=elf  the  .Tufbor  of  the  fiction.  .As  aijainst 
the  drawer  then  such  a  bill  could  be  treated  as  payable  to  bearer. 

NEQOT.  INBTRUMENT8 — 9 


\ 


130  FOKM    Kr.QlUKKl).  [aUT.    II. 

But  if  it  cannot  bo  so  treated  as  against  tlie  accept  or,  tlie  holder,  wlio, 
it  \n.\y  l>e,  bought  or  discounted  it  on  tlie  faith  of  the  acceptance,  rely- 
ing on  the  credit  of  the  acceptor,  and  unwilling  to  trust  to  that  of  the 
drawer  alone,  is  deprived  of  that  upon  which  he  relied,  and  of  the 
liability  which  he  regarded  as  his  security  for  payment.  The  holder 
in  such  a  case  suffers  wrong.  Would  any  injustice  result  if  the  bill 
could,  as  against  the  acceptor  also,  be  treated  as  payable  to  bearer? 
The  drawer  must  be  taken  to  have  intended  the  bill  to  be  paid  by  the 
acceptor  at  maturity  —  but  to  wliom?  Not  to  the  fictitious  payee,  or 
some  one  claiming  througli  him.  Why  not  then  to  the  bearer,  who 
can  hold  the  drawer  liable  upon  the  bill,  and  treat  it  as  payable  to 
him  ?  And  if  it  were  the  law  that  the  acceptor  was  bound  in  such  a 
case  to  pay  the  bearer,  who  would  suffer?  Not  the  drawer,  for  pay- 
ment would  have  been  made  to  a  person  who  could  compel  him  to 
make  payment,  and  he  could  have  no  ground  for  complaint  if  the 
acceptor  used  his  funds  in  thus  discharging  his  liability  on  the  bill, 
or  in  case  he  had  not  provided  such  funds  if  he  were  held  liable  to 
reimburse  the  acceptor.  And  how  would  the  acceptor  suffer  in  such 
a  case?  It  wasTTis  objcd  in  mccpiing  the  bill  to  render  himself  J  i^ble 
to  make  pa^liigiil  UTElic  niison  iiitiuded-bv  the  drav^^er  to  receive_i^ 
JeTther  out  oT~mone\'^s  provided  l)y  him,  or  looking  to  him  for  reim- 
buTsPTTrPTrt:     His   position   under   such   circumstances   would    be   pre- 

'^— cioclv  what  it  "^tould  have  been  if  he  had  made  payment  to  a  real 
person  designated  as  payee,  or  to  those  claiming  under  him.  And  it 
might.  I  think,  fairly  be  said  that  he  was  making  the  payment  in 
accordance  with  the  intention  of  the  drawer. 

It  may  be  that  the  right  of  the  holder  to  treat  such  a  bill,  as 
against  an  acceptor  ignorant  of  the  fictitious  character  of  the  payee, 
as  a  bill  payal)le  to  bearer,  could  not  be  established  merely  by  an 
appeal  to  the  law  of  estoppel,  and  that  such  estoppel  would  exist 
only  against  the  drawer  who  knew  that  the  payee  was  a  fictitious 
person.  I  will  assume  that  this  was  the  law  prior  to  the  recent 
statute.  But  why  should  not  the  Legislature  have  intervened  with 
a  positive  enactment  imposing  this  liability  upon  the  acceptor  —  an 
enactment  which,  it  seems  to  me,  would  wrong  no  one,  and  would 
prevent  a  holder  for  value  from  suffering  wrong?  Estoppelisjot . 
the  onlv  sound -princrn''    I'l    n  wliich  n  Inw  rnn  be  I)a'g5Tt?'''TTie  law 

__iiL-e«to|rpiJl    wHtr— ftot,  I  '•>  Milord   -unicicnl  protection-- io-5hose 

dealing  with  the  apparent  owm  r  nf  lio'hI-.  The  Legislature  deemed 
it  necessar}'  to  intervene,  and  ilic  FaMms  iVcts  were  passed,  each 
of  which  added  something  to  the  protection  of  persons  so  dealing. 
Whv,  then,  should  it  be  thought  improbable  that  the  I^egislature 
should  have  created  in  the  holder  of  a  bill  drawn  payable  to  a 
fictitious  person  a  new  right  against  the  acceptor?  If  I  am  correct 
in  thinking  that  this  added  right  would  obviate  and  not  entail 
inju.stice,  that  it  would  make  the  law  more  reasonable  and  bring  it 


IV.]  PAYABLE  TO  OKDER  OR  TO  BEARER.  131 

more  into  conformity  with  the  course  of  commercial  transactions,  I 
can  see  no  reason  for  doubting  that  the  Legislature  so  intended,  if 
this  be  the  plain,  natural  meaning  of  the  words  they  have  used,  or 
for  endeavoring  so  to  construe  the  language  as  to  find  in  it  no  more 
than  a  statement  of  the  previous  law. 

******** 

Even  assuming,  it  is  said,  that  where  the  payee  is  a  "  fictitious  " 
person  the  hill  may  be  treated  as  against  the  acceptor  as  a  bill  payable 
to  bearer,  the  word  "  fictitious  "  is  only  applicable  to  a  creature  of  the 
imagination,  Having  no  real  existence,  whilst  in  the  present  case  "  C. 
Petridi  and  Company  "  was  the  name  of  a  firm  having  a  real  exist- 
ence, so  that  the  payee  here  cannot  be  ternie^.a.ictitious  person. 

[After  discussing  this  proposition  at  great  length  tTie  court  con- 
cludes:] 

It  seems  to  me,  then,  that  where  the  name  inserted  as  that  of  the 
payee  i>~.-n  nm^rted  by  unv  n{  yiuteui-e-only,  it  mny,  without  impro- 
priety. Ijo  ^•■■ng  rnaOLf  puyic  is_a^^igned  or  iirctended,  or,  in  other 
words,  a  fictitious  person.  Stress  was  laid  upon  the  fact  that  the 
words  of  the  statute  are  "  where  the  payee  is  a  fictitious  person,"  and 
not  "  where  the  payee  is  fictitious."  There  is  not,  to  my  mind,  any 
substantial  difference  in  the  meaning  of  the  two  phrases;  and  I  cannot 
think  tiiat  the  Legislature  intended  the  rights  and  liabilities  arising 
upon  mercantile  instruments  to  depend  upon  nice  distinctions  such 
as  this. 

*  *  *  I  have  arrived  at  the  conclusion  that,  whenever  the  name 
inserted  as  that  of  tlie  payee  is  so  inserted  by  way  of  pretence  merely, 
without  any  intention  that  payment  sliall  only  he  made  in  conformity 
therewith,  the  payee  is  a  fietitioy!^  person  ^yitbin  tVjP  Trp?"ing  of  thr 
statute,  whetlier  the  name  be  that  of  an  existinsr  person,  or  of  oa 
who  has  no  existence,  and  that  the  bill  may,  in  each  case,  be  treated  _ 
by  a  lawful  holder  as  pavahlp  fn  ppnT.ai»  / 

*       r   ., .  R-    l^r^^-  ..*        *        *        *      /  ^'  ^ 

Lords  ]\a\f)ui^,  Watson, ^ramwell,  Maenaghten,  Morris,  Field,  and^''  ^ 
the  Earl  of  Selbourne,  also  delivered  opinions. 

Judgments  of  the  Court  of  Appeal  and  of  the  Queen's  Bench 
Division  reversed  and  judgment  entered  for  the  defendants  with  costs 
here  and  below;  causje  remanded  to  the  Queen's  Bench  Division.  -/ 


§  28      MACBETH  v  NORTTf  A>^D  SOT^TTT  WALES  BANK. 

[190C]  2  King's  BE.\rii,  718. 

One  White,  by  falsely  representing  to  the  plaintiff  that  he  had  agreed 
to  f)iirebape  from  a  riian  nany:d  Kt;rr  cpr-tain^shares  then  held  by  Kerr 
in  a  company,  and  that  he  had  arranged  to  resell  the  shares  at  a  profit, 


l:v2  pouM  nEQuinED.  [art.  ii. 

iiuluood  tho  plaintiff  io  a^roo  to  assist  him  in  financing  the  trans- 
action. For  this  purpose  the  phiintiif  drew  a  ciieck  on  the  Clydesdale 
Bank  payable  to  Kerr  or  order  for  the  amount  of  the  purchase  money, 
which  was  delivered  to  White  in  order  that  he  might  hand  it  to  Kerr 
in  payment  for  the  shares.  White  forged  Kerr's  indorsement  to  the 
check,  and  paid  it  into  his  own  account  with  the  defendant  bank,  who 
credited  him  with  the  amount,  and  collected  the  money  from  the 
Clydesdale  Bank.  White  had  not  agreed  to  buy  any  shares  from 
Kerr  and  Kerr  had  at  the  time  no  shares  in  the  company. 

The  piaintiir's  claim  was  for  damages  for  the  conversion  of  the 
check  or  alternately  for  money  had  and  received  to  the  plaintiff's  use. 

Bray,  J.,  read  the  following  judgment: 

The  plaintiff  was  told  thaf  Kerr  was  an  engineer  formerly  living  at 
Bootle,  but  then  near  Manchester.  That  was  true.  He  was  told  that 
Kerr  had  agreed  to  sell  the  5,000  shares  to  White.  That  was  untrue, 
and  he  in  fact  held  no  shares.  There  had  been  no  such  transaction, 
but  the  plaintiff  believed  the  statements  made  to  him,  and  made  the 
cheque  payable  to  Kerr  in  order  that  he  and  no  one  else  should  get 
the  money.  Can  Kerr,  under  these  circumstances,  be  said  to  be  a 
fictitious  payee?  I  will  first  examine  the  authorities.  In  Vinden  v. 
Hughes,  [1905]  1  K.  B.  795,  the  facts  were,  in  my  opinion,  indis- 
tinguishable from  the  present  case.  Vinden  had  a  real  person  in  his 
mind  when  he  drew  the  cheque,  although  in  fact  the  payee  was  not 
his  creditor,  as  he  supposed,  and  had  had  no  transaction  with  him 
giving  rise  to  such  a  debt.  He  had  been  deceived  by  his  clerk,  but  he 
intended  the  payee  and  no  one  else  to  receive  the  money.  Warrington, 
J.,  held  that  the  payee  was  not  fictitious.  He  says:  "It  was  not  a 
merfi. pretense  at  the  time  he  drew  it.  He  had  every">eafion  to 
believe,  and  he  did  believe,  that  the  cheques  wore  being  drawn  in  the 
ordinary  course  of  business  for  the. purpose  of  the  money  being  paid  to 
the  persons  whose  names  appeared  on  the  face  of  those  cheques."  That 
seems  to  me  to  exactly  fit  the  present  case.  Under  ordinary  circum- 
stances I  should  consider  mvself  bound  by  this  decision,  but  it  was 
pressed  on  me  that  Warrington,  J.,  hnd  misread  the  judgments  in 
the  Bank  of  Enrjland  v.  Vaqliano.  1  think,  therefore,  I  ought  to 
examine  these  judgments.  What  were  the  facts  of  that  case?  There 
was  no  real  drawer;  the  bills  had  been  drawn  by  Vagliano's  clerk  Glyka 
to  make  Vagliano  think  that  they  were  real  hills  drawn  in  the  ordi- 
nary course  of  business  by  customers  who  were  entitled  to  ask  Vagliano 
to  accept  them.  In  truth,  the  whole  bills  were  fictitious,  though  Vag- 
liano believed  them  to  be  real  and  accepted  them.  It  was  strongly 
urged  that,  inasmuch  as  it  was  the  oliligations  of  the  acceptor  which 
were  in  question,  the  payees  could  not  be  fictitious  unless  they  were 
so  to  his  knowledge,  and  tho  Court  of  Appeal  so  held;  but  tho  House 


IV.]  PAYABLK  TO  ORDER  OR  j"0  BEARER.  133 

of  Lords  held  the  contrary.  T  think  the  real  ground  of  their  decision 
is  to  be  found  in  Lord  Herschell's  judgment  beginning  near  the  bottom 
of  p.  147.  I  have  therefore  to  ask  myself,  is  this  the  ordinary  case 
where  the  payee  designated  in  the  hill  "  is  a  real  person  intended  by 
the  drawer  to  receive  payment  either  by  himself  or  by  some  trans- 
feree ?  "  It  seems  to  me  that  there  can  be  but  one  answer  to  that 
question.  Kerr  was  a  real  person  intended  by  the  plaintitf,  the  drawer, 
as  I  have  found,  to  be  the  person  who  should  receive  payment.  It  is  / 
a  fallacy  to  say  that  Kerr  was  fictitious  because  he  had  got  no  shares"'^" 
and  had  never  agreed  to  sell  any  to  White.  The  plaintiff  believed  he 
had,  and  intended  him,  and  no  one  else,  to  receive  the  money.  It 
seems  to  me  that  when  there  is  a  real  drawer  who  has  designated  an 
existing  person  as  the  payee  and  intended  that  person  should  be  the 
payee,  it  is  impossible  that  that  payee  can  be  fictitious.  1  think  the 
jKord-- fictitious  "implies  that  the  name  has  been  inserted  by  the 
person  who  has  put  it  in  for  some  dishonest  purpose,  witliout  any 
intention  that  the  cheque  shoutd  be  paid  to  that  person  only,  and 
therefore  it  is  that  such  a  drawer  is  not  permitted  to  say  what  he  did 
not  intend,  viz.,  that  the  cheque  shall  be  paid  to  tliat  person  only, 
and  the  only  way  of  effecting  this  is  to  say  that  it  shall  be  payable  to 
fcearer.  It  matters  not,  in  my  opinion,  how  much  the  drawer  of  thei 
Jcheque  ma}'^Tavebeen  deceived  if  ho  honestly  intends  that  the  cheque/ 
/phall  be  paid  to  the  person  designated  by  him.  T  think  WARRTynTONJ 
'J.,  has  not  in  any  way  misread  the  judgments  in  Bank  nf  Knghnd  v. 
Vaqlinno.  T  think  his  decision  and  mine  are  really  founded  on  the 
principles  laid  down  in  that  case,  and  in  the  result  therefore  I  am  of 
opinion  that  the  throe  contentions  raised  by  Mr.  Isaacs  fail,  and  that 
the  plaintiff  is  entitled  to  recover  the  whole  11,250/. 

This  judgment  was  affirmed  by  tbe  Court  of  Appeal,  [1908]  1  K.  B. 
13,  and  an  appeal  was  taken  to  the  House  of  Lords. 

[lOOS]   Appeal  Cases,  137. 
Loiin  LoRKUURN.  L.  C. 


I  adopt  the  language  of  Bray,  .1. :  "  It  seema  to  me  that  where  there 
is  a  real  drawer  who  has  designatccl  an  existing  person  as  the  payee, 
and  intends  that  that  person  should  be  the  payee,  it  is  impossible  that 
the  payee  can  be  fictitious." 

If  the  argument  for  the  ajipelhints  were  to  avail,  namely,  tliat  the 
payee  was  a  fictitious  person  because  White  (who  was  himself  no  party 
to  the  cheque)  did  not  intend  the  payee  to  receive  the  proceeds  of  the 
cheque,  most  serious  consequences  would  ensue.  It  would  follow.  !i.-»  it 
seems  to  me,  that  e\ery  cheque  to  order  might  be  treated  as  a  dicque 
to  bearer  if  the  drawer  '  rl  1.    :i  di    rjved,  no  matter  by  whom,  into 


134  I'oitM  iii:Qiii;L;i).  [art.  II. 

drawinjr  i<.  To  state  siidi  a  [iroposilioii  \:-  lo  n'fiilc  it.  Yel  nothing 
short  of  this  i-oiild  oslalilish  Ihi'  appclhinls"  conlrnlioii. 

As  ti>  the  an<h(irit  ics.  I  aLircr  with  the  Court  of  .\[i|)(':il  in  thinkiiuj; 
that  neither  ViKjIiano  v.  inud-  of  Kmjiiuid  nor  (Million  v.  AUenborou<)!i , 
(I  ISH?  I  A.  l\  HO)  uroverns  the  ])resent  ease.  I  will  not  discuss  tlu> 
former  of  those  authorities  heyond  sayiiif^  that  it  was  not  a  ease  in 
whieh  the  drawer  intended  the  payee  to  receive  the  proceeds  of  the  bill. 
And  in  the  latter  authority  the  payee  was  a  non-existent  person  whom 
no  one  either  could  or  did  mean  to  be  the  recipient  of  the  cheque. 

That  being  so,  1  tliink  this  ap})eal  should  be  dismissed  with  costs. 

Lord  Kobertson  also  deliveied  an  of)inion,  and  Lord  Collins  con- 
curred. 

Order  of  the  Court  of  Appeal  affirmed,  and  appeal  dismissed  with 
costs.* 


§  28       PHILLIPS  V.  MERCANTILE  NATIONAL  BANK. 

140  New  York,  556.—  1804. 

Action  by  John  E.  Pliillips.  as  rec-eiver  of  the  National  Bank  of 
Sumter,  S.  C,  against  the  Mercantile  National  Bank  of  the  city  of 
New  York.  From  a  judgment  of  the  General  Term  affu-ming  a  judg- 
ment at  Cii'cuiL  dismissing  tlie  complaint,  plaintili'  ap|)eals. 

Gray,  J.  The  plaintifli'  is  the  receiver  of  the  National  Bank  of 
Sumter,  in  South  Carolina,  and  througli  tliis  action  seeks  to  recover  a 
balance  alleged  to  be  due  on  a  deposit  account  with  the  defendant 
l)-ink.  The  question  presented  by  the  record  is  wlictlicr  certain  twelve 
'^'"ccks,  drawn  by  the  casliier  of  the  Sumter  b;ink.  v.liicb  were  paid  by 
^he  defendant  bank,  could  properly  1h'  debited  in  account  to  the  Sumter 
liank.  Bartlett,  its  cashier,  had  drawn  them  upon  the  def(>ndant  for 
various  amounts,  some  to  the  order  of  .\.  S.  Brown,  ami  some  to  the 
order  of  C.  E.  Stubbs.  In  the  chock  book  he  would  enter  sometimes 
the  real  amount  of  the  checks,  and  sometimes  an  amount  much  less 
than  the  checks  actnallv  were  drawn  for.  The  names  of  these  payees 
were  tliose  of  persons  who  actually  resided  in  Sumter,  and  were  dealers 
with  the  bank,  but  they  knew  nothing  of  these  checks,  and  had  no  con- 
nection whatever  with  the  transactions  of  the  cashier  in  issuing  these 


8  See  Mr.  .Tolm  I).  Falconhridfie's  article  entitled  "  Fictitious  or  non-existinpj 
payee  '  in  tlie  ('ana<la  Ln\r  Journal  for  April,  1907,  ji.  225,  where  the  English 
and  British  colonial  cases  arc  admirably  disciiss.-d  and  compared.  In  addition 
to  the  Vaf/Uano  and  Macbeth  cases,  reported  herein,  the  followin*^  cases  are 
commented  upon:  Cfuttfm  i>.  Attenboroitf/h,  [18971  A.  ('.  90;  Vindrn  v.  Hughes, 
f  19051  1  K.  R.  795;  London  LIfr  Ins.  Co.  v.  .\foLsons  lik.,  [1904]  8  O.  L.  R. 
238;  City  lik.  v.  Uou„r,.  [1^9.'^]    14  N.  S    \V.  H.  127. —  C. 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  135 

checks.  Bartlett,  after  having  drawn  the  checks,  indorsed  them  in 
the  name  of  the  payee,  making  them  payable  to  the  order  of  some 
firm  of  stock  brokers  in  New  York,  who  collected  them  from  the 
defendant.  By  subsequent  manipulations  of  the  books  in  his  bank, 
Bartlett  was  able  to  prevent  a  discovery  of  his  dishonest  acts  until 
after  lie  had  absconded,  and  the  insolvency  of  the  bank  was  dis- 
closed.    *     *     * 

We  think  the  judgments  below  were  right.  Whether  indorsing  the 
check  in  the  name  of  the  payee  therein  was  a  forgery  in  the  legal  sense 
or  not  is  not  the  important  question.  In  a  general  sense,  of  course, 
the  cashier  did  forge  the  payee's  name,  but  that  fact  did  not  affect  the 
title  or  rights  of  the  defendant.  Coggill  v.  Bank,  1  N.  Y.  113.  In 
the  case  cited,  a  bill  was  drawn  upon  the  plaintiff  to  the  order  of  one 
Truman  Billings,  and  was  disjL-ounted  at  a  bank.  The  drawer  had 
indorsed  it  with  the  name  of  the  payee,  Truman  Billings,  a  person 
who  in  fact  had  no  interest  in  the  bill.  It  was  held  that  the  defendant 
in  the  case,  who  had  accepted  and  paid  the  bill,  held  it  by  a  good  title. 
Broxson,  J.,  said :  "  As  the  payee  had  no  interest,  and  it  was  not  in- 
tended that  he  should  ever  become  a  party  to  the  transaction,  he  may 
be  regarded,  in  relation  to  this  matter,  as  a  nonentity ;  and  it  is  fully 
settled  that,  when  a  man  draws  and  puts  into  circulation  a  bill  which  is 
payable  to  a  fictitious  person,  the  holder  may  declare  and  recover  upon 
it  as  a  bill  payable  to  bearer.  In  legal  effect,  though  not  in  form,  the 
bill  is  pavablo  to  bearer." 

The  case^of  Shipman  v.  Banlc,  126  N.  Y.  318,  which  was  recently 
before  us,  did  not  decide  any  question  inconsistently  with  what  the 
courts  below  bave  decided.''  Tbere  it  had  been  found  that  the  checks 
were  signed  by  tlic  firm  in  the  belief  that  the  names  of  the  payees 
represented  real  persons  entitled  to  receive  the  amounts  of  the  checks, 
and  with  the  intention  that  they  should  be  delivered  to  real  payees, 
and  should  not  go  into  circulation  otherwise  than  through  a  delivery 
to,  and  an  indorscjmcnt  by,  the  payees  named.  Bedell  was  tlieir  clerk, 
whose  employment  did  not  comprehend  the  drawing  or  indorsing  of 

»  In  thia  case  plaintifTs  were  depositors  in  defendant  bank.  They  signed 
twenty-seven  checks  yiayahle  to  certain  jiersons  desipnated  by  Bedell,  a  clerk 
in  their  employ,  an«l  entrusted  these  cheeks  to  T^ericll  Un  delivery  to  the 
payees  respectively  therein  named,  who  were  in  pood  faith  believed  by  the 
plaintiffs  to  he  real  persons,  entitled  to  receive  the  amounts  of  said  checks, 
respectivi'ly.  from  them.  The  defendant  paid  the  checks  to  a  third  person, 
upon  an  indorsr-ment  thereon  of  the  payees  named,  forced  by  T?edell,  who  con- 
verted the  proceeds  to  his  own  use.  The  names  of  the  payees  written  in 
sixteen  of  the  checks  were  not  the  names  of  real  but  fictitious  persons.  The 
remaining  checks  were  made  j)ayable  to  the  order  of  real  [)ersons,  whose 
indf)rs»>mf'nts  were  in  every  case  forged  by  Rcdell.  .Judgment  for  ftlaintifTs, 
the  court  holding  that  the  checks  "  cannot  lie  treated  as  payable  to  bearer 
unless  the  maker  knows  the  payee  to  he  fictitious  and  actually  intends  to  make 
the  papi-T  payable  to  a  fictitiouu  perHon."     V.  330.  —  C. 


136  POUM  liKQUiuKD.  |akt.  It, 

cluvks  or  drafts;  and  in  indorsinij  upon  the  chocks  tlio  names  of  the 
payees  he  conunitled  the  crinu^  of  f<)r<fery,  because  he  was  witliout 
authority  in  that  respect,  and  did  so  with  th(>  iulciition  to  deceive 
his  employers,  the  makers,  and  to  put  their  checks  in  circuhition  for 
his  account.  That  was  a  case  wliolly  other  tlian  was  nuide  out  here. 
It  was  stated  in  the  8hi])nian  case  that  the  makers  intention  is  the 
controllinij  consideration  which  determines  the  character  of  the  paper, 
and  that  the  statutory  rule  which  gives  to  paper  drawn  payable  to  tho 
order  of  a  fictitious  person,  and  negotiated  by  the  maker,  the  same 
validity  as  paper  payable  to  bearer,  applies  only  when  such  paper  is  put 
into  circulation  by  the  maker  with  knowledge  that  the  name  of  the 
payee  does  not  represent  a  real  person.  The  principle  of  that  decision 
is  quite  applicable  to  the  case  at  bar.  Though  Bartlett  selected,  for  the 
execution  of  his  dishonest  purposes,  the  names  of  persons  who  were 
dealers  with  his  bank,  it  was,  in  legal  eiTect,  as  though  he  had  selected 
any  names  at  random.  The  difference  is  that,  by  the  methods  resorted 
to,  he  av^erted  suspicion  on  the  part  of  the  directors  or  other  officers 
of  his  bank.  The  names  he  used  were,  for  his  purposes,  fictitious, 
because  he  never  intended  that  the  paper  should  reach  the  persons 
whose  names  were  upon  it.^  The  transaction  was  one  solely  for  the 
fraudulent  purpose  of  appropriating  his  bank's  moneys  by  a  trick 
which  his  position  enabled  him  to  perform.  Concededly,  if  tho  names 
of  the  payees  were  of  fictitious  persons,  the  Sumter  bank  would  have 
had  no  claim  upon  tlie  defendant.  Plow,  then,  can  the  transaction  I)e 
said  to  assume  a  different  aspect  because  the  names  adopted  were  of 
known  persons?  That  the  intention  was  to  treat  them  as  being  of 
fictitious  persons  is  manifest.  As  cashier,  invested  with  the  authority 
to  draw  checks  upon  the  bank's  accounts  with  its  correspondents, 
instead  of  drawing  them  directly  to  the  order  of  the  parties  who  he 
intended  should  get  the  moneys,  he  drew  them  to  the  order  of  persons 
who  had  no  interest  in  them,  and  thereupon  wrote  their  names  under  a 
direction  to  pay  to  the  real  parties,  who  were  intended  to  be  the 
recipients  of  the  funds  drawn  upon.     If  the  checks  had  been  drawn 


1  In  finyder  v.  Corn  Exchange  Nat.  Bank,  221  Pa.  St.  599,  the  court  says: 
"A  fictitious  person  within  the  contemplation  of  the  Act  f)f  1901  is  not  merely 
a  non-existing  one;  for,  if  so,  the  word  'non-existing'  wonlfl  have  been  suf- 
ficient without  more.  It  is  clear,  then,  that,  when  the  Legislature  declared 
that  a  check  payable  to  a  '  fictitious  or  non-existing  person  '  is  to  be  regarded 
as  paj'able  to  bearer,  it  meant  a  fictitious  person  to  be  one  who,  thou'^h  namcil 
as  payee  in  a  check,  has  no  right  to  it,  or  the  proceeds  of  it,  because  the 
drawer  of  it  .so  intended,  and  it  therefore  matters  not  whether  the  name  of 
the  payee  used  by  him  be  that  of  one  living  or  dead,  or  of  one  who  never 
existed." 

See  this  point  discussed  in  Jonlan  Marsh  Co.  v.  Nat.  Hhawmut  lilc,  201 
Mass.  at  p.  410,  where  the  court  concludes  by  saying  that  "The  name  so  u'sed 
would  be  none  the  less  fictitious  that  it  was  a  real  name  of  a  person  not 
intended  to  be  designated."  —  C, 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  137 

directly  to  the  order  of  the  real  parties,  the  defendant  would  un- 
doubtedly have  been  protected  in  paying  them.  As  it  was,  the  payees 
were  fictitious  persons  in  the  eye  of  the  law,  and  the  only  real  parties 
were  the  firms  in  New  York,  to  whom  the  cashier  sent  them  in  such 
form  as  that  they  could  draw  the  moneys  upon  them. 

The  fictitiousness  of  the  maker's  direction  to  pay  does  not  depena 
upon  the  identification  of  the  name  of  the  payee  with  some  existent 
person,  but  upon  the  intention  underlying  the  act  of  the  maker  in 
inserting  the  nnnie.  Where,  as  in  this  case,  the  intent  of  the  act  was, 
by  the  use  of  the  names  of  some  known  persons,  to  throw  directors  and 
officers  off  their  guard,  such  a  use  of  names  was  merely  an  instru- 
mentality or  a  means  which  the  cashier  adopted,  in  the  execution  of 
his  purpose  to  defraud  the  hank,  in  an  apparently  legitimate  exercise 
of  his  authority.  The  cashier,  through  his  office  and  the  power  con- 
fided to  him  for  exercise,  was  enabled  to  perpetrate  a  fraud  upon  his 
bank  which  a  greater  vigilance  of  its  officers  might  have  earlier  dis- 
covered, if  it  might  not  have  prevented.  If  his  position  and  the  confi- 
dence reposed  in  him  were  such  as  to  enable  him  to  escape  detection  for 
the  while,  then  the  consequences  of  his  fraudulent  acts  should  fall 
upon  the  bank  whose  directors,  by  their  misplaced  confidence  and  gift 
of  powers,  made  them  possible,  and  not  upon  others  who,  themselves 
acting  innocently  and  in  good  faith,  were  warranted  in  believing  the 
transaction  to  have  been  one  coming  within  the  cashier's  powers. 

It  may  be  quite  true  that  the  cashier  was  not  the  agent  of  the  bank 
to  commit  a  forgery,  or  auy  other  fraud  of  such  a  nature;  but  he  was 
authorized  to  draw  or  check  upon  the  bank's  funds.  If  he  abused  his 
authority,  and  robbed  his  bank,  it  must  suffer  the  loss.  The  distinc- 
tion between  such  a  case  and  the  many  other  cases  which  the  plaintiff's 
coimsel  cites  from  is  in  the  fnet  that  it  was  within  the  scope  of  this 
cashier's  powers  to  bind  the  bank  by  bis  checks.  In  transmittint:  them 
made  out  and  indorsed  as  fhey  were,  the  bank  was  so  far  concluded  bv 
his  acts  as  fo  be  estopped  from  now  denving  their  validity.  For  the 
reasons  givrn.  the  judgment  should  be  affirmed,  with  costs.  All  concur. 
except  Hartlett,  .7.,  not  sitting.^ 


§  28       TRIST  rOMPANY  OK  A.^[K1?F^A  ,•.  HAMILTON 
liAXK  OF  NEW   VOKK   CITY. 
127  Appf:i,l.\te  Division  (N.  Y.)  515. 

MoTmttottltn.  J.  This  is  a  controversy  submitted  to  the  court 
upon  an  agreed  statement  of  farts  under  section   1279  of  the  Code 

2  Followed  in  Rnydrr  v.  Corn  Exchnntir  Snt.  Ilk.,  221  Pa.  509,  whrro  the 
oonrt  myx  flint  tli.-  Phillips  cane  is  "singularly  similar  to  the  one  now  hefore 
Hf«."     P.  fi07.  —  C, 


138  FOKM   HKQUlHKn.  [aRT.    II. 

of  Civil  Procedure.  The  oontroveisy  relates  to  four  cheeks  for  $500 
each,  drawn  iiiioii  the  plaiiiliU",  a  Irusl  ioiii|taiiy  doiii<;  a  Itaiikiiifj;  l)uyi- 
ness,  and  signed:  "  Estate  of  Kate  M.  Walhice.  Artiuir  i>.  Wallace, 
Adm'r."  At  the  time  the  checks  were  prcaTTrted  to  the  plaiiitill'  for 
payment,  the  estate  of  Kale  M.  Wallace  was  one  of  its  dci)ositors, 
having:  to  its  credit  an  amount  in  excess  of  all  the  checks,  which  could 
be  drawn  out  on  checks  signed  by  Arthur  B.  Wallace,  administrator, 
when  countersigned  by  the  United  States  Fidelity  &  Guaranty  Com- 
pany. The  Wallace  estate  had  then  been  practically  settled,  and  the 
amount  on  deposit  was  ready  for  distribution  among  the  next  of  kin 
of  the  decedent.  The  four  checks  in  question  were  drawn  without  the 
knowledge  or  authority  of  the  administrator,  his  signature  being 
forged,  and  in  each  there  was  inserted  as  payee  the  name  of  some  one 
of  the  next  of  kin  whose  distributable  share  of  the  amount  on  deposit 
with  the  plaintiff  was  greater  than  the  amount  of  the  check  or  checks 
thus  apparently  payable  to  such  person.  The  first  check  was  dated 
September  25,  1905,  and  was  presented  on  that  day  to  the  United 
States  Fidelity  &  Guaranty  Company  by  a  person  unnamed,  without 
the  knowledge  of  plaintiff  or  defendant.  The  United  States  Fidelity 
&'  Guaranty  Company,  relying  upon"  the  apparent  genuineness  of  the 
check,  countersigned  the  same,  and  it  was  then,  by  some  person  un- 
known, presented  to  the  plaintiff  for  acceptance  and  by  it  accepted,  in 
writing.  The  name  of  the  payee  w^as  then  forged  upon  the  back  of 
the  check  as  first  indorser,  and  it  was  subsequently  deposited  with 
the  defendant,  by  one  M.  F.  Kerby,  one  of  its  depositors,  who  was 
given  credit  for  the  same.  It  then  bore  the  following  additional  in- 
dorsements: "  TTarvey  .T~Conkey.  l\f.  F.  T\orby.  A.  p]dward  Fisher." 
Thereafter,  the  defendant,  throngh  the  Xcw  York  Clearing  House, 
presented  the  check  to  the  plaintiff  for  payment,  guaranteoing  the 
indorsements,  and  it,  relying  upon  the  genuineness  of  the  check,  with 
the  guarantee  of  the  defendant  thereon,  not  knowing  that  the  indorse- 
ment of  the  payee  was  forged,  paid  the  same  in  good  faith.  Substan- 
tiallv  the  same  facts  are  true  in  regard  to  the  second  check,  which  was 
dated  in  November,  1!'05.  The  other  two  checks,  dated  in  December, 
1905,  and  January,  190G,  were  not  presented  to  plaintiff  for  acceptance 
before  payment  and  were  deposited  with  defendant  by  Harvey  J. 
Conkey,  one  of  its  depositors,  to  the  ci-edit  of  his  account;  otherwise, 
the  same  course  was  pursued  with  regard  to  them.  They  were  indorsed 
"Harvey  J.  Conkey"  below  the  forged  indorsement  of  the  payee. 

T'^pon  discovering  the  forgeries,  the  plaintiff  at  once  notified  the  de- 
fendant, tendered  back  the  checks,  and  demanded  repayment.  In  the 
meantime  both  Xerby  and  Conkey  had  withdrawn  the  proceeds  of  the 
checks,  and  the  defendant,  relying  on  plaintiff's  acceptance  and  pay- 
ment of  them,  had  paid  out  the  same  in  good  faith.  The  defendant 
has  refused  to  pay  plaintiff  the  amount  of  fbo  choclss,  or  any  of  them, 
and  the  question  presented  is  whether  plaintiff  is  entitled  thereto, 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  139 

The  general  rule  is  that  pa}Tnents  made  under  a  ini»tak«-of.  fact 
marHTT— reem^rrrf,  nfThnuirli  nt'gliLn'iitly  made;  but  it  is  also  settled 
that,  if  the  drawee  of  a  liill  of  exeliange  tu  which  the  drawer's  name 
ias-beefi~fr?r^d  accepts  nv  pays  tlie  same,  he  can  neither  repudiate  the 
acceptance  nor  recover  the  money  paid,  since  he  is  bound  to  know  the 
drawer's  signature!  Frice  v.  Nral,  3  Burrow.s,  1354;  Bank  of  United 
fates  y.  Bant-  of  Georgia,  10  Wheat.  (U.  S.).  333;  National  Park 
Bank  v.  Ninth  National  Bank,  46  X.  Y.  77;  Goddard  v.  The  Mer- 
chants Bank,  4  N.  Y.  147.  It  jsalso  settled  that,  where  the  indorse- 
ment of  the  payee  of  a  bill  of  exc5aM(J  has 'bcciT'tgfged^  subsequent 
holderS-Obtain  no  title  to  it,  and  payments  made  to  one  who  holds 
under  such  forged  indorsements  may^be_re£Q^^ed.  Corn  Exchange 
Bank  v.  Nassau  Bank,  91  N.  Y.  lA;Tiolfv7Ross,  54  N.  Y.  472;  Canal 
Bank  V.  Bank  of  Albany,  1  Hill,  287. 

Therefore^  if  all  the  indorsements  on  the  checks,  in  _question  had 
been  genuine,  ine  plaintiff  couldnot  recover;  but  if  the  maker's  sig- 
natures had  been  genuine,  and  only  the  indorsements  or  any  of  them 
forged,  it  could  recover.  Having  paid  the  checks,  the  plaintiff  cannot 
now  be  heard_Jo^saxi]iat_,the_inalteria  signatures,  are  not  genuine,  or 
recover  on  the  ground  that  the  same  were  forged,  and  by  reason  of 
that  fact  it  is  suggested  tliat  the  rights  of  the  parties  are  precisely  the 
same  as  though  the  drawer's  signatures  were  genuine,  and  since  the 
defendant  never  obtained  good  title  to  them,  on  account  of  the  forged 
indorsements  of  the  payees,  the  plaintiff  is  entitled  to  recover.  There 
are  authorities  to  support  this  contention.  First  Nat.  Bank  v.  North- 
western Bank,  152  111.  2!)fi ;  MrCall  v.  Craning,  3  La.  Ann.  409.  But 
it  does  not  necessarily  follow,  because  the  checks  were  not  indorsed 
by  the  persons  whose  names  appeared  on  them  as  payees,  that  the 
defendant,  which  received  them  in  good  faitli  and  paid  value  therefor, 
can  be  comfielled  to  repay  their  ninoimts  to  the  plaintiff. 

A  loading  authority  on  the  subject  is  Bank  of  England,  v.  Vagliano 
Bros.,  L.  R.  1891  App.  Cas.  107,  which  reversed  Vagliano  v.  Bank  of 
England,  23  Q.  R.  D.  243.  and  22  Q.  B.  D.  103.  This  authority  has 
been  fre(piently  cited  and  is  directly  in  fMH«l^**-^I^J' 

The  correctness  of  the  decision  in  First  Nntiona\  Bank  v.  North- 
western Bank,  supra,  may  well  be  rpiestioned,  since  the  decision  of  the 
lower  court,  which  was  reversed  by  the  House  of  T>ords,  in  the  Bank 
of  England  case,  was  cited  at  length  and  relied  upon.  Whether  this 
be  HO  or  not,  the  decisions  in  our  own  state  are  entirely  in  harmony 
with  the  views  expressed  iiy  llie  House  of  Lords.  Thus,  in  Cnggill 
V.  Amrrtran  E.Trhangr  Bank,  1  X.  V.  113,  19  .\m.  Dec.  310,  a  partner 
drew  a  bill  of  exchange  in  the  name  of  the  partnership,  payable  to 
one  Truman  Billings  and  forged  thereon  the  indorsement  of  the  lat- 
ter. The  bill  sultserpiently  canu'  into  the  hands  of  the  defendant  bank, 
and  the  plaintiff,  upon  whom  it  was  rlrawn.  accepted  and  paid  it.  It 
was  held  that  the  plaintiff,  on  discovering  the  forgery,  conld  not  re- 


140  FORM  REQUTnEn,  [aHT.    11. 

cover  the  amount  paid  from  tho  dofeiulant,  since  the  bill  was  in  effect 
payable  to  lieaiiT,  and  di'l'i'iulaiit  had  gciod  tillr.  Mr.  Justire  Brunson, 
who  delivered  the  opinion  d'  tlir  court,  dii?(in_i;iiislicd  the  ease  of  Ciinal 
Bank  v.  Bdiik-  of  Alhain/.  sitpra.  and  siiid  : 

"As  the  pay(H'  had  no  interest,  and  it  was  not  intended  that  lie 
should  ever  become  a  party  to  tlie  transaction,  lie  may  be  regarded,  in 
relation  to  this  matter,  as  a  nonentity;  and  it  is  fully  settled  that  when 
a  man  draws  and  puts  into  circulation  a  hill  which  is  payable  to  a 
fictitious  person,  the  holder  may  declare  and  recover  upon  it  as  a  bill 
payable  to  bearer.  *  *  *  In  legal  effect,  though  not  in  form,  the 
bill  is  payable  to  bearer.  *  *  *  r^^^^  plaintiff  probably  acceptcfl 
and  paid  the  bill  under  the  mistaken  assumption  that  the  indorsement 
was  genuine:  but  he  was  not  mistaken  about  the  main  fact  which  he 
was  concerned  to  know,  which  was  that  the  holder  was  the  owner  of 
the  bill." 

And  in  Phillips  v.  Me.rcanlilc  National  Bank,  140  N.  Y.  556,  the 
cashier  of  the  National  Bank  of  Sumter,  S.  C,  drew  checks  in  the 
name  of  the  bank,  inserting  as  payees  the  names  of  customers  of  the 
bank,  whose  indorsements  he  forged.  The  checks  thus  drawn  were 
sent  to  various  firms  in  New  York  and  subsequently  came  into  the 
hands  of  the  defendant,  v.hich  received  them  in  good  faith  and  charged 
them  to  the  account  of  the  Sumter  Bank.  The  receiver  of  the  Sumter 
Bank  thereafter  brought  an  action  to  recover  the  amount  of  these 
checks,  and  it  was  held  that  the  same  could  not  be  maintained,  since  in 
legal  etTect  the  payees  were  fictitious  and  the  checks  payable  to  bearer, 
and  for  that  reason  the  defendant  obtained  good  title.     *     *     * 

Under  the  negotiable  instruments  law  and  the  cases  cited,  T  am  of 
the  opinion  the  checks  in  question,  as  between  plaintiff  and  defendant, 
were  payable  to  bearer.  It  does  not  appear  wdio  forged  the  maker's 
signatures,  but  the  subsequent  history  of  the  checks  does  not  leave  it 
open  to  doubt  thnt  the  person  who  did  so  knew  that  the  parties  whose 
names  were  used  as  payees  would  never  have  any  interest  in  the  in- 
struments. Just  as  in  the  Bank  of  England  and  the  i^hillips  cases. 
in  order  to  accomplish  the  fraud  more  easily,  the  names  inserted  as 
payees  were  those  of  persons  to  whom  checks  might  naturally  be  made. 
Whether  indorsing  the  names  of  the  payees  upon  the  checks  was  tech- 
nically forgery  or  not  it  is  unnecessary  to  consider.  It  has  been  con- 
venient to  thus  descril)e  them.  Despite  these  forged  indorsements, 
then,  tlie  defendant  acquired  good  title,  since  in  legal  effect  the  checks 
were  payable  to  bearer.  Plaintiff,  having  pnid  them  to  a  holder  in 
due  course,  cannot  recover  upon  the  ground  that  the  payees'  signatures 
were  forged. 

Xor  is  this  view  at  all  in  conflict  witli  Shipin'in  v.  Bonk  of  Slate  of 
New  York,  126  N.  Y.  31 S.  *  *  *  The  court  held  that  the  plain- 
tiffs could  recover  from  the  bank  the  amount  paid,  distinguishing  the 
Bank  of  England  case,  and  the  distinction  is  obvious.     Fn  flic  former 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  141 

case,  the  member  of  the  firm  who  signed  the  checks  in  the  firm  name 
believed  that  in  every  instance  the  payee  was  a  real  person  to  whom 
alone  the  check  was  payable,  while,  in  the  latter  case,  the  person  who 
wrote  the  makers  signature  was  a  forger  who  knew  that,  so  far  as  the 
bills  of  exchange  were  concerned,  the  payee  was  fictitious.  The  court 
expressly  recognized  the  rule  that  the  maker's  intention  was  control- 
ling, saying: 

"  The  maker's  intention  is  the  controlling^  consideration  which 
determines  the  character  ol"   iiii  li  piipi  i  "  ^^^~'''~~~"~~— — — 

It  is  true  that  in  many  of  the  authorities  cited  the  person  guilty  of 
the  fraud  was  connected  in  some  way  with  one  of  the  parties,  which 
may  have  affected  the  equities  of  the  case,  as  was  suggested  in  Skip- 
man  V.  Bank  of  State  of  Neiv  York,  supra,  concerning  the  decision  in 
the  Bank  of  England  case,  while  here,  so  far  as  appears,  the  guilty 
party  was  a  stranger  to  both  plaintiff  and  defendant,  and  they  are 
equally  innocent.  But  that  cannot  change  the  law  as  to  the  fictitious- 
ness  of  the  payees,  and,  if  it  did,  I  am  of  the  opinion  that  any  equities 
in  the  present  case  arc  with  the  defendant.  The  risk  of  paying  out 
money  upon  a  forged  signature  of  a  depositor  is  one  which  a  banker 
must  assume,  and,  if  the  plaintiff  had  detected  the  forgeries  when  the 
checks  were  presented  fnr  payment,  it  would  not  have  suffered  any 
loss,  and  it  is  possiblo  flint  fbn  dofendant  would  not. 

T  am  of  the  opinion  lint  tlir  pl.iiiiiifT  li;is  no  Ingnl  claim  against  the 
defendant,  and  for  tli.it  n';i-(«u  tin  hilln-  is  entitled  to  judgmentupon 
the  merits,  with  costs.     All  concur.'^ 


Df  in  any  of  its  decisions  pa 


3  As  the  New  York  Court  of  Appeals  has  nof  in  any  of  its  decisions  passed 
upon  the  precipe  (piestions  involved  in  tliis  case,  this  decision  cannot,  of  course, 
he  reparded  as  setflintr  the  law  in  New  "N'ork. 

See  a  most  instructive  article  hy  Professor  Ti.  M.  Tireeley  in  .1  TH.  Tiaw  Rev. 
3.31,  entitled  "Fictitious  payees  in  forped  checks  or  hills,"  criticizing  this 
case  and  fUitik  v.  \  afiliano,  and  arpuinp  that  I''irst  A«7.  Hank  v.  Northwestern 
Hat.  Hank.  l.')2  111.  25)0,  was  correctly  decided,  and  that  it  is  not  overthrown 
by  the  suhsequent  enactment  of  the  Illinois  Nepotiahle  Instruments  Tiaw.  Tn 
this  connection  attention  is  called  to  the  difTerent  wording  of  the  Illinois  Act 
(it  f)rovideH  that  "the   instrument   is  payahle   to  henrer  .     when    it   is 

payahle  to  the  order  of  a  person  known  hy  the  drawer  ur  niiikcr  to  he  fictitious 
or  nonexistent,  or  of  a  livinp  person  not  intended  to  have  any  intercut  in  it  ") 
which  "seems  to  the  writer  ...  to  justify  a  construction  dilTercnt  from 
that  placed  upon  the  Knplish  and  New  York  Acts."     P.  r?.3!(. 

Thn  note  to  Seahfinnl  Xnt.  Hunk  v.  Hank  of  Anirrien,  193  N.  Y.  26,  in  22 
L.  N.  S.  4ftfl,  entitled  "  When  is  a  nofjotiahle  instriiment  deemed  payable  to 
the  order  of  a  fictitious  person  within  the  rule  which  repards  such  an  instru- 
ment as  [layahle  to  bearer,"  discusses  nil  the  cases  printed  herein  on  this 
subject,  and  deserves  n  most  careful  readinp.  Attention  is  particularly  called 
to  the  followinp  extracts: 

"The  court,  in  l\nhn  v.  Wntkins.  20  Kan.  001,  .  .  .  makes  a  distinction 
bearing  on  the  question  now  iinrler  consideration,  as  to  the  necessity  of  knowl- 
edge by  the  maker  or  drawer  of  the  tictitious  character  of  the  payee,  In^twecn 
a  case  where  an  instrument  purports  to  be  payable  to  a  real  person,  known  at 


148  rOKM    KKyi'IRKD.  [aUT.    II. 

§  28       McKEEIIAN,  The  Negotiable  Instruments  Law. 

1 41    Am.    Law   Reg.,   N.   S.,   pp.   448-450.] 

The  second  iTititism  of  !^  D  |  X.  Y.,  §  28J,  par  .'J,  is  that  such  an  in- 
strument is,  uniler  the  act,  payable  to  bearer  without  being  indurscd, 
and  that  this,  also,  ignores  the  tenor  of  the  instrument.  "  Nor  is  there 
any  judicial  precedent  or  mercantile  custom,"  says  Professor  Ames, 
"  in  support  of  the  notion  that  a  bill  payable  to  a  fictitious  payee,  but 
not  indorsed  in  the  nanie  of  such  payee,  is  payable  to  bearer.  In  all 
the  reported  cases,  instruments  payable  to  a  fictitious  payee  have  been 
indorsed  in  the  name  of  such  payee  before  negotiation."    That  is  sub- 


the  time  to  exist,  and  present  to  the  mind  of  the  maker  or  drawer  as  the  party 
to  whose  ordor  it  was  to  be  paid,  although,  as  a  matter  of  fact,  he  had  no 
connection  with  the  transaction,  and  a  case  where  there  was  no  such  person 
in  existence,  although  the  maker  or  drawer  supposed  there  was;  holding  that 
the  drawer's  hclicf  that  the  person  named  was  the  real  payee  will  prevent  the 
application  of  the  rule  as  to  fictitious  payees  in  the  former  case,  but  not  in 
the  latter.  As  subsequently  shown,  substantially  the  same  distinction  is  made 
bv  the  English  cases,  when  the  Vayliano  case  is  considered  in  connection  with 
the  subsequent  cases."     P.  502. 

"These  cases  [Sfhipman  v.  Bank.  126  N.  Y.  318,  and  Armstrong  v.  Nat. 
Bank,  ante,  p.  123]  are  .  .  .  clearly  oppo.sed  to  the  distinction  made  in 
the  Kohn  case  and  the  later  English  cases."     P.  503. 

"The  opinions  in  these  cases  [Vinden  v.  Hughes  (1905),  1  K.  B.  795,  and 
Macbeth  v.  Bank,  ante,  p.  131]  leave,  perhaps,  some  doubt  as  to  whether  the 
doctrine  of  the  Vagliano  case  is  restricted  to  the  very  facts  of  that  case;  i.  e., 
the  case  of  acceptance  of  a  bill  whore  the  drawer's  signature  as  well  as  that  of 
the  payee  is  forged,  or  whether  the  doctrine  of  that  case  would  still  be 
applicable  -so  as  to  characterize  a  bill  as  payable  to  a  fictitious  payee,  as  against 
an  acceptor  who  had  in  mind  an  actually  existing  person  as  the  payee,  where 
the  drawer  knew  of  the  fictitious  character  of  the  payee,  that  is,  knew  that  the 
person  named  had  no  connection  with  the  transaction. 

"  It  will  be  noticed  that  Trust  Company  of  America  v.  Hamilton  Bank 
[atite,  p.  1371  .  .  .  was  very  similar  in  its  essential  facts  to  the  Vagliano 
case,  and  the  decision  is  in  harmony  with  the  doctrine  of  that  case,  even  when 
confined  to  the  first  or  narrower  of  the  two  hypotheses  just  stated. 

"Aside  from  the  aspect  of  the  question  ju.st  suggested,  the  English  cases, 
when  considered  together,  seem  to  adopt  practically  the  same  position  and 
distinction  as  the  Kansas  court.  lajQiJierJS^ds,JhjlJE!!£.l.is''  doctrine  ajipears 
to  be  that  the  belief  of  the  party 'sought  to  be  charged,  that  the  payee  was  an 
actrnrriy  existing  person,  tr.  whom,  or  upon  whose  indorsement,  hejoTended  the 
instrument  to  be  paid,  will  not  prevent  the  application  of  the  rule  as  to  fic- 
titious payees  if  ther^  was  in  fart  nO  real  person  in  existence  whom  he  had 
particularly  in  mind  as  payee;  but  that  the  intention  of  the  party  sought  to 
be  charged,  at  least  if  he  IfTthe  drawer,  that  the  instrument  was  to  be  paid  to 
or  upon  the  order  of  an  actually  existing  per.son,  known  to  him,  and  in  his 
mind  as  the  person  to  whom  or  upon  whose  order  the  instrument  was  to  be 
paid,  will  defeat  that  rule."     Pages  .504.  505. 

See  also  the  article  entitled  "  Fictitiotis  payees  under  Negotiable  Instru- 
ments Act"  in  13  Law  Notes.  23. 

"In  Keenan  v.  Blue,  240  111.  177,  a  promissory  note  payable  to  D.  L.  Buck- 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  143 

stantially  true.*  If  such  an  instrument  requires  no  indorsement,  a 
departure  has  been  made  from  what  has  been  supposed  to  be  the 
law  —  and  Professor  Ames  and  Judge  Brewster  agree  that  the  new  act 
dispenses  with  the  necessity  of  an  indorsement.  Indeed,  any  other 
reading  of  it  seems  impossible,  though  whether  an  indorsement  is 
necessary  under  the  English  act  has  never  been  decided,  and  seems 
fairly  open.'' 

Judge  Brewster  defends  the  change.  He  says :  "  Surely  it  is  more 
logical  to  hold  that  a  note  which  purports  to  be  payable  to  a  person 

worth  or  order  was  indorsed  by  Buckworth  '.  .  .  to  I.  N.  Porter  or  bearer,' 
signed  '  D.  L.  Buckworth.'  So  indorsed  the  note  was  discounted  by  the  plain- 
tifiFs  .  .  .  who  sued  the  makers.  It  was  held,  .  .  .  Second,  that  the 
name  '  I.  N.  Porter  '  was  fictitious,  and  hence  could  be  disregarded,  and  the 
indorsement  deemed  to  be  to  '  bearer.'  The  plaintiffs  were  therefore  permitted 
to  recover,  thoujjh  the  note  was  not  indorsed  in  the  name  of  '  I.  N.  Porter.' 
One  judge  dissented  on  the  ground  that  our  statute  requires  an  indorsement 
in  the  case  of  negotiable  paper  payable  to  a  named  person  or  l)earer.  111.  R.  S., 
ch.  98.  §  4;  Roosa  v.  Crist,  17  111.  450.  He  was  of  opinion  that  since  the 
indorser  did  not  know  the  name  '  I.  N.  Porter  '  was  fictitious,  the  name  could 
not,  as  to  him,  be  deemed  fictitious,  and  the  indorsement  treated  as  payable  to 
bearer.  .     .     The  name  '  I.  N.  Porter '  was  fictitious.     This,  liowever,  was 

not  known  by  the  indorser.  Buckworth,  the  name  having  been  suggested  by  the 
plaintifls,  when  they  arranged  with  certain  note  brokers  to  buy  the  note,  in 
order  to  conceal  their  part  in  the  transaction,  the  indorser  simply  writing  the 
indorsement  as  directed  by  the  brokers.  On  these  facts,  it  would  seem  that  the 
name  '  I.  N.  Porter  '  was  simply  another  name  for  the  plaintiffs,  assumed  for 
this  transaction  —  not  the  name  of  a  fictitious  person.  The  decision  of  the 
court  seems  sound,  though  perhaps  all  of  the  reasons  urged  in  support  of  it 
are  not.     L.  M.  G.  "     4  111.  Law  Rev.  .•{54.  —  C. 

♦  In  New  Vork,  however,  it  has  been  held  for  manj'  years  that  a  bill  or  note 
payable  to  the  order  of  a  fictitious  payee  is  payable  to  bearer  without  being 
indorsed  by  the  maker  or  payee.  Plets  v.  Johnson,  3  Hill,  112;  Central  Bank 
of  lirooUyn  v.  Lanc),  1   Bosworth,  203;  Irving  N.  li.  v.  Alley,  79  N.  Y.  356. 

■'•  It  might  be  argued  that  the  words  "  may  be  treated  as  payable  to  bearer  " 
u'serj  in  the  Knglish  act  mean  that  the  bill  may  be  so  treated  only  when  regular 
in  all  other  resjM'cts,  i.  e.,  among  other  things,  when  properly  indorsed.  Judge 
(  halmers,  the  draughtsman  of  the  I'.nglish  act,  says  of  this  sub-sectiou:  "  Wlu-n 
a  bill  is  payable  to  the  orrler  of  a  fictitious  person,  it  is  obvious  that  a  genuine 
indorHcment  can  never  be  obtained,  and  in  accordance  with  the  language  of  the 
old  cases  and  text  hooks,  the  act  puts  it  on  the  footing  of  a  hill  payable  to 
l»earer.  But  inasmuch  as  a  bill  payable  to  one  person  but  in  the  hands  of 
another  is  patently  irregular,  it  is  clear  that  the  bill  should  be  indorsed,  and 
perhaps  a  fcona /ir/c  holder  wo)ild  Ik-  justified  in  indorsing  it  in  the  [)ayee's  name. 
It  might  have  be<'n  l)etter  if  the  act  had  [)rovided  that  a  bill  jiayable  to  the 
order  of  a  fictitious  p<Tson  might  be  treated  as  payable  to  the  oriler  of  anyone 
who  should  indorse  it,  or,  in  other  words,  as  indorsable  by  th«'  bearer."  Chalmers' 
Bills  of  Kxchange.  5th  edition,  page  22.  From  this,  it  would  appear  that  the 
failure  of  the  English  act  to  retjuire  an  indorsement  was  a  mere  oversight  — 
though  the  use  of  the  words  "  may  !  "  treated  "  furnishes  a  method  of  correct- 
ing the  omission.  .Judge  Brewster's  reafliness  to  defend  the  chance  in  thp 
American  art  seems  to  indicate  that  the  change  was  intentional.  Except  for 
this,  one  would  suppose  that  it  had  been  an  oversight. 


144  FORM  REQUIRED.  [aRT.    II. 

wlicn  there  is  no  such  person,  and  the  maker  knows  it,  must  have  heen 
intwjjltHl  t<»-  be  payable  to  bearer,  tlian  to  liold  that  somebody  must 
as<>Hme  the  mwne  of  such  lietitious  person  and  inakc  a  false  indorsement 
in  order  to  trive  title  to  the  note."  There  is  mueli  eommon  sense  in 
that.  Rut  the  troul)le  is  that  title  to  a  note  payable  to  order  is  de- 
rived through  the  indorsement  on  the  back  of  it.  What  "  must  have 
been  intended  "  by  a  maker  who  names  a  fictitious  payee  it  is  extremely 
liard  to  say.  Moreover,  both  commercial  practice  and  \egi\\  theory  tend 
more  and  more  to  disregard  everything  except  that  which  actually 
appears  on  the  instrument.  When  A.  makes  his  note  payable  to  "  John 
White  or  order"  all  our  notions  about  negotiable  paper  require  that 
John  White  be  written  on  the  back  of  this  note,  even  though  no  such 
j)erson  as  John  White  exists.  It  seems  necessary  for  form's  sake.  To 
dispense  with  the  necessity  for  it  gives  a  decided  jolt  to  our  ideas. 
Aside  from  this,  however,  it  is  difficult  to  see  how  any  harm  can  result 
from  the  change.  In  the  first  place  (and  though  this  does  not  touch 
the  theory  of  the  criticism,  it  docs  toucli  its  practical  worth)  notes 
payable  to  fictitious  payees  and  unindorsed,  will  be  about  as  plentiful 
as  counterfeit  dollars  labelled  "counterfeit."  Either  the  maker  or  the 
person  to  whom  he  delivers  the  instrument  will  indorse  it  in  the  name 
of  the  fictitious  payee.  Why?  Because  othci'wisc  no  one  would  dis- 
count it.  It  would  be  patently  irregular  on  its  fa(;e.  An  indorsement 
is  necessary  to  give  such  a  note  any  roinmrrrial  value. 


(c)    When  the  name  of  the  payee  does  not  purport  to  he  the  name  of 

any  person. 

§  28       GORDON  v.  LANSING  STATE  SAVINGS  BANK. 

[Reported  herein  at  p.  107.] 


(rf)    When  the  only  or  last  indorsement  is  an  indorsement  in  blank. 

§  28  CURTIS  V.  SPRAGUE. 

51  California,  239. —  1876. 

The  defendant,  Thomas  Sprague,  executed,  and  delivered  his 
promissory  note  to  the  plaintitf,  Dennis.  Dennis  indorsed  the  note 
in  blank,  and  delivered  it  to  F.  Magiiire.  Subsequently,  Maguire 
■assigned  the  note  to  Dennis  by  indorsement,  without  recourse,  and 
redelivered  the  same-to  him.  Afterwards,  Dennis  delivered  the  note 
to  the  plaintifT  Curtis,  without  receiving  any  value,  but  with  an  agree- 
ment that  Curtis  should  bring  suit  and  divide  with  him  what  he 
recovered.  The  plaintiff  recovered  judgment  and  the  defendants 
appealed. 


IV.J  PAYABLE   TO   ORDER  OR  TO   BJiARER.  145 

By    the   Cuurl:     "     *      * 

2.  Thure  was  uo  error  in  the  refusal  of  the  court  below  to  nonsuit 
the  plaintiff  on  the  motion  of  the  defendants.  When  the  note  was 
delivered  to  Curtis,  it  had  on  the  back  the  blank  indorsement  of 
Deni'.i.i,  llie  payee;  and  "the  first  effect  of  an  indorsement  in  blank, 
is  to  nial:e  the  paper  payable,  not  to  the  transferee  as  indorsee,  but  as 
hearer."     C?  P(uso)ts  on  Notes  and  Bills,  19.) 

Curti.?.  tluTcfoi-e,  acqiiind  fho  le^^al  title  to  ilio  note,  with  a  cor- 
respondinr — rttrht  oT'ntlicii,  wln'ii  if  \\;is  (]rli\(M'c(l  to  liiiii  by  tlie 
payee,  iiTrTorSod  in  blank.  We  attribute  no  iniprirl.inco  to  the  fact 
"'thnt"the  notes  had  before  been  delivered  by  Dennis  with  the  blank 
indorsement  to  JIaguire,  and  that  the  latter  had  redelivered  it  to 
Dennis,  with  a  special  assignment.  The  title  would  have  been  as 
etreetnaliy  reinvested  in  Dennis  by  mere  delivery,  without  the  assign- 
ment, as  w  itii  il  :  and  wben  Dennis  afterwards  delivered  the  note  to 
Curtis,  tliere  was  no  lU'cd  tliat  he  should  again  indorse  it  in  blank, 
m  order  to  convey  the  legal  title,  as  the  blank  indorsement  already 
on  it  was  etl'ectual  for  that  jmrpose. 

3.  The  legal  title  and  right  of  action  being  wholly  in  Courtis,  the 
court  erred  in  permitting  Dennis  to  be  joined  as  a  co-plaintilf.  But 
it  was  an  error  which  has  wrought  no  substantial  injury  to  the 
defendants.  Nevertheless,  in  order  to  preserve  a  proper  consistency 
in  the  record,  we  deem  it  better  to  remand  the  cause  for  further 
proceedings. 

It  is  tberefoi-e  ordered  that  the  judgment  be  reversed,  ;nid  the 
cause  remanded,  with  an  order  to  the  court  below  to  vacate  the  order 
allowing  Dennis  to  be  joined  as  a  eo-plaintiff.  and  to  enter  a  judgment 
in  tbe  findings  in  fa\or  of  jbc  plaintiff  Ciii-tis.'         _ 

U      '^''^'•— •'--'    -     UV-^-.,.   y       ■' 
§28  (  WF/PTLAUFER  1'.  BAXTER.  ^^^'    ^'/.  / 


IJT.^ol  -linVKSTERN    (Kv.)    741.—    liHO. 

C.AiMioii..  .1.  hi  Ilic  sl.ilc  of  New  York  on  July  :?,  lOor).  (lir  r.iif- 
falo  CarriatT''  'l'<'|)  Corn[>any  e.xecutt'd  to  Newton  .1.  Baxter  tbe  follow- 
ing note:  ".Fannary  l',  inOO,  after  date  we  promise  to  pay  lo  N(nvton 
J.  Baxter  two  hnndred  and  fifty  dollars  at  HS  Carroll  SI..  Hnllalo, 
N.  Y."  Dn  the  bacK  of  tbe  note  Newlon  .7.  Baxter  wrote  bis  name, 
and  before  \\<  mattiritv  it  was  discmmtcd  Ity  appellant.  Wclllanffr, 
nnrj  fjcjivercd  to  bim  l>v  Baxter.  Wln-n  tbe  note  fell  due  it  was  pre- 
sented to  tlic  liiid'alo  Carriage  Top  Company  for  jiayment,  and  pay- 
ment rofnsed.  Thereupon  tbe  note  was  protested  by  a  notary,  and 
notice  r»f  its  dishonor  mailed  to  Baxter  at  his  residence,  in  Owens- 
hnro,  Ky.     I'.axtor  declining  to  [)ay  the  note,  suit  was  brought  on  it 


I  Accord:   MiihUrton  v.  flriffllh,  57  N.  J.  L.  442,  —  il. 
NEGOT.  INBTRCMENTH  — 10 


14G  FOUM   UKtiUlRED.  [aUT.    II. 

against  him  in  the  Davioss  Circuit  Court.  A  goiu'ral  (li'iuurrcr  was 
sustained  to  tlio  petition,  and,  declining  to  plead  I'urtlier,  the  petition 
was  dismissed.     *     *     * 

The  questions  involved  in  tiie  case  are:  Was  the  note  before  its 
indorsement  by  Baxter  a  negotiable  instrument  within  the  meaning 
of  the  negotiable  instrument  act?  Or,  if  not,  did  Baxter,  by  signing 
his  name  on  the  back  of  the  note  and  selling  and  delivering  it  before 
maturity  to  Wettlaufer,  convert  it  into  a  negotiable  note  and  make  all 
the  parties  to  it  subject  to  the  negotiable  instrument  act  the  same  as  if 
it  had  been  a  negotiable  note  in  the  first  instance? 

The  contention  of  counsel  for  Baxter  is  that  the  note  was  not  a 
negotiable  instrument,  and  that  Baxter  by  signing  his  name  on  the 
back  of  the  note  became  merely  an  assignor.-   *     *     * 

On  the  other  hand,  the  contention  for  Wetthuifer  is  that  the  liability 
of  Baxter  upon  this  note  is  to  be  determined  by  the  negotiable  instru- 
ment act,  *  *  *  and  that  by  tlie  provisions  of  this  act  Baxter 
occupies  the  position  of  an  indorser  and  not  as  assignor  of  the  note. 
Or,  in  other  words,  that,  although  the  note  may  not  have  been  nego- 
tiable when  first  executed  and  delivered,  Baxter  by  his  indorsement 
converted  it  into  a  negotiable  note.     *     *     * 

[After  quoting  sections  1,  8,  9,  30,  34,  and  184  of  the  Kentucky 
act,^  the  court  continues:] 

For  the  purpose  *  *  *  q(  ascertaining  what  bills  and  notes  it 
was  intended  should  be  negotiable  within  the  meaning  of  this  act,  we 
may  with  propriety  inquire  what  words  were  generally  considered 
necessary  to  make  a  bill  or  note  negotiable  before  this  act  went  into 
effect,  with  a  view  of  noting  what  change  if  any  was  made  in  this  par- 
ticular. In  an  article  in  7  Cyc,  p.  606,  by  a  well-known  writer  on 
commercial  paper,  it  is  said:  "the  usual  form  of  negotiable  paper  is  a 
provision  for  payment  to  '  order  '  or  '  bearer.'  These  or  similar  words 
are  in  general  necessary  to  its  negotiability,  and  are  often  required 
by  statute,  but  a  note  which  is  non-negotiable  for  want  of  such  words 
is  still  a  valid  note  and  may  be  declared  on  as  such.  Bills  payable 
to  bearer  were  formerly  held  to  be  non-negotiable,  as  being  without 
words  of  transfer;  but  they  are  now  recognized  as  negotiable  and 
transferable  by  delivery.  Making  the  instrument  payable  '  to  the 
order  of '  a  person  named  is  the  same  as  to  such  person  '  or  order ' ; 
and  in  like  manner  to  a  person  named  '  or  bearer '  is  the  same  in  effect 
as  'to  bearer.'  Without  words  of  negotial)ility  purchasers  take  the 
^'  hill  or  note  suhJ£cL3ip^tili  defgpgss  'which  were  ayaJLable  between  the 
'.  original  parties;  and  if  it  was  orlgmaTly^non-negotiable,  as  against  the 
\  original "partres,  it  will  not  be  rendered  negotiable  by  subsequent  trans- 
'  fer  in  negotiable  form."  The  same  rule  is  announced  in  4  Am.  &  Eng. 
Encv.   of  Law,   133;  Story  on  Bills  of  Exchange,   §  60;  Daniel  on 

2  N.  Y.,  §§  20,  27,  28,  60,  64,  and  320.  —  C. 


IV.]  PAYABLE  TO  ORDER  OR  TO  BEARER.  147 

Negotiable  Instruments,  §  105;  Bank  v.  Butler,  113  Tenn.  574,  83  S. 
W.  655;  Westburg  v.  Chicago  Lumber  Co.,  117  Wis.  589,  94  N.  W. 
572. 

It  will  thus  be  seen  that  it  was  uniformly  held  that,  in  order  to 
make  a  note  or  a  bill  negotiable,  the  words  "  to  order  "  or  "  to  bearer," 
or  equivalent  words,  must  be  used  in  the  body  of  the  note.     It  will  be 
kept  in  mind,  however,  that  the  absence  of  these  words  do  not  affect  I  '  KrC 
the  validity  of  a  note  or  render  it  non-transferable  or  non-assignable.  I 
Their  only  effect  is  to  make  the"  insliTTrnent  negotiableT'irnT}  thereby'  /^^ 
cut  off  defenses  that  the  maker  or  either  of  the  parties  to  the  paper 
might  have  and  make  against  a  holder  in  due  course  if  the  note  was 
not  negotiable.     The  negotiable  instrument  act  does  not  apply  to  or 
affect  the  rights  or  liabilities  of  persons  on  paper  that  is  not  within  its 
meaning  negotiable.     *     *     *     This  note  in  our  opinion,  which  was 
payable  to  Baxter  alone,  and  did  not  contain  the  words  "  to  order  "  or 
"  bearer,"  was  not  a  negotiable  instrument.     These  words  by  sections 
1  and  184  ^  are  indispensable  to  make  the  paper  a  negotiable  instru- 
ment within  the  meaning  of  the  act.   ■ — 

But  the  argument  is  furtlicr  made  that  as  Baxter  indorsed  the  note 
in  blank  —  that  is,  signed  his  name  on  the  back  of  it  without  any 
other  words  —  he  thereby  converted  the  note  into  a  negotiable  instru- 
ment.    It  is  true  that  section  9  of  the  act  provides  that  "  the  instru- 
ment is  payable  to  bearer     *     *     *     when  the  only  or  last  indorse- 
ment is  an  indorsement  in  blank ;  "  but  this  does  not  mean  that  an 
indorsement  in  blank  converts  a  note  non-negotiable  on  its  face  and 
by  its  terms  into  a  negotiable  note.     This  construction  would  enable 
the  person  who  last  signed  his  name  on-  the  back  of  the  note  to  change 
entirely  the  contract  as  entered  into  between  the  parties,  and  have  the 
effect  of  making  the  maker,  payee,  and  all  prior  indorsers  liable  upon  a 
negotiable  instrument  when  they  intended  to  and  only  became  liable 
upon  a  note  that  was  not  negotiable,  and  this,  as  can  readily  be  seen, 
would  be  a   most   important  and    material   change   in   the   obligation 
assumed  by  tlierii  when  they  signed  the  paper.     To  give  the  act  this 
construction  would  place  it  in  the  power  of  any  indorser  who  chose 
to  sign  his  name  in  blank  to  change  by  this  act  the  entire  character  of 
the  paper  as  well  as  the  righfs  and  liabilities  of  the  parfies  to  it.     Tf  / 
would  make  the  character  of  the  paper  depend  uf^wnt  thrTTTnTmrT  nf  the  /   "-^ 
indorsement  and  not  upon   the  terms  expressed  in  the  paper.     Tluis,  / 
if  A.  indorsed  it  m~T)Tafik  Tn  R,  f+,  w^ild-hc  Tie^'otiable ;  hut,  if  R./ ^ 
indorsed  it  specifically  to  C,  it  would  he  non-negotiable.     Manifestly;       r" 
it  was  not  intenderl  that  the  mere  iridorsctuent  of  the  note  by  a  remote  • 
or  other  indorser  sliould  have  this  elTect.     When  a  paper  is  started  on 
ita  journey  into  the  commercial  world,  it  should  retain  to  the  end  the 
character  given  to  it  in  the  beginning  and  written  into  its  face.     Tf  it       i 

. : li 

sN.  Y.,  5§  20  and  320.  —  C.  / 


148  K)|{M    liKiilUUKD.  [aUT.    U. 

was  intoiulod  to  be  n  lU'gotiabk'  jnsliuiiu'iit,  and  was  so  written,  it 
slioulil  (.'ontimu'  to  Ih>  oiu".  If  ii  \Tas  intriukii  hi  \iv  a  non-not^otiable 
instruinont  and  was  so  wrild-n,  il  should  so  remain,  'i'lien  every  oue 
who  jiuts  his  name  on  it,  as  well  as  every  one  who  discounts  or  pur- 
chases it.  will  need  only  to  read  it.  to  know  what  it  is  antl  what  his 
riglits  and  liabilities  ai(\ 

In  our  opinion  section  !^  was  merely  intended  lo  describe  or  desig- 
nate the  conditions  under  which  a  imtt'  neuoliahle  on  its  face  might 
become  payable  to  bearer,  and  was  not  intended  to  apply  to  a  note  not 
on  its  face  or  by  its  terms  negotiable.  To  illustrate,  if  this  note  was 
payable  to  "  Newton  J.  Baxter  or  order,"  then  the  ])np(>r  u])on  its  face 
would  be  a  negotiable  instrument,  although  payalile  only  to  Baxter  or 
order,  and  the  only  elfect  of  the  indorsement  on  the  note  by  Baxter  in 
blank  would  be  to  convert  the  note  from  a  note  ])ayable  to  order  into 
an  instrument  payable  to  bearer.  But  this  indorsement  would  not  in 
any  manner  change  the  negotiability  of  the  note,  nor  change  the  atti- 
tude of  any  of  the  prior  parties  on  the  note,  or  increase  their  liability 
or  cut  off  any  defenses  that  they  might  have  made,  as  it  was  at  all 
times  a  negotiable  instrument.  Then,  too,  "  when  the  only  or  last  in- 
jdorsement  is  an  indorsement  in  blank,"  thf^  pnyee  without  notice  of 
I  any  defect,ij]LJli£»J4jy[eofthe  holder  may  pay  the  same  to  hijn, 
I  will  be"presumed  it  cam e  into  1 1 1 s  TT; i ITTs  rntfiiT'  ( f)iirFrTlTo"iii(lorsement 
i  being  neces^aTyT  Although  the  nole  luuhr  our  imislruetion  of  the 
Megotiabrs — froh-ument  Act  was  not  a  negotiable  instrument,  yet 
Baxter  had  the  right  to  indorse  it  and  transfer  it  by  delivery,  and  pass 
whatever  title  he  had  to  the  transferee  or  assignee.  But  the  assignee 
would  then  take  the  note,  not  -subject  to  the  provisions  of  the  Nego- 
tiable Instrument  Act,  but  under  the  law  applicable  to  non-negotiable 
paper.     *     *     * 


l-_^,       r]5^tT 


x^ 


The  judgment  is  affirmed.* 


V.  Drawee  must  be  certain. 

§  20  WATROUS  V.  HALBROOK. 

39  Texas,  573. —  1873. 

Ogdex,  p.  J.  This  suit  was  brought  by  the  heirs  of  John  S.  Storrs 
against  the  estate  of  D.  E.  Watrous,  on  the  following  instrument  of 
writing,  viz. : 

$2771.02  MoNTKVALLO.  June   1,   1858. 

Ten  months  after  date  pay  to  the  order  of  John  S.  Storrs,  two  thousand 
seven  hundred  and  seventy-one  and  62-100  dollars,  value  received,  and  charge 
to  account  of 

D.  E.  Watbou.s. 

To  .  Mobile,  Ala. 

*  For  fiirtlifr  di-fii.->ioii  of  §  28.  see  extract  from  McKeehan's  Negotiable 
Instruments  Law,  post,  pp.         .  —  C. 


v.]  DKAWEE  MUST  BE  CERTAIN.  1-49 

The  petition  charged  that  for  a  valuable  consideration  from  Jolin 
S.  Storrs  to  him  thereunto  moving,  said  Daniel  E.  Watrous  executed 
and  delivered  to  said  Storrs  the  instrument  of  writing  above  set  out, 
and  that  thereby  said  Watrous  undertook,  and  bound  himself,  and 
became  liable  to  pay  said  sum  therein  specified. 

To  this  petition  the  defendants  filed  a  general  and  special  demurrer, 
which  were  both  overruled  by  the  court,  and  judgment  was  rendered 
for  the  plaintiffs,  and  the  defendants  took  their  bills  of  exception  to 
the  ruling  of  the  court,  and  brought  the  case  here  by  appeal. 

The  only  question  now  presented  for  decision  is,  does  this  instru- 
ment, independent  of  any  allegations  of  ownership  for  a  valuable 
consideration,  or  promise  to  pay,  give  the  holder  any  cause  of  action. 

This  instrument  is  not  a  promissory  note  in  its  ordinary  form,  nor 
can  it  be  treated  as  such,  since  there  is  no  promise  to  pay  in  any  event. 
The  instrument  is  directed  to  no  one,  and^JJaxtfofffre  cannot  be  con- 
IsideTud  iijjj:ai^^r-WII 'ul-pxi'^IUiiUfc'.    Und  libeeiT  aL'cepeTT)y'an}^he, 
tltaf~gc'efptance"  Would  flHVtj  I'Diistitiited  a  promise  to  pay  in  the  ac- 
ceptor, and  then  the  maker  might  have  becoine  liable  as  surety  or 
guarantor;  but  as  there  is  <no  drawee  or  acceptor,  the  maker  cannot,, 
I  without  allegations  aud  proof  of  other  £acts  setting  foTtli  aiiil_  yatab-/ 
Misliing  his  liability ^"iTO^iTgW-TesponsiHey"'!^  with  thd 

exception  of  the  want  of  a  drawee,  is  in  the  ordinary  form  of  an! 
accommodation  bill  or  draft,  on  which  the  maker  cannot  be  held  liable 
until  after  an  acceptance  or  non-acceptance.  We  think  the  instrument, 
as  it  is,  is  an  imf)erfect  bill  or  draft,  for  the  payment  of  which  no  one 
is  liable.  With  [)roper  averments,  showing  tiie  objects  and  purpose  of 
the  parties,  nn<l  that  the  maker  intended  to  l)ind  himself  in  the  first 
instance  to  pay  the  same,  he  might  possibly  be  held  responsible  without 
a  drawee  or  acceptor,  but  not  otherwise.  ' 

We  can  see  no  mat<?rial  difference  between   the  writing  here  sued    ^ y^ 
on  and  tlic  one  in  hoU  v.  A\h'n   (IT)  Mass.  4.33),  in  wliicli  the  court  ^^    ^ 
says:     "But  th<'  mere  possession  of  a  paper  drawn  in  the  form  of  an  "V 
order,  there  being  no  drawee   in   existence,   we  think   cannot   entitle 
the  possessor  to  an  action  in  any  form." 

The  same  doctrine  may  be  drawn  from  Prii)  v.  Hrjinnlds  (!)  Kxch. 
H.  411)  and  in  /hiris  v.  (Utirk  (\  l^'ng.  Com.  l>aw  \\.  177).  From 
these  authorities,  and  the  rcas^oji  of  law  governing  instruments  of  tliis  '' 
or  the  like  character,  we  an*  clearly  of  the  opinion  that  the  petition  in 
this  case  did  not  set  out  a  good  cause  of  action,  and  that  the  court 
erred  in  overriding  defendant's  special  demurrer  to  the  same.  We 
think  the  demurrer  should  have  been  sustained  and  the  plaintiffs  per- 
mitted to  amend  their  pleadings,  that,  if  desired,  they  might,  by 
proper  averments  and  proof,  establi.sh  the  liability  of  the  maker  or 
drawer  in  the  first  instance,  without  an  acceptance  or  non-acceptance. 


loO  t'OUM    UKyUIKKD.  [aUT.    11. 

Till'  judj^mout   of    the    Oistrict   Court    is    reversed    and    the   cause 
remauded. 

Reversed  and  remanded.* 


t 


§20  Funk  v.  Babbitt,  15(1  111.  408.-1895.  "  B.  Apr.  23,  1891. 
Thirty  days  after  date  pay  to  the  order  of  E.  D.  Babbitt  $350,  for 
value  rt'ooived.  Funk  &  Lackey."  Mr.  Justice  Baker:  "Said 
instruments  were  dechued  on  as  promissory  notes.  It  is  urged  that 
they  are  not  notes,  or  even  promises  to  pay,  and,  not  being  directed  to 
any  one,  do  not  constitute  drafts  or  orders,  and  in  fact  amount  to  no 
more  than  blank  pieces  of  paper.  They  are,  undoubtedly,  very  irregu- 
lar and  informal  instruments,  but  they  are  not  void  as  written  evi- 
dences of  indebtedness.  A  person  may  draw  a  bill  upon  himself,  pay- 
able to  a  third  person,  in  which  case  he  is  both  drawer  and  drawee. 
Here  the  firm  drew  bills,  but  did  not  address  them  to  any  third  person 
or  persons,  and  it  is  therefore  to  be  regarded  that  they  were,  in  legal 
effect,  addressed  to  themselves,  as  drawees,  and  the  signatures  of  the 
firm  to  the  several  bills  bound  the  firm  both  as  drawers  and  acceptors. 
The  instruments  are  inland  bills  of  exchange,  to  which  the  firm  sus- 
tains the  triple  relation  of  drawers,  drawees,  and  acceptors,  and  as  the 
declaration  contains  the  consolidated  common  counts,  the  ImIIs  were 
admissible  in  evidence  under  them.  Moreover,  the  drawers  and 
drawees  being  the  same,  the  bills  are,  in  legal  etTect,  promissory  notes, 
and  may  be  treated  as  such,  or  as  bills,  at  the  holder's  option.  (1 
Daniel  on  Neg.  Inst.,  §§  128,  129)." 


§  20  Wheeler  v.  Webster,  1  E.  D.  Smith  (N.  Y.  C.  P.)  1  (1850). 
By  the  Court,  Ingraham,  First  J.  *'  I  am  of  the  opinion  that  the 
omission  of  the  name  of  the  drawee  at  the  foot  of  the  bill  will  not 
vitiate  it.  The  acceptance  may  be  considered  as  supplying  the  defect, 
and  as  being  an  admission  by  the  acceptor,  that  he  is  the  person  in- 
tended. At  any  rate,  it  does  not  lie  with  him  to  make  such  defense, 
after  having  admitted,  by  the  acceptance,  that  he  was  the  person  in- 
tended, and  after  having  promised  to  pay  the  draft  at  maturity.  He  is 
estopped,  by  his  own  act,  from  such  a  defense." 

5  In  Peto  V.  Reynolds,  (9  Exch.  410),  cited  above,  the  bill  was  Tiot  addressed 
to  any  drawee,  but  across  the  face  was  written:  "Accepted,  Samuel  Reynolds, 
Esq.,  Shorn  Lane,  Bedminster,  Bristol."  One  Rifjhton  (the  drawer  of  the  bill) 
wrote  this  acreptance.  Defendant  denied  Fifjhton's  authority,  riiore  was  evi- 
dence that  defendant  had  orally  promised  to  pay  the  hill,  but  whether  abso- 
lutely or  conditionally  was  not  clear.  Plaintiff  had  a  verdict.  The  court  held 
there  must  be  a  new  trial  because  of  the  unsatisfactory  state  of  the  evidence. 
Three  of  the  four  judges  expressed  the  opinion,  however,  that  the  instrument 
was  not  a  bill  of  exchange  for  the  want  of  a  drawee,  but  might  be  treated  as  a 
promissory  note  if  Reynolds,  in  fact,  ratified  the  signature.  —  H. 


VI.]  MUST  BE  DELIVERED.  151 

VI.  Delivery  essential, 

§  35  HILLSDALE  COLLEGE    v.  THOMAS. 

40  Wisconsin,  661.—  1876. 

Action  on  a  promissory  note  signed  by  defendant's  testator  and 
payable  to  plaintiff. 

The  answer  is  to  the  effect  that  one  Parmalee,  an  agent  of  the 
plaintiff*,  called  npon  the  defendant's  testator,  and  solicited  him  to  pur- 
chase a  scholarship  in  the  plaintiff  college,  which  he  at  first  refused  to 
do;  that  finally,  at  tlie  request  of  Parmalee,  he  signed  the  note  in  suit, 
and  left  it  with  Parmalee,  under  an  agreement  that  the  latter  should 
hold  it  for  the  testator  until  a  certain  time,  to  be  returned  to  the  testator     i 
in  case  he  should  not  decide  to  purchase  such  scholarship,  and  in  the    I  y 
meantime  the  note  should  not  be  considered  as  delivered  to  the  plain- 
tiff;  and  that  at  the  specified  time,  the  testator  informed  Parmalee  that 
he  had  decided  not  to  purchase  the  scholarship,  and  demanded  a  return  | 
to  him  of  the  note,  but  Parmalee,  professing  to  have  sent  the  npte  by  1 
mistake  to  the  plaintiff,  did  not  comply  with  such  demand.  --**-/' /jl^^«  l.^,     ^^ 

On  the  trial,  by  proof  and  the  defendant's  admissions,  pTamtiff 
made  a  prima  facie  case.  Defendant  offered  testimony  tending  to 
prove  the  averments  of  the  answer,  but  an  objection  to  its  admission 
was  sustained;  and  the  jury,  by  direction  of  the  court,  returned  a 
verdict  for  the  plaintiff  for  the  amount  due  on  the  note  by  its  terms. 
From  a  judgment  entered  on  such  verdict  tlie  defendant  appealed.      '^^^ 

Lyont,  J.     The  ruling  of  the  court  rejecting  al  Itest  i  mon  v-~uTTder  the   / 
answer  is  equivalent  to  an  order  sustaining  a  general  demurrer  thereto. 
It  is  an  adjudication  that  the  answer  does  not  contain  facts  sufficient 
to  constitute  a  defense  to  the  action.     If  it  states  a  defense,  the  ruling  "^ 

is  erroneous  and  fatal  to  the  judgment.  We  have  no  doubt  whatever 
that  the  answer  states  a  complete  defense  to  the  action,  aiul  that  the 
testimony  offered  to  |)rove  the  allegations  tlicrcof  sliojild  have  been 
received. •  >  /-t^  •        ••  c^C'-,,! 

The  note  was  not  left  with  I'iiiiiimIcc,  the  agent  of  the  plaintiff,  as 
an  escrow.  On  the  contrary,  the  dd'cndant's  testator  retained  the  abso- 
lute control  of  the  note,  and  the  right  to  recall  it  if  he  chose  to  do  so. 
Such  a  deposit  has  none  of  the  essential  fcnlnres  of  a  delivery  in 
escrow,  and  hence  we  are  not  called  upon  to  dctcrniine  the  legal  effect 
of  the  delivery  of  a  note  in  escrow  to  the  agent  of  the  payee.' 


's,^ 


•  While  it  18  now  generally  conceded  that  a  negotiable  instrument  may  be 
delivered  in  escrow  to  a  third  person  for  the  payee,  the  name  as  a  sealed  instru- 
ment, it  is  a  disputed  question  whether  it  jnay  be  so  delivered  in  escrow 
directly  tf»  the  jinyec  or  his  aj;ent.  The  f»)lh)wing  cases  hold  that  it  may  not: 
KtDrnrt  V,  Anilrrson.  .'iO  Tnd.  37.'i :  .fonrs  v.  Shnir.  67  Mo.  667;  Oarnrr  v.  Fite,, 
93  Ala.  40.') :  f'nrlrr  v.  Moulfnn.  ."il  Kans.  '.).  The  foHowint'  ca«es  hoM  that  it 
may:  Burkr:  v.  Dulaney,  153  U.  S.  228;  Benton  v.  Martin,  52  N.  Y.  570;    Wot- 


\y2  I'OHM    UKyUlUKD.  [aUT.    11. 

'r[iero  was  no  delivory  of  the  iiisiniiiu-iit^  aiul  licnce  it  never  liad 
an  imeption  or  legal  existence  as  the  note  or  obligation  of  the  tes- 
tator. It  remained  mere  waste  paper,  just  as  it  would  have  been 
had  the  testator  kept  it  in  his  pocket  instead  of  leaving  it  with 
Parmalee.  The  fact  that  Tarmalee  was  the  agent  of  the  plaintitl'  is 
of  no  importance.  Were  the  plaintitl"  a  natural  person,  and  had  the 
testator  left  the  note  wTtlTsueh  persbif  YmderTtie  same  circumstances, 
it  would  not  be  a  delivery,  and  would  confer  no  right  of  action.  Had 
the  paper  been  put  in  circilirrttcmrand  wenTthc  pltiintiif 'a  bona  fide 
holder  thereof,  for  value,  before  due,  we  would  or  might  have  to  deter- 
mine whether  or  not  the  testator  had  been  guilty  of  negligence  in  the 
premises.  But  we  have  no  such  question  in  this  action.  These  views 
are  abundantly  sustained  by  the  following  cases:  Waller  v.  Ehcrt,  29 
Wis.  194;  KcUofjq  v.  Sfci'ner,  Td.  G26 ;  Bvtler  v.  Cams,  37  Td.  61; 
Thomas  v.  Watk-ins,  IC)  Id.  549  :  rhipman  v.  Tucker,  38  Id.  43  ;  Roberts 
V.  McGrath,  Id.  52 ;  Roberts  v.  Wood,  Id.  60. 

Judgment  reversed  and  a  new  trial  awarded.^ 


§35 

17  Mi.NNESOTA,  230.-1871. 

Action  on  a  promissory  note,  brought   in  the  District  Court  for 

Steele  county,   resulting   in   a   verdict   for   the   defendant.     Plaintiff 

moved  for  a  new  trial,  which  was  denied,  and  he  appeals  to  this  court 

from  the  order  denying  such  new  trial.     A  single  point  only  is  dis- 

'-  ctissed  in  the  appeal,  which  is  fully  stated  in  the  opinion. 

By  the  Court  — Bkhry,  J.  This  is  an  action  upon  a  promissory 
note  payable  by  its  terms  to  C.  W.  Stevens,  or  bearer,  and  signed  by 
the  defendant.    - 

There  was  plenary  evidence  showing  thai  the  plainlifl'  is  a  bona  fide 
v^'holder  of  the  note,  having  purchased  the  same  before  maturity  in  good 
faith,  WMtliout  notice,  and  for  value. 

The  only  defense  urged  here  is  that  there  was  no  delivery  of  the 

kitis  V.  Bowers,  119  Mass.  383;  Brown  v.  St.  Charles,  06  Mich.  71;  Siceet  v. 
Stevens,  7  R.  I.  375.  —  H. 

[For  autliorities  on  the  admissil.ility  of  parol  oviricncc  to  show  conditional 
delivery  of  bill  or  note  see  the  followin},':  Beach  v.  Xevins,  1G2  Fed.  129,  18  L. 
N  S.  2S8  with  note;  Graham  v.  Urmm.el,  70  .Ark.  140;  St.  PauVs  Ep.  Ch.  v. 
Fields  81  fonn.  670;  Murray  v.  IV.  IF.  Kimhall  Co.,  10  Ind.  .App.  141,  184; 
Oakland  Cem.  .-l.v.^'n  v.  I.alrhu',.  126  Iowa.  121.  3  A.  &  E.  Ann.  Cas.  ^^9  with 
notfe;  McMght  v.  Parson.-i,  135  Iowa,  390,  15  A.  &  E.  Ann.  Cas.  665  with  note: 
Burt  V.  Ford,  142  Mo.  283;  ./ame.ftown  Hits.  College  v.  .Mien,  172  N.  Y.  201, 
92  -Am.  Pt.  Rep.  740  with  note.  —  C] 

^  See  note  on  "  InstruTnents  pnt  in  cirrnlation  in  violation  of  instrnctions  or 
conditions"  in  11   Am.  St.  Hep.  314-316.  —  C. 


VI.]  MUST  BE  DELIVERED.  153 

note  to  anj^_£ersonJyLiir_jOB-befeftlf  of  the  defendant;  that  for  want 
of  delivery  it  is  not  the  note  of  defendant,  and  he  is  not  liable  thereon 
even  to  a  bona  fide  holder.  "  A  bona  fide  holder  for  value,  without  ,y 
notice,  is  entitled  to  recover  upon  any  negotiable  instrument,  which  ^  c^ 
he  has  received  before  it  has  become  due,  notwithstanding  any  defect 
or  infirmity  in  the  title  of  the  person  from  whom  he  derived  it ;  as,  for 
example,  even  though  such  person  may  have  acquired  it  by  fraud,  or 
eyenjjy  theft,  or  by  robbery."  (Story  on  Prom.  Notes,  §  191 ;  2  Gr. 
Ev.,  §^  lU;  S'wifi  V.  ^'yson,  16  Pet.  1;  Goodman  v.  Symonds,  20 
Howard  365;  Raphael  v.  Bank  of  England,  17  C.  B.  162;  Wheeler  v. 
auild,  20  Pick.  545 ;  Magee  v.  Badger,  34  N.  Y.  249 ;  Powers  v.  Ball, 
27  Vt.  662;  C'atiin  v,  Hamon,  1  Duer,  325;  Gould  v.  Seger,  5  Duer, 
268;  Marston  v.  Allen,  8  Mees.  &  W.  494;  Sm.  Lea.  Cas.  597  et  seq.; 
1  Koss,  Lead.  Cases,  205  et  seq.) 

The  fact  that  there  has  been  no  delivery  of  the  instrument  by  or 
for  the  maker,  or  by  or  for  an  indorser  through  whom  the  holder  must 
claim,  is  a  defect  or  infirmity  of  title  within  the  meaning  of  the  rule 
above  cited,  a  rule  which  is  said  to  be  laid  up  among  the  fundamentals 
of  the  law.  (Worcester  Co.  Bank  v.  Donh.  cQ  Melton  Blc,  10  Cush. 
488;  Edwards  on  Bills  and  Notes,  188;  Gould  v.  Seger,  supra;  Ingham 
V.  Primrose,  7  C.  B.  (N.  S.)  S2  ;Shippey  v.  Carroll,  45  111.  285;  Clark 
V.  Johnson,  52  111.) 

The  order  denying  a  new  trial  must  be  reversed.®  i    , 

«  For  an  oxcoIFpnt  case  setting  forth  with  great  persuasiveness  the  contrary 
doctrine,  .see  ,Sallry  v.   Ternll,   U5   Me.  553.      In   this  case   the  detentiant   wnA 
engaged  in  a  lunibi-riiig  operation,  and  Ilurd  was  in  his  employ.     Among  his   ^  "^ 
duties  was  that  of  keeping  tlie  time  c.f  tlie  m~en   in  llie~"wonds  and   when  one  ^  , 

was  discharged  to  draw  an  order  on  the  def.-ndant  for  the  amount  due.  Blank  ^^  /* 
orders  were  furnislied  Ihird  liy  the  defendant  for  this  purpose.  As  a  matter  ^^  ^ 
of  practice.  Jliird  drew  an  order  on  tiie  defendant,  payable  to  the  order  of  Harry 
Carter,  for  .$75.25,  the  same  being  in  full  sctliemint  for  cooking.  This  order 
was  never  delivered  to  Carter,  nor  inlend.-d  to  be  delivered.  Hurd  left  it  on 
his  table,  with  other  papers,  for  a  few  moments,  while  he  was  called  away,  am! 
on  his  return  he  took  all  the  papers  and  everything,  and  burnt  them  up.  and 
supposed  the  order  was  thus  burned.  Carter  in  the  nieantinu-  had  abstracted 
the  order.  Later  Hurd.  thinking  of  the  order,  a.-ked  Carter,  who  had  been  near 
when  it  was  written,  if  he  had  scr-n  it.  and  he  said  he  had  not.  Carter 
negotiated  the  order  to  the  |.l:iintiir  for  a  valuable  connideration  without  notice 
<if  the  facts. 

Judgment  was  rendered  for  defemlant.  the  court  saying:  "  In  i]w  ciise 
before  us.  where  the  order  had  n.v.r  been  delivered,  and  therefore  had  no  legal 
inception  or  existence  as  an  order,  the  question  is  whether  there  is  any 
liability  Jipon  it  to  an  innocxmt  indorsee  for  valin-.  As  is  said  in  Hur.son  v. 
Huntiiujtiw,  21  Mich.  4)5:  "J  he  wrongful  act  of  a  thief  or  a  trespasser  may 
deprive  the  holder  f)f  his  property  in  a  note  which  has  om-e  become  a  note  or 
property  by  delivery,  and  may  transfer  tho  title  to  an  innocent  purcha-er  for 
value.  P,ut  a  note  in  the  hands  of  a  maker  before  delivery  is  not  property, 
nor  the  subject  of  ownership,  as  such.  It  is  in  law  but  a  bl;ink  fiieec  of  paper. 
Can  the  theft  or  wrongful  seizure  of  this  paper  create  a  valid  contract  on  the 


154  FOKM   REQUIRED.  [aKT.    II. 

§  35      massachusp:tts  national  bank  v.  snow. 

187  Massachusktts.  150.  —  1905. 

Action  by  the  MassaehuseUe  National  Bank  against  one  Snow. 
Verdict  for  defendant,  and  plaintid"  hriiifjs  exceptions.  — 

Knowlton,  C.  J.  This  is  an  action  of  contract  on  three  promis- 
_sory  notes,  signed,  "  II.  G.  &  H.  W.  Stevens,"  payable  to  the  order 
^{  the  defendant,  indorsed  by  hiHr~rn  blank,  and  discounted  by  the 
plaintiff.--  They  severally  bear  date  December  9,  1897,  and  the  rights 
of  the  parties  are  accordingly  governed  by  St.  1898,  p.  493,  c.  533, 
sometimes  called  the  "  Negotiable  Instruments  Act,"  which  is  now 
embodied  in  Rev.  Laws,  c.  73,  §§  18-212,  inclusive.  In  referring  to 
different  provisions  of  this  statute,  it  may  be  convenient  to  cite  the 
sections  of  the  Eevised  Laws,  rather  than  the  original  act. 

The  maker  of  the  notes,  H.  W.  Stevens,  who  did  business  under  the 
name  of  H.  G.  &  H.  W.  Stevens,  has  deceased ;  and  the  defendant 
introduced  evidence  tending  to  show  that,  after  the  defendant  had 
indorsed  the  notes,  they  were  taken  from  his  possession  by  the  maker, 
Avithout  his  knowledge  or  consent,  and  discounted  at  the  plaintiff 
bank,  and  that  they  were  altered  by  the  insertion  of  the  words  "  seven 

part  of  the  maker  against  his  will  where  none  existed  before?  There  is  no 
principle  of  the  law  of  contracts  upon  which  this  can  be  done,  unless  the  facts 
of  the  case  are  such  that  in  justice  and  fairness,  as  between  the  maker  and 
the  innocent  holder,  the  maker  ought  to  be  estopped  to  deny  the  making  and 
delivery  of  the  note.'  .  .  .  That  there  must  be  delivery  of  the  paper,  either 
actually  or  constructively,  is  clear.  Until  then  it  has  no  existence  as  a  con- 
tract.    Bnuk  V.  Strang,  72  111.  550." 

The  court  further  held  that  the  case  did  not  fall  "  within  the  principle  that, 
when  one  of  two  innocent  persons  must  suffer  by  the  act  of  a  third,  he  who 
has  enabled  such  third  person  to  occasion  the  loss  must  sustain  it.  .  .  .  The 
order  was  drawn  at  the  table  of  Hurd,  and  momentarily  left  there  with  other 
papers  of  his,  to  which  no  one  had  right  of  access,  and  from  which  it  could 
only  be  abstracted  by  a  criminal  act,  which  he  could  not  reasonably  anticipate." 

See  also  the  note  in  10  L.  N.  S.  107,  entitled  "  Rights  of  owner  of  negotiable 
paper  payable  to  bearer,  or  indorsed  in  blank,  as  against  bona  fide  purchaser 
from  one  unlawfully  in  possession  thereof,"  where  the  authorities,  pro  and 
con.  on  the  question  whether  a  delivery  is  necessary  to  the  existnnce  of  the 
instrument  as  an  enforcible  contract  are  exhaustively  considered  (see  particu- 
larly, pages  109-111). 

The  conflict  of  authority  in  the  decisions  represented  by  the  Salley  and  the 
Kinyon  cases  was  rpsolved  in  favor  of  the  doctrine  of  the  latter  cases  by 
section  35  of  tho  Negotiable  Instruments  Law.  "  The  primary  purpose  of  the 
Negotiablf  Instruments  Law  was  to  make  the  law  relating  to  commercial 
paper  uniform  throughout  tlie  United  States.  Specifically,  it  was  the  purpose 
of  the  act  to  exchide  non-delivery  by  the  maker  as  a  defense  to  a  suit  on  a 
note  complete  in  form  and  pxecution  by  a  holder  in  due  course."  8  Mich. 
Law  Rev.  41.  "This  change,  like  some  others  made  by  the  act,  is  in  the 
direction  of  facilitating  the  circulation  of  commercial  paper."  Crawford's 
Neg.  Inst.  Law,  3d  ed.,  p.  28.—  C, 


VI.]  MUST  BE  DELIVERED.  155 

per  cent."  after  the  words  "  with  interest."     The  defense  is  founded 

on  this  evidence.     The  defendant's  counsel  stated  that  he  made  no 

contention  tliat  the  bank  had  actual  knowledge  of  any  infirmity  in 

the  instruments,  or  defect  in  the  title  to  them,  or  that  it  took  them  ^^-^.^ 

in  bad  faith.     Nor  was  it  contended   !\v   thi-  defendant   tliat   in  disr  ,/  ^*^-^ 

counting  the  notes  the  bank  acted  otherwise  than  in  the  nLTuhir  and"  /^    . 

uSttal^course   of  business.     But  upon    the   defendant's    tcstiniDnv    it 

might  be  found  that  Hie  notes  were  given  to  him  by  tiie  maker  in  -y^ 

payment  of  indebtedness;  that,  after  he  had  indorsed  them  in  blank,  ^'^^ 

and  put  them  in  his  desk  for  collection  or  discount,  he  was  called  out  "^ 

of  his  office,  leaving  the  maker,  Stevens,  there;  and  that  Stevens  then     ^^^ 


took  them  without  right,  and  three  days  later  carried  them  to  the  ~S_^ 
plaintiff  bank,  and  caused  them  to  be  discounted  for  his  own  benefit.^    ^^*a^ 

The  plaintiff  made  many  requests  for  rulings,  which  were  refused,    ^*^ 
subject  to  its  exception,  among  which  were  the  following:     *     *     * 
Fifth.  That,  when  an  instrument  is  in  the  hands  of  a  bnlrlpr-in 

id  delivery  inereoi  py  all  parties  prior  to  him,  so  as      | 
'to  makeJii£ffl--UabIc~EcrlThri.  is  eonclusively  presumed."     '     ^     *  / 

"Ninth.  That  a  holder  of  a  note  is  deemed  prima  facie  to  be  a 
holder  in  due_ course?"    *     *     * 

"TN^ineteenth.  That  when  an  instrument  has  been  materially  altered, 
and  is  in  the  hands  of  a  holder  in  due  course,  not  a  party  to  the  alter- 
ation, he  may  enforce  payment  thereof  according  to  its  original 
tenor."     -     -'    - 

The  plaintiff  also  excepted  to  the  following  instructions  given  at 
the  request  of  tho  defendant: 

"  Fourth.  That  if  the  jury  find  that  the  notes  were  taken  from  the 
dofonrlant  wrongfully,  and  that  the  same  were  never  delivered  by  the 
defendant  to  Stevens,  the  plaintiff  gained  no  title  to  the  notes  by  the 
negotiation  of  the  same  by  Stevens,  and  the  plaintiff  cannot  recover. 

"  Fifth.  The  burden  is  upon  flic  iilainlifT  to  show  thai  the  notes 
were  delivered  by  the  defendant  in  StcM'iis.  or  snnic  oihrr  person 
autliorl/.ed   to  negotiate  tliem  at   the   plaint  ill'  hank." 

"Seventh.  Or,  in  the  alternative,  if  the  jury  lind  that  tho  notes  in 
question  were  altered  by  the  addition  of  the  words  'seven  per  cent.' 
thereto  after  the  same  were  indorsed  by  the  defendant,  such  an  alter- 
ation is  a  material  and  wrongful  one,  destroying  the  validity  of  the 
notes,  and  upon  the  notes,  or  any  one  of  thorn,  thus  altered,  the 
plaintiff  rannot  roeovor." 

Xhe  notes,  being  indorsed  in  blank,  were  payable  to  Ip^ayer.  yifhin 
the  meanintr  of  ttie  statute.  T?ev.  Tiaws,  c.  73,  ^  2fi  (5)."  A\nien  the 
notes  were  taken  to  the  plaint  iff  for  discount,  Stevens  was  the  hearer 
Rev.  T.iaws,  r.  73,  §  207.'     The  presentation  of  sneh  notes  for  di.^eount 

•N.  Y.,8  28.  Bubd.  6.  — C. 
»  N.  Y.,  §  2.  —  C. 


156  I'OKM  Ki;(^uiuKn.  [art.  ii. 

raisod  a  prcsuiTiption  of  fact  that  the  bearer  was  the  owner  of  them. 
Pet  ire  V.  rroiif.  ;?  (^ray,  50"?.  T'"pon  tlio  undisputed  evidence,  and 
upon  tlie  defendant's  admission  tliat  the  plaintilT  took  thein  in  good 
faith,  and  diseounted  Iheni  witliouf  knowledge  of  any  infirmity  in 
them  or_defggt  pf  title  in  Stevens,  the  plnintiif  became  a  holder  in 
due  course,  within  the  definition  of  the  statute.  Kev.  Laws,  c.  73, 
ij§  Gi)-7l5;-'  lioston  Steel  tt:  iron  Conipanij  v.  Sleiier,  183  Mass.  140. 

The  defendant's  contention  that,  after  the  notes  had  been  delivei-ed 
to  the  defendant  and  indorsed  by  him,  they  were  stolen  by  Stevens, 
brings  us  to  the  question  whether,  under  the  Negotiable  Instruments 
Act.  a  holder  in  due  course  of  a  note  payable  to  bearer,  that  has  been 
stolen,  can  acipiire  a  good  title  from  the  thief.  Even  before  the  enact- 
ment of  the  statute,  while  the  decisions  were  not  uiiifdiin,  the  weight) 
of  authority  was  in  favor  of  an  nOirniative  answer  to  the  (jiiestion./ 
Wheeler  w.Uiiihl.  '.^O  i'irk.  T)!-").  f).".!).  :):).■; ;  W'nrccslrr,  dr..  Hank  v. 
Dorchester,  etc.,  Bajil-,  10  Cush.  488;  ]Vyrr  v.  Same,  11  (hish.  51,  53; 
Spooner  v.  IloJmes,  102  Mass.  503;  London  Joint  Stock  Bank  v.  Sim- 
vions,  (1892)  App.  Cas.  201,  and  cases  cited;  Smith  v.  Bank,  1  Q.  B. 
D.  31 ;  Goodman  v.  Sim,onds,  20  Howard  343-365 ;  Murray  v.  Lar'dner, 
2  Wall.  110;  Hotchkiss  v.  National  Shoe  &  Leather  Bank,  21  Wall. 
354;  Kinyon  v.  Wohlford,  17  Minn.  239  (Oil.  215)  ;  Clarke  v.  John- 
son, 54  111.  296;  Seybel  v.  National  Currency  Bank,  54  N.  Y.  288; 
Pvertson  v.  National  Bank  of  Newport,  66  N.  Y.  14  ;  Kuhns  v.  Geftiis- 
hurrj  National  Bank,  68  Pa.  445. 

The  following  specific  language  of  the  statute  touching  this  ques- 
tion, as  well  as  its  provisions  in  other  sections,  was  intended  to  estab- 
lish the  law  in  favor  of  holders  in  due  course:  "  But  where  the  instru- 
ment is  in  the  hands  of  a  holder  in  due  course,  a  valid  delivery  thereof 
l>y  all  parties  prior  to  him,  so  as  to  make  them  liable  to  him,  is  con- 
clusively presumed."  Eev.  Laws,  c.  73,  §  33.^  This  conclusive  pre- 
sumption exists  as  well  when  the  note  is  taken  from  a  thief  as  in  any 
other  case.  Of  course,  this  rule  does  not  apply  to  an  instrument 
which  is  incomplete.  But  in  reference  to  a  complete,  negotiable  promis- 
sory note,  payable  to  bearer,  it  is  a  wholesome  and  salutary  provision. 
See  Greeser  v.  Sugarman,  37  Misc.  (N^.  Y.)  799.  Upon  the  defend- 
ant's statement  and  the  counsel's  theory  of  the  case,  the  rule  is  ap- 
plicable. The  note  was  not  only  complete  in  form  and  in  execution, 
but,  upon  his  testimony,  it  had  been  delivered  to  him  by  the  maker 
as  a  binding  instrument,  and  had  afterwards  been  indorsed  by  him. 
Therefore  the  first  sentence  of  Eev.  Laws,  e.  73,  §  33,  "  Every  contract 
on  a  negotiable  instrument  is  incomplete  and  revocable  until  delivery 
of  the  instrument  for  the  purpose  of  giving  effect  thereto,"  was  in- 
applicable.    The  instrument  had  taken   effect,  and  was  subsequently 

*N.Y.,  §§91-98. —  C. 
«  N.  Y.,  §  .35.  —  C. 


VI.]  MUST  BE  DELIVERED.  157 

negotiated  by  the  bearer  to  the  plaintiff  as  a  holder  in  due  course. 
That  the  bearer  was  also  the  maker  was  immaterial  after  the  instrument 
h;id  been  so  indorsed  as  to  become  payable  to  bearer.  Upon  the  plain- 
tiff's theory  of  the  facts,  there  was  no  theft,  but  an  ordinary  accom- 
modation indorsement  by  the  defendant  for  the  benefit  of  the  maker, 
I  and  none  of  theso  (-|iieptinns  arise.  We  are  of  opinion  that  the  judge 
erred  in  giving  the  rniii-th  and  fifth  instructions  iT(iiicsir(l  by  "the 
defendant,  and  in  refusing  other  instructions  requested  by  the  plain 
tofFj  fnnndod  upon  a  different  view  of  the  statute. 

There  was  also  error  in  the  instructions  given  as  to  the  allege 
alteration  of  the  notes.  By  Eev.  Laws,  c.  73,  §  141,*  it  is  provide 
that  "  wlien  an  instrument  has  been  materially  altered,  and  is  in  the 
hands  of  a  holder  in  due  course,  not  a  party  to  the  alteration,  he  may 
enforce  payment  thereof  according  to  its  original  tenor."  This  lan- 
guage is  directly  applicable  to  the  present  case.  See  Scholfield  v. 
Earl  of  Londesborough,  (1894)  2  Q.  B.  660,  (1895)  1  Q.  B.  536, 
(1896)  A.  C.  514;  Schwartz  v.  Wilmer,  90  Md.  136-143. 

We  understand  tluit  the  instructions  were  given  independently  of 
any  question  of  pleading,  and  we  therefore  do  not  deem  it  necessary 
to  determine  at  this  stage  of  the  case  whether  the  plaintiff  should 
amend  its  declaration  by  inserting  counts  u})on  the  notes  as  they  were 
before  the  alleged  alteration,  if  it  wishes  to  recover  upon  them  as 
notes  bearing  interest  at  only  6  per  cent.  See  Mutual  Loan  Ass'n  v. 
Leaser,  76  App.  Div.  (N.  Y.)  614.  Nor  do  we  consider  other  ques- 
tions which  are  not  likely  to  arise  upon  a  second  trial. 

J      ,  -  Exceptions  sustained. 


§35  "       y    BUZZm.L  r.  TOBIN.       ^  v^    ,,^ 

201  Marsacht'sf.tts,  1.  —  1000 


Contract,  by  one  alleged  to  be  tbc  lidldcr  in  due  course  of  a  check 
signed  by  Ibe  dffcndant,  <o  recover  Ibej^n^ounl  of  the  cbeck.  /     " '  ■ 

At   tlie  trial  tbere  was  evidetu-e  tending  to  show  tlial   the  defendant '^  r ... 
had    ngreed    to    pnrchnse    two    liorses    of   otu'    Leoiuird.    tb;it    Lcniiard 
brought  the  horses  to  the  (TerelldilllfK  [il.iie  of  hui.iinnit^-llie  (lifeinliiut 
previously  having  marie  oTiTlTnd  feigned  and  left  on  his  desk  ;i  elieck 
'  payable  fo  ly<-on;ird's  ordrr  for  the  purdinse  price  of  Ibe  horses:  that 
the  defendant    unexpectedly   wms  enlled   upon   lo   |r>jive  Ids  ofllcr  "for  a 
short  time,  and  that,  in  his  al)spnee.  ;it   lyconard's  request,  th(>  defend- 
ant's bookkeeper  delivererl  the  check   to  biui  :  that   very  shortly  there- 
after the  defendant  stopped   payment  of  the  cbeck,  Iml    tliat.   in   tin-  ^ 
meantime,   fycfjuard  had  ne<rf)tiated   the  check   for  vahie  to  the  i)lain-^^--^  i^ 
tiff,  who  had   no  notice  of  the  transaction   between   TiConard   and   the'-'/^. 

-o^;<i 

*  N.  Y.,  §  205.  —  C.  ,  j^ 


168  l-OHM    KKQUIRED.  [aRT.    II. 

dofeiulant.  Tlio  dofondant's  ovidonoe  iondcd  to  show  tliat  the  hook- 
koe{)i'r  had  uo  authority  to  lU-liwr  tho  clu-ck  to  Leonard,  and  that  the 
reason  why  hestopped-P^v"'^'"t  on  Ihe  cheek  was  that  he  discovered 
tlwt  thC'Tiorses  were  unsound. 

At  the  close  of  the  evidence,  tlie  dcfenthint  requested  the  presiding 
judge  to  rule  that  the  plaintilT  could  not  recover.  T+ie  request  was 
refused  and  the  jury  returned  a  verdict  for  the  plaintiff.  The  de- 
fendant alleged  exceptions.' 

Bralky,  J.  If  the  consideration  of  the  check  as  between  the  de- 
fendant and  the  payee  was  tlie  price  of  a  pair  of  horses,  which  might 
have  been  found  to  have  been  jinsound  at  the  time  of  sale,  yet  the 
plaintiff  as  indorsee  having  taken  it  for  value,  and  in  good  faith  before 
it  was  overdue,  and  without  notice  of  any  infirmity,  or  that  payment 
had  been  stopped  at  the  bank,  became  a  holder  in  due  course,  with  all 
the  rights  appertaining  to  such  a  title.  Kev.  Law^s,  c.  73,  §69;° 
Wheeler  v.  Guild,  20  Pick.  545,  552,  553,  32  Am.  Dec.  231 ;  Shawmut 
National  Bank  v.  Manson,  168  Mass.  425 ;  Massachusetts  National 
Bank  v.  Snow,  187  Mass.  159.  The  defendant,  while  not  expressly 
conceding  tliis,  rests  his  defense  solely  on  the  ground  that,  because  his 
clerk  had  no  express  autliority  to  deliver  tlie  check  to  the  payee,  it 
was  unlawfully  put  m  circulation,  and  the  contract  being  incomplete, 
no  title  passed  to  the  plaintiff  byitssul)sequent  negotiation.  Fearing 
V.  Clark,  16  Gray,  74:;  Hill  v:  Hall,  W-i  Mass.  253,  265.  But  the 
check  was  in  the  hands  of  the  plaintiff  as  a  holder  in  due  course,  and 
as  to  him  a  valid  delivery  by  the  defendant  was  conclusively  presumed, 
even  if  this  defense  would  have  been  open  as  between  the  original 
parties.  Rev.  Laws,  c.  73,  §  33 ;  *  Massachusetts  National  Bank  v. 
Snow,  187  Mass.  159,  163.  We  are,  therefore,  not  called  upon  to 
decide  whether  there  was  other  evidence  upon  w'hich,  under  suitable 
instructions,  the  jury  could  have  found  either  actual  or  constructive 
delivery.  It  accordingly  follows  that  the  ruling  requested  could  not 
properly  have  been  given,  and  the  case  was  rightly  submitted  to  the 
jury.    '■ —  _ 

J^.       )>,/^,^jufr     Lno  Exceptions  overruled. 

Vn.  Non-essentials.  .„  , 

§  25  MEHLBERG  v.  TTSHER. 

24  Wisconsin,  607.  —  1869. 

Action  on  the  following  instrument: 

To  HoxiE  and  Rich:  Please  pay  to  (has.  Mehlberg  the  sum  of  $69.20,  and 
charge  to  me.  Chas.  Tisheb. 

Township  of  Manchester,  Feb'y  23,  1881. 

6N.  Y.,  §91.  — r. 
«  N.  Y.,  §  35.  —  C, 


VII.]  NON-ESSENTIALS.  159 

Dixon,  C.  J.  The  written  instrument  *  *  *  ^^g  ^  i,\]\  of 
exchange.  It  is  not  essential  to  the  validity  of  a  bill  of  exchange 
that  it  should  be  made  payable  to  order,  or  bearer/  or  have  the  words 
"  value  received,"  or  be  payable  at  a  day  certain,  or  at  any  particular 


§25  BROWN  V.  JORDHAL. 

32  Minnesota,  135.  — 1884, 

Plaintiff  brought  this  action  in  the  District  Court  for  Freeborn 
county,  as  holder  of  the  following  instrument: 

Township  of  Manchester,  Feb'y  23,  1881. 

$120.  Six  months  after  date,  (or  before,  if  made  out  of  the  sale  of  Drake's 
horse  hay  fork  and  hay  carrier),  I  promise  to  pay  James  B.  Drake,  or  bearer, 
one  hundred  and  twenty  dollars. 

Negotiable  and  payable  at  the  Freeborn  County  Bank,  Albert  Lea,  Minn., 
with  ten  per  cent,  interest  after  maturity  until  paid. 

OlE  J.  JOBDAHL  [Seal]. 

Witness:  J.  Williamson.  [Seal]. 

At  the  trial,  before  Farmer,  J.,  the  plaintiff,  having  introduced 
evidence  that  he  bought  the  note  from  Williamson  for  value,  before 
maturity,  in  good  faith  and  without  notice  of  any  defense  to  it, 
admitted  that  the  note  was  obtained  from  defendant  by  Williamson 
by  fraud,  and  that  as  between  those  parties  the  note  was  without  /^'*-\, 
consideration  and  fraudulent.  The  court  thereupon  directed  a  ver-_,-__^  ^ 
diet  for  defendant,  a  new  trial  was  denied,  and  the  j)hiiiitiff  appealed. ^^I^  ^  ^ 

GiLFiLLAX,  C.  J.     The  defendant  executed  an  instrument  in  the  '-\      ^-^ 
form  of  a  negotiable  promissory  note,  except  that  after  and  opposite      /"V-^^ 
the  signature  were  brackets,  and  between  them  the  word  "seal  "  thus,    >^  ^^ 
"  [seal]."    The  fpiestion  in  the  case  is,  is  this  a  negotiable  promissory  ^^^^'^.^ 
note,  .so  as  to  be  entitled   to  the  peculiar  privileges  and   immunities  "^ 

accorded  to  commercial  p;iper?  The  rule  that  an  instrument  under 
seal,  though  otherwise  in  tlie  form  of  a  promissory  note,  is  not  (cer- 
tainly when  executed  l)y  a  natural  person,  however  it  may  be  when 
executed  by  a  corporation)  a  negotiable  note,  entitled  to  such  privi- 
leges and  immunities,  is  universally  recognized,  and   is  not  di>;puied 


7  Nor  to  the  validity  of  a  promissory  note  that  it  should  bo  payable  to  order 
or  bearer,  f^mith  v.  Kendall,  6  T.  R.  124;  Carnwrifjht  v.  Gray,  127  N.  Y.  92; 
Wrll.t  V.  liriqhnm,  fi  Ciish.  (Mass.)  0.  Contra:  Bristol  v.  Warner,  19  Conn.  7. 
The  matter  as  to  promisnory  notes  is  one  of  eonstriirf ion  of  stafiitc,  as  such 
notes  are  the  creature  of  statute.  See  Neg.  Inst.  L.,  §  .'(20.  It  must  be  remem- 
bered, however,  that  the  Negotiable  Insfruments  I, aw  applies  only  (o  negotiable 
paper.  — ■  11. 

"  "  The  omission  of  the  words  '  for  vnluc  received  '  riocs  not  impair  the  note, 
afTect  its  legal  import  or  weaken  t)ic  presumption  tliat  it  was  given  for  value." 
McLend  V.  Jhintrr,  29  Mi.sc.   (N.  Y.)  .^fiS.  5f.O.  —  C. 


inO  FORM  RKQUIRKD.  |  ART.    II. 

in  this  state.  But  the  appellant  contends  that  merely  placing  upon  an 
iiistruincnt  a  siToll  or  ili'\iti',  jsiii'l)  as  the  slaliid'  allows  as  a  suhstilulo 
for  a  conunon-law  seal,  without  an}'  iwo^Miition  of  it  as  a  seal  in  the 
hody  of  the  inslriinu'ut,  does  not  make  it  a  sealed  instniiiieiit.  Un- 
douhtedly,  where  fliere  is  a  scroll  or  device  iipdii  ;in  inst  I'liriient,  there 
must  he  something:  iipmi  the  inst  inmeiit  \n  show  that  the  scroll  fw 
device  was  intended  for  and  used  as  a  seal.  The  scroll  or  rjeviee  does 
not  necessarily,  as  docs  a  common-law  seal,  estahlish  its  own  cliarac- 
ter.  Such  words  in  the  imtimnnium  clause  as  "  witness  my  hand  and 
seal.''  or  "scaled  with  my  seal."  would  estahlish  that  the  scroll  or 
device  was  used  as  a  seal.  No  such  reference  in  the  hody  of  the  instru- 
ment was  necessary  in  the  case  of  a  common-law  seal,  ((loddard's 
Case,  2  Coke  Kep.  5a;  7  l^ae.  Ahr.  |  Bouvier's  ed.|  '^44.)  Nor  is  there 
any  reason  to  require  it  in  the  case  of  the  statutory  suhstitute,  if  the 
instrument  anywhere  shows  clearly  that  the  device  was  used  as  and 
intended  for  a  seal,  it  would  he  difficult  to  conceive  how  the  party 
could  express  that  the  device  was  intended  for  a  seal  more  clearly 
than  hy  the  word  "seal,"  placed  within  and  nuide  a  part  of  it.  This 
was  ^n  instrument  under  seal. 

Order  afhrmed." 


CHRYSLER  r.  RENOIS'.      '-- "'^ 


[Rcpnrfrd  herein  at  p.  85.] 

§25  HOGUE  V.  WILLIAMSON". 

\ Reported  herein  «<  p.  88.] 


9  Accord:  ^Ynrrrn  v.  Lynch.  .5  Jolins.  (N.  Y.)  2.'?9;  Oshnrn  v.  Kisthr.  .^r)  O'l. 
St.  00:  O-shnrne  v.  Tluhhnrd.  20  Orr.  .TIP:  Mvue  v.  Pfn,l:Jrr.  S.-)  Al.i.  f^.'iO.  ''"Iio 
statute  (Neg.  Inst.  L..  §  25.  subsec.  4).  ctiMiiircs  tlic  law  upon  ttiis  point. 
\Sl.  I'auVs  Ep.  Ch.  v.  Fielits.  81  Conn.  (iTO.  lioKIs  a  nolc  under  .seal  negotiable 
under  tlie  Negotiable  Instruments  T>a\v. —  r.]  ^\itbnut  llie  aid  of  statutes  tlie 
courts  bad  decided  tbnt  tlie  bill  or  note  of  a  corporation  did  not  lo=e  it.s 
negotiable  clinraeter  because  of  tlie  preseTiee  of  tlie  corporate  seal.  Chase  N.  R. 
V.  Faurot.  140  N.  V.  .5.^2:  Mason  v.  Frick,  105  Pa.  St.  162;  Mackay  v.  f^aint 
Mary's  Church,  15  H.  1.  121  ;  Central  ^\  Ti.  v.  Charlotte,  etc.,  R.,  5  S.  Tar.  156. 
Tn  order  1o  tK'conir>  a  common-law  specialty  fbe  instrument  miist  recite  tbe  seal 
or  otberwise  indicate  tbe  intention  of  tbe  maker  to  create  a  specialty.  Weeks 
V.  Esler,  14.3  N.  Y.  374;  cases  supra.  [Followed  in  Matter  of  Ririe,  198  N.  Y. 
209.  —  C] 


VIII.]  DATE.  161 

(w)   Interpretation. 
Vin.  Date. 

§  30  ALMICH  V.  DOWNEY. 

45  Minnesota,  460.  —  1891. 

Action  on  a  promissory  note  for  $500,  brought  in  the  District  Court 
for  I,^Sueur_Cj2JiDi'y-  Trial  before  Edson,  J.,  and  verdict  for  defend- 
ants, who  appeal  from  an  order  granting  a  new  trial.  j:!^^ y^,**-'^ 

Vanderburgh,  J.  Plaintiff  is  the  indorsee  of  the  note'  in  ^uit. 
The  note  was  dated  June  25,  1886,  and  was  by  its  terms  payable  six 
months  after  date.  It  is  alleged  in  the  complaint  to  have  been 
executed  and  delivered  on  the  day  of  its  date.  It  appears  from  the 
evidence,  however,  that  the  note  was  actually  executed  and  delivered 
on  the  25th  day  of  June,  1887,  and  that  the  date  was  written  1886, 
by  mistake.  There  was  evidence  to  go  to  the  jury  tending  to  show 
that  it  was  indorsed  to  the  plaintiff  for  value  within  six  mouths  from 
the  actual  date  of  its  delivery,  but  not  within  six  months  or  before 
its  maturity,  according  to  the  face  of  (Tie  note.  The  court  charged 
the  jury,  um^er  plaintiff's  exception,  that  if  the  note,  when  trans- 
ferred to  plaintiff,  was  due  according  to  the  date  as  actually  expressed 
therein,  and  was  given  without  consideration,  their  verdict  must  be 
for  the  defendants.  If  a  note  is  antedated  or  post-dated  by  the  maker, 
it  is  a  valid  contract  from  the  time  of  its  delivery;  and,  since  it  is 
competent  to  express  the  agreement  of  the  parties  in  that  way,  the 
courts  will  construe  the  instrument  according  to  its  terms;  and  if, 
when  delivered,  it  is  by  its  date  overdue,  it  will  then  be  treated  as  a 
demand  note.  (1  Para.,  Notes  and  B.,  p.  49;  3  Rand.,  Com.  Paper, 
§  1031.) — ftrft  where  the  notg  ii^  intended  to  bear  d"t"  i"  ■(jf  fhr  timfr 

alee  anotl 


of  its  dcliveryT'tfiat  is  the  trugjjaj^)  finn  u  py  "^^s^:a^<e  another  date 
is  WTitU'rr^n  the  fare  of  the  note,  the  mistake  may  De  correctedr" 
ejfcppf  as^  to"~an  innwf^nt  mdnrsee  or  j^nrcnaser  who  wou'ld  be  p'V'jn- 
dicexTTiy  the  correction,  and  the  mistake  may  be  shown  by  parol.  (2 
Pars.,  Notes  and  I')..  511.)  As  it  clearly  appeared  that  the  note  was 
given  in  1887,  ami  the  wrong  year  inserted  in  the  date  by  mistake,  '• 
the  note,  by  intemhiient  of  law,  was  payal)l(!  in  six  months  from  June 
25,  1887;  and  if  negotiated  and  indorsed  to  the  plaintilV  before  due, 
in  good  faith  and  for  value;,  the  defense  of  want  of  consideration  is 
not  available;  and  the  mistake  may  in  such  case  be  shown  as  well  by 
the  indorsee  as  the  payee  of  the  note.  (Drake  v.  Rogers,  32  Me.  524; 
Gernvmin  Haul-  v.  Disllcr.  1  II  un,  633;  affirmed  in  64  N.  Y.  642;  li> 
Daniel.  Xeg.  Inst.,  §  83;  1  Edw..  P.ills  and  N.,  5J  171.)  .U^'  /j"^  t- 


The  mistake  should  strictly  have  been  alleged  in  the  complaint,^ 
but  as  the  evidence  wa«(  received  without  ol)j(>ction,  and  the  fact 
was  before  the  court  as  if  properly   pleaded,  and  considered  by  the 

NEGOT.  INBTHOMBNTB — 11 


> 


I 

t 

i 


162  INTEHPnETATlON.  [aUT.    11. 

court  in  its  chargo,  the  objoction  to  the  pleading  cannot  be  raised 
now.  Tlie  pleading  niiglit  have  been  amended  I'ormally  to  conform 
to  the  proofs  after  the  evidence  was  in. 

For  the  reasons  stated,  it  is  apparent  that  the  court  erred  in  its 
charge  on  this  branch  of  the  case,  and  the  order  granting  a  new  trial 
was  proper,  though  based  on  other  grounds.     *     *     * 

Order  affirmed. 


§31  COLLINS  1'.  DRISCOLL. 

69  California,  550.  —  1886. 

Belcher,  C.  C.  The  controlling  question  in  this  case  relates  to  the 
statute  of  limitations.  The  action  was  commenced  on  the  twenty- 
fourth  day  of  October^.. 13^2^  and  was  based  on  a  promissory  note 
dated  May  1,  1878,  and  payable  one  day  after  date,  with  interest. 
In  the  complaint  it  was  alleged  that  the  note  was  not  in  fact  made  or 
delivered  to  plaintiff  until  the  fifteenth  day  of  July,  1879 ;  that  during 
the  year  1878  the  plaintiff  loaned  to  the  defendant  sums  of  money, 
which  amounted  in  the  aggregate  to  the  sum  named  in  the  note  as 
principal,  and  which  he  verbally  promised  to  repay,  but  made  no 
written  promise  to  do  so ;  that  on  the  fifteenth  day  of  July,  1879, 
"  the  defendant,  at  his  own  instance,  and  without  any  request  from 
plaintiff,  caused  said  note  to  be  prepared,  and  he  signed  and  delivered 
the  same  to  plaintiff  without  being  thereto  requested  or  required  by 
the  plaintiff;  that  said  note  was  antedated  as  aforesaid,  at  defend- 
ant's own  instance,  for  the  reason  that  defendant  wished  to  pay  in- 
terest on  said  principal  from  the  first  day  of  May,  a.  d.  1878,  and  at 
the  rate  in  said  note  specified."  The  defendant  demurred  to  the  com- 
plaint, upon  the  ground  that  the  cause  of  action  was  barred  by  the 
statute  of  limitations.  The  court  at  first  overruled  the  demurrer,  but 
afterwards  reconsidered  its  ruling,  and  sustained  it,  and  then  entered 
judgment  in  favor  of  defendant. 

In  our  opinion,  the  first  ruling  was  right  and  the  second  wrong. 
■'  In  general,  it  is  not  essential  to  a  note  that  it  should  be  dated  ;  and 
if  there  be  no  date,  it  will  be  considered  as  dated  at  the  time  it  was 
made.  If  it  be  dated,  the  date  will  be  prima  facie  evidence  of  the  time 
when  the  noTe"wg?~[oade,  hut  Tint  CDnpluai-ve."  (1  Pars..  Notes  &  Bills, 
41.  >  A  note  may  be_aiLtfidak.d  or  postdated,  and  "  where  the  purposes 
of  justice  require  it,  the  real  date  may  be  inquired  into,  and  effect  givenj 
to  the  instrument."  (Story,  Prom.  Notes,  §  48;  Paige  r.  Carter,  64: 
Cal.  489.)  And,  whatever  may  he  its  date,  a  note  takes  effect  only  oni 
delivery.  Until  it  is  delivered  it  is  not  made,  in  a  legal  sense,  and  by 
it  no  obligation  is  imposed  on  the  maker.  If  the  delivery  be  subse- 
quervt~f6  the  dateTit  l)ecomes  a  valid  and  binding  note  on  the  day  of 
its  delivery,  and  not  before.    "  If  it  be  made  payable  in  so  many  days 


IX.]  BLANKS.  163 

or  weeks  or  months  from  the  date,  this  period  must  begin  from  the 
date  which  the  paper  bears,  without  reference  to  the  day  of  actual 
delivery;  for  it  is  perfectly  competent  for  the  parties  to  agree  that  the 
money  should  be  payable  when  they  please,  and  they  express  their  agree- 
ment on  this  point  by  making  it  payable  in  so  many  days  from  a 
certain  day.  Thus,  if  a  note  payable  in  three  months  from  date  were 
delivered  four  months  after  date,  it  would  be  payable  on  demand." 
(1  Pars.,  Notes  &  Bills,  49.) 

Here,  according  to  the  averments  of  the  complaint,  which  must  be 
taken  as  true,  the  note  was  delivered  on  the  fifteenth  day  of  July,  1879. 
It  was  due  at  that  time,  and  a  cause  of  action  at  once  accrued  upon  it. 
Until  then  there  was  no  cause  of  action^  because  there  was  no  note. 
Uj.it  ihn.  p,tofntn  r^t  K^nitnt.nr^  Hfljni  tfiTUU  wlieu  tliG  right  of  adion 
accrues,  and_nevfiiJifiiaro^  This  is  a  general  rule,  and  applies  to  all 
actfon*. — Uudti  uur  statute  one  has  four  years  in  which  to  bring  suit 
upon  a  promissory  note  after  his  right  of  action  accrues,  and  his 
action  is  never  barred  until  tli;it  time  has  elapsed.  As  this  action  was 
commenced  within  four  years  after  the  plaintifT's  cause  of  action 
accrued,  it  is  clear  the  court  erred  in  sustaining  the  demurrer.^ 


IX.  Blanks :  Authority  to  fill. 

§32  PAGE  V.  MORT^EL. 

3  Abbott's  Appeal  Declsions  (N.  Y.)  433. —  1S66. 

Ira  and  Orlando  Page  sued  David  and  Daniel  II.  Morrcl,  compos- 
ing the  firm  of  Morrel  &  Son,  and  P.cnjaniiri  .V.  Xcllis,  in  the  Supreme 

>  ApprovpfJ  and  followed  in  Webber  v.  Webber,  14fi  Mich.  31,  where,  however, 
it  was  also  held  that  the  note  heinp  payable  with  interest,  the  interest  ran 
from  the  date  of  the  instrument  and  not  from  the  time  of  its  <lelive)  v. 

r?ut  in  I'atil  V.  Smitli,  32  N.  J.  L.  13,  it  was  held  that  where  at  the  time  a 
promissory  note  was  made  it  was  antedated  a  niimhor  of  years  by  the  a-rree- 
ment  of  the  parties,  the  statute  of  limitations  bejjins  to  run  against  it  from 
the  time  it  comes  due  by  its  terms,  and  not  from  the  time  it  was  made.  Tiie 
court  said  in  part:  •'There  can  I*  no  doubt  that  the  true  time  when  a  note 
waH  made  may  be  shown  if  it  was  wrongly  dated  by  fraud  or  mistake.  A  note 
takes  effect  only  from  its  delivery,  but  if  delivered  after  it«  rlate.  it  is  then 
good  by  relation,  and  takes  effect  from  its  date:  Pnirrll  v.  Watera.  8  fow.  f>70. 
A  note  may  be  antedated  or  postdated,  and  in  both  cases  it  is  valid  if  no 
statute  exiNts  to  the  contrary:  and  where  the  purposes  of  justice  require  it, 
the  real  date  may  l»e  inquired  into,  and  pffort  piven  to  the  in-^trument :  Slorv 
on  Promissory  Notes.  S  43.  The  note  in  question  was  due  immediately  after 
its  delivery.  It  was  not  antedaterl  by  mistake,  or  for  any  unlawful  purpose, 
but  to  carry  into  effect  the  object  of  the  jiarties.  To  alter  the  datr-,  or  to  give 
it  a  lepal  effect  different  frf)m  that  expressed  on  its  face,  is  not  re(|iiircd  for  the 
purposes  of  justice,  but  wnubl  be  to  make  a  new  bargain  for  the  parties,  and 
thus  U>  do  injustice."     Elmkj{,  .1.,  at  p.  14.  —  C. 


ICA  INTKUI'K'KTATIOM.  [aHT.    11. 

Court,  on  a  promissory  nol(\  of  which  D.  "^^()rn'l  I't  Son  were  makers, 
and  Nollis  tho  inilorscM*. 

Tlie  note  was  made  on  June  10,  18r)9,  for  (h(^  sum  of  fifty  dollars, 
payable  thirty  (^njgjifter  date.     It  was  dated  June,  hut  with  a  blank 

where  the  day  of  the  month   is  usually  stated,  tluis:     "June  , 

lHr)I)." 

In  this  condition  [he  note  was  indorsed  by  th(>  defendant  Neliis 
for  the  accommodation  oC  the  makers,  and  on  the  same  day,  the  tenth, 
the  makers  transferred  it  for  value  to  one  Wiles.  On  the  fifteenth  of 
the  montli.  Wiles  transferred  the  note  to  the  plaintifll's  for  value,  and 
they,  without  tlie  knowledge  of  any  of  tlie  other  parties  thereto,  and  of 
course  without  their  express  consent,  filled  the  blank  in  the  date  with 
the  figure  "  1,  "  so  as  to  make  the  date  "June  1,  1859.'' 

The  indorser  havin<;  been  charged,  on  non-payment  thirty  days 
after  June  1,  this  action  was  brought;  and  the  only  question  was, 
whether  the  note  was  valid  against  the  defendants,  notwithstanding 
the  insertion  of  the  figure  in  the  date.  The  judge  found  the  foregoing 
facts,  and  held  that  the  note  was  valid,  and  gave  judgment  for  the 
plaintiffs. 

By  {lie  Court  —  James  C.  Smith,  J.  —  The  only  (picstion  in  tliis 
case  is,  whether,  as  between  these  parties,  the  note  is  rendered  invalid, 
in  consequence  of  its  having  been  antedated  by  the  plaintiffs  after  the 
transfer  to  them,  so  that  it  had  ten  days  less  to  run  than  it  would 
have  had  if  it  bad  been  dated  as  of  the  day  when  it  was  indorsed  and 
negotiated  to  Wiles. 

There  can  be  no  doubt  that,  if  the  same  day  of  the  month  had 
been  inserted  by  the  makers  when  they  negotiated  the  note  to  Wiles, 
without  the  knowledge  of  the  indorser,  the  note  would  not  thereby 
have  been  rendered  invalid,  as  against  the  indorser;  and  so  if  the 
day  had  been  inserted  by  Wiles,  with  the  express  direction  or  con- 
sent of  the  maker.  In  such  case,  the  note,  when  indorsed,  being  perfect 
in  every  respect  but  the  date,  and  that  having  been  left  blank,  the 
makers  would  have  had  an  implied  authoi-ity  from  the  indorser,  to 
insert  any  day  of  the  month  they  might  think  proper.  (Mitckell  v. 
Culver,  7  Cow.  336;  M.  &  F.  Bank  v.  Schuyler,  Id.  337,  note.)  Such_ 
authority  results  from  the  general  rule,  that  an  indorsement  on  a~ 
blank  note,  without  sum,  or  date,  or  timeT)!  pn:ymgnt7~\vill  l)ind  the 

^gg£I^^■-any  sum,  payabl^llL  smy  linw,  A^•hiph  the  person,  to  whom 
indorser  trusi-  il.  (Ikki-c-  lo  insert.  The  date  of  a  note  is  no 
"^TCcptioB'to'ihis  rule,  allhougli  it  is  not  essential  to  the  validity  of  a 
note  that  the  date  be  expressed  :  for,  where  a  note  has  no  date,  the 
time,  if  necessary,  may  be  inquired  into,  and  will  be  computed  from 
the  dav  it  was  issued.  But  it  is  essential  to  the  free  and  uninterrupted 
negotiability  of  a  note  that  it  should  be  dated,  and,  therefore,  all  the 
parties  to  a  note  intended  for  circulation,  are  presumed  to  consent 
that  a  person,  to  whom  such  a  note  is  intrusted  for  the  purpose  of 


TX.]  BLANKS.  165 

raisinor  money,  may  fill  up  the  blank  with  a  date.  (Tb.)  And  a 
blank,  left  for  the  day  of  the  month,  may  be  filled  with  anY  rVjyfn 
that  month,  there  being-  nrrffaud,'or  express  direction  to  the  contrary. 

Upon  the  same--pr4ndple.  Wiles,  to  whom  the  note  was  delivered^ 
by   the   makers,   had   an    implied   authority,   from   both   makers   and 
indorsers,  to  fill  the  blank  with  any  day  in  the  month. 

But  it  is  claimed  by  the  defendant's  counsel,  that  the  implied 
authority,  above  stated,  is  restricted  to  the  first  holder  of  a  note,  and 
that  it  was  unlawfully  exercised  by  the  plaintiff,  to  whom  the  note 
was  transferred  in  blank  by  Wiles. 

That  position  cannot  be  maintained.  It  is  immaterial,  to  the 
parties  to  the  note,  whether  tlie  blank  in  the  date  was  filled  by  the 
first  holder  or  his  transferee.  The  latter  acquired  all  the  rights  of 
the  former  in  regard  to  the  paper.  Until  the  blank  was  filled,  each 
successive  holder  took  the  note  with  authority  to  fill  the  blank,  accord- 
ing to  the  implied  intent  of  the  parties.  The  reasoning  of  Justice 
Bockes  upon  this  point,  in  the  court  below,  is  satisfactory  and  con- 
vincing. The  case  of  Inglish  v.  Brir,:eman  (5  Ark.  377),  so  far  as  it 
holds  to  the  contrary,  is  not  supported  by  authority. 

The  judgment  should  be  affirmed. 

All  the  judges  concurred,  except  Morgan,  J.,  who  dissented. 

Judgment  affirmed,  with  costs.' 

§  32  BANK  OF  HOUSTON  v.  DAy/  '  '^  cl^^ 

122  SouTUWESTERN  ( Mo.  —  St.  Louis  Ct.  App.  )   756.  —  1909. 

.Action  against  accommodaiion  indorsers  on  a  promissory  note  de- 
livered by  the  defendant  McCaskill  to  the  plaintiff  about  December 
1,  1905,  and  payable  four  months  after  date,  hut  not  dated.  Shortly 
after,  plaintiff's  fashier  insfrfi'd  the  date  December  30,  100.").  Judg- 
ment for  defendants  and  |)laintiff  appeals. 

NoinoNi.  y[  *  *  *  It  is  conceded  throughout  the  ease  that  the 
date  December  30th  was  inserted  in  the  note  by  the  cashier  without 
any  express  authority  whatever  from  either  the  makers  or  the  in-  t^  _ 
dorsers  thereon;  and,  if  the  testimony  of  .lack  Mc('askill  is  to  l)e  be- 
lieved, it  was  inserted  contrary  to  bis  instructions  on  delivery  of  the 
note  to  the  bank.  McCaskill  testified  that  he  instructed  the  cashier 
at  the  lime  of  dejfvering  the  note  to  insert  the  date  August  30,  IflOrj. 
Be  lliis  as  it  may,  the  plaintitf  bank  does  not  rely  upon  any  express 
authority  from  any  one  to  date  the  note  December  30,  HIO.I,  but,  on 
the  contrary,  relies  upon  the  fact  that  the  note  was  undated,  and  that 


sRpp  notp  in  2  A.  A  E.  Ann.  rn«.  .1.11,  ontitled  "Implied  autliority  tu  fill  in 
blanicB  so  as  to  complftf  siiBrned  instrument."  —  C. 


/^ 


ir,(>  INTKIU'HKTATION.  [aKT.    II. 

thore  wa?  a  lilaiik  loft  tlit'roiii  for  date  at  the  time  of  its  delivery  and 
tlie  implied  authority  whiih.  in  the  ahsenoe  of  express  instructions, 
is  assured  by  the  law  to  tlie  hoKler  of  a  note,  to  fill  in  such  blanks  as 
are  necessary  to  either  make  the  oblifjation  complete  or  render  it  an 
appropriate  instrument  as  commercial  pa|)er.  -- 

Tlie  accommodation  indorsers  only  defended  the  action,  and  the 
tinding  and  judgment  of  (he  court  were  for  them  to  the  efl^'ect  that 
in  the  absence  of  directions  from  McCaskill  who  delivered  the  note 
to  the  cashier  of  the  hank,  or  an  agreement  of  some  kind  to  that  effect, 
the  cashier  was  without  authority  to  postdate  the  note  December  30, 
1905;  in  other  words,  the  instructions  go  to  the  effect  that  in  the 
absence  of  a  direction  from  or  agreement  with  McCaskill,  who  de- 
livered the  note  to  the  bank,  which  might  be  regarded  as  express 
authority  therefor,  there  is  no  authority  implied  by  law  authorizing 
the  cashier  to  postdate  the  note  December  30,  1905.  The  question, 
therefore,  presented  for  derismn-ie  tho-souiidness  of  the  proposition 
of  law  announced  in  these  instructions. 

Now,  there  is  no  doubt  where  a  note  is  issued  without  a  date  and 
an  improper  date  is  inserted  therein  by  the  payee  and  the  note  is  there- 
after negotiated  to  an  innocent  party  or  bona  fide  holder  without 
notice  that  such  bona  fido  holder  may  enforce  the  same  notwithstand- 
ing the  improper  date.  This  follows  for  the  reason  that  one  who 
signs  such  an  instrument  furnTsTies  the  means  of  fraud,  and4s-estopped 
to  denvTTTsTiabirrtv'fKereon.  MUrhrll  v.  Cvlver,  7  Cow.  (N.  Y.)  336; 
Frank  y.  LilirnfeJd,  33  Orat.  (Va.)  377:  Re.dlich  v.  Doll,  54  N.  Y. 
234;  Joyce,  Defenses  to  Commercial  Paper,  §  22;  Daniels,  Negotiable 
Instruments  (5th  ed.),  §  143;  Androscoggin  Bank  v.  Kimball,  10 
Cush.  (Mass.)  373.     *     *     * 

It  is  no  doubt  true  that  a  note  issued  bearing  the  month  of  its  issue 
and  the  year,  with  a  blank  for  the  day  of  the  month,  may  be  enforced 
by  a  subsequent  holder,  although  the  day  of  the  month  is  filled  in  by 
him  without  express  authority  therefor.  Such  was  the  case  of  Page  v. 
Morrell,  3  Abb.  Dec.  (N.  Y.)  '33.  In  such  a  case  it  is  obvious  that 
the  subsequent  holder  filling  in  the  day  of  the  month  is  not  aware 
of  the  particular  day  on  which  the  note  was  issued,  for  he  knew  noth- 
ing of  its  issue.  The  paper  having  come  into  his  hanHs  for  value 
in  due  couTsT-Tbearing  date  the  month  of  June  and  the  year  in  which 
it  was  issued,  in  the  absence  of  any  knowledge  whatever  as  to  the  date 
of  issue,  authority  was  implied  to  him  to  insert  any  date  during  fhe 
month  mentioned.  However,  that  authority  is  not  in  point  here  for 
the  reason  that  in  that  case  the  8ubsequent^^i2m^Sil^J^olde^  of  the  note 
had  no  knowledge  as  to  what  was  the  true  -date  of  the  instrument; 
■A'hereas.  in  the  present  controversy,  the  subsequent  holder  of  the  note 
(that  is,  the  plaintiff  bank),  who.  it  may  be  said  purchased  it  from 
Da- ,  the  payee,  in  fact  an  accommodation  party  only,  knew  the  day 


i:^.]  BLANKS.  1G7 

and  date  of  its  issue,  and,  indeed,  witli  such  knowledge  occupied  the 
same  position  in  respect  of  that  matter  as  an  original  payee  who  knows    / 
the  tru'elTaTe'o?  issue;  that  is.  the  plaintiff  hank  knew  that  it  acquired   / 
ote  about  the  Ist  of  Dcci'iiiIht,  and  not  December  30th,  for  such  / 
was  the  d^ite  of  issue  under  the  tacts  in  this  case.    Having  this  knowl-  | 
edge  as  between  it  and  these  accommodation  indorsers,  whom  McCas- 
kill  represented  when  he  delivered  the  note,  it  became  the  duty  of  the 
cashier  of  the  bank  to  insert  the  date  August  30,  1905,  as  instructed 
by  McCaskill,  if_hisjtestimony  is  to  be  believed.     On  the  contrary,  if 
no  instructions  whatever^wfe^iven,  then  it  became  the  duty  of  the 
bank  to  insert  the  true  date  of  issue  identically  as  though  it  were  an  4 
original  payee.  ^     *     *  *^  ^ 

After  much  careful  reading  and  reflection  on  the  subject,  we  believe 
as  a  general  rule  between  the  original   parties  to  the  instrument  or  "^ 

subsequent  holder  with  notice  the  original  payee  or  such  subsequent 
holder  with  notice  has  implied  authority  by  virtue  of  the  blank  con- 
tained in  the  note  only  to  fill  in  the  true  date  or  such  a  date  as  was  / 
dH»ect<^d'nr  cnntrrnjilatid  by  the  pajdifi*^  Daniels,  Negotiable  Tnstru-  / 
men  I-  (.".ili  mI).  ,i  11.1-/.  144;  2  Cyc.  1G3.  164;  2  Am.  t<c  Eng.  Enc.  ' 
Law  (2d  ed.).  255;  Overion  v.  MaHhrws,  35  Ark.  146;  Emmons  v. 
'  Mcel-rr.  55  Ind.  329.  It  is  obvious  that  what  has  been  said  is  in  ac- 
cord with  the  public  policy  of  this  state  as  declared  in  the  new  nego- 
tiable instrument  law  approved  April  10,  1905^  See  Laws  of  1905. 
And  the  note  in  suit  is  in  all  "fe^pprt^fflihject  to  that  enactment. 
Section  6  ^  of  the  act  referred  to  declares  that  the  validity  of  a  nego- 
tiable instrument  is  not  affected  by  the  fact  that  it  is  not  dated.  Sec-  ^^  r. 
lion  18  *  declares  that  the  instrument  is  not  invalid  for  the  reason  only 
that  it  is  antedated  or  postdated,  "  provided  this  is  not  done  for  an 
illegal_0£^fxaiidiilent  purpose.  The  person  to  whom  an  instrumefit  so 
date^  is  delivered,  acquires  the  title  thereto  as  of  the  date  of  delivery."  / 
This  section  seems  to  contemplate  instruments  which  arc  antedated  or 
postdated  by  the  parties  in  accordance  with  a  mutual  agreement  to 
that  effect,  as  is  frefpienfly  done,  and  declares  that  thev  are  not  in- 
valid because  of  such  fact,  provided  no  illegal  or  fraudulent 
purpose  is  intended.  Section  13-  of  the  act  is  as  follows:  [Quoting 
it.]  It  will  be  ob.servcd  that  this  section  authorizes  the  holder  of  an 
undated  instrument  to  insert  the  fruo  dale  of  issue  therein  and  makes 
the  instruiiicnf  payable  accordingly.  It  provides,  too,  that  the  inser- 
tion of  a  wrong  riate  does  not  avoid  the  instrunieiif  in  the  hands  of  a 
subsequent  holder  in  du<'  coiirse,  and,  as  to  bim,  flic  dale  so  inserted 
is  to  be  regarded  as  the  true  dale.  This  is  in  allirmance  of  the  doctrine 
wl)ich  obtains  in  the  law  merchant,  and  it  implies,  at  least,  thai   Ihc 


8N.  Y..  §  25.— C. 
1  N.  Y..  §.T1.  — C. 
IN.  Y.,§32.  —  C. 


IGS  INTKUl'ltKTATIOM.  [aRT.    II. 

ins(M-tion  of  n  wrnnf]:  dnio  in  an  iindatod  ini5trumont  by  ono  liaving 
knowlodi^o  of  \ho  Iruo  date  of  i.^suo  would  avoid  the  iiistrumont.  Such 
we  uudorstand  to  be  the  seitb^d  doctrine  of  tlie  cases  hereinbefore  cited, 
expoundins;  the  princiyik's  of  the  law  merchant;  that  is,  that  such 
amounts  to  an  alteration.  2  Am.  &  Eng.  Enc.  Law  (2d  ed.)  142. 
Now.  for  one  to  be  a  liolder  of  commercial  paper  in  due  course,  the 
element  of  good  faith  with  respect  to  the  same  is  essential.  More  v. 
Finger,  128  Cal.  313;  Reese  v.  Bell,  138  Cal.  xix.  Therefore,  the 
present  plaintiff,  liaving  inserted  an  untrue  date  in  the  instfumenT 
when  it  was  possessed  of  knowledge  of  the  true  date  of  TSBueT^s^ot  a 
subsequent  holder  in  due  course  within  the  meaning  of  the  statute. 

Judgment  affirmed.     All  concur. 


§33  CAULKTNS  t'.  WHTSLER.  '^  ^  f     ^ 

29  Iowa,  495.  —  1870.  •'^  Si  ^/ 

Action  upon  a  promissory  note;  defense  that  the  instrument  is  a 
forgery.  The  cause  was  submitted  to  the  court  without  a  jury.  The 
court  found  the  followiniL-fnets:  Defendant  entered  into  a  contract 
with  one  Smith  to  sell  for  him,  as  his  agent,  grain  seeders.  At 
Smith's  request,  defendant  signed  bis  name  upon  a  blank  piece  of 
paper,  which  Smith  was  to  send  to  the  manufacturers  of  the  seeders, 
that  they  might  know  defendant's  signature  upon  orders  which  he 
should  make  upon  them  for  the  machines.  The  signature  was  made 
for  no  other  purpose. — 

The  instrument  in  suit  was  printed  over  the  signature  of  defend- 
ant, so  obtained,  without  his  knowledge  and  consent,  and  the  stamp 
in  the  same  manner  attached  and  canceled.  The  plaintiff  purchased 
the  note  before  maturity,  for  a  valid  consideration,  and  without 
knowledge  of  any  matter,  connected  with  its  execution.  Upon  these 
findings,  the  court  held,  that  the  note  is  a  forgery  and  void,  and  that 
plaintiff  is  not  entitled  to  recover  thereon.     Plaintiff  appeals*^ 

Bkck,  J.  —  A  bolder  of  negotiable  paper,  acquired  before  dislioiior. 
is  not  protected  against  defenses  that  make  void  the  instrument,  lie 
can  have  no  claim  upon  forged  paper  against  tEe  person  wHose  name 
is  falsely  affixed  thereto  as  the  maker,  and  who  is  without  fault  as  to 
the  forgery  and  the  taking  of  the  paper  by  the  holder.  (1  Parsons, 
Bills  and  Notes,  75,  and  authorities  cited.) 

Is  the  note  sued  upon  a  forged  instrument?  "The  making  or 
lalteration  of  any  writing  with  fraudulent  intent,  whereby  another 
•may  be  prejudiced,  is  forgery."  {State  v.  Wooderd,  20  Iowa,  542; 
Rev.,  §  4253.)  In  order  to  constitute  the  offense  of  forgery  it  is 
not  necessary  that  the  signature  of  the  instrument  be  false.  The 
instrument  may  be  altered  so  that  it  is  not  the  instrument  signed  by 


IX.]  BLANKS.  169 

the  maker,  and,  if  this  be  fraudulently  and  falsely  done,  it  is  forgery. 
So  if  words  be  added  to  change  its  effect,  with  like  intent,  it  is  a 
forgery.  In  the  case  before  us  the  instrument  was  falsely  and  fraudu- 
lently made  over  the  genuine  signature  of  defendant,  which  was  not 
obtained  for  the  purpose  of  binding  defendant  by  any  contract.  ,_It-ia.^ 
evident  that  tht?  diTTcr?,  in  no  respect,  from  the  cases  mentioned,  and 
that  till'  univ  is  a  foim'iy  andvoid.     (See  2  Parsons,  Bills  and  Notes, 

The  case  differs  materially  in  its  facts  from  tlie  cases  cited  in  sup- 
port of  plaintiff's  right  to  recover.  In  those  cases  blanks  were  filled 
up  contrary  to  the  direction  of  the  maker,  or  without  his  authority. 
But  in  all  such  cases  the  makers  intended  to  execute  an  instrument    ^ 


that  should  he  binding  upon  them 
to  ttie  auttiarity  given  by  the  makers 


em.     Blanks  were  filled  up  contrary   /  ~^v-ts_/ 
kers,  or  in  some  other  way  the  instru-  |      / 
id  not  correspond  with  the  intention  '       ^"^ 


ments  were  made  so  that  they  did  not  correspond 
of  the  makers ;  but  in  all  such  cases  there  were  mnl-ers  and  inMmments, 
and  through  the  frauds  of  those  to  whom  the  instruments  were  in- 
trusted they  were  thus  made  to  be  of  different  effect  than  was  designed 
hy  fbp   n^akpra      In  these  cases  it  is  correctly  held,  that  while  the 
parties  perpetrating  the  fraud  in  some  cases  may  have  been  guilty 
of  forgery,  yet  the  makers  were  bound  upon  the  instruments,  as  against 
holders  in  good   faith  and  for  value.     The  reason   is  obvious.     The 
maker  ought  rather  to  suffer,  on  account  of  the  fraudulent  act  of  one 
to  whom  he  entrusts  his  paper,  or  who  is  made  liis  agent  in  respect 
of  it,  than  an  innocent  party.     The^lawjestcciiis  liiui  in  fault  in  thusJ 
j)iilttng  tt  in  ijie  power'  ofanotlior  to  perpelrale  the  fraud,  and  re-TT 
(|uir<p  bini  to  bear  the  loss  consecjncnf  upon  Jiis  negligence.     In  the  case  ( 
"  imrtrr  run-idcTatlon  TTfrfnTTTf  can  be  iniinitcd  |.,  Ilio  dofcndanl.     He  did      / 
not  inlni-i    hi>  siLTnaiiire  to  the  ])()ss('ssion  fif  Ww   fni-^cr   for  Ww.  pur-    / 
pose  of  I'iii'liti.'-  binisolf  by  a  cofifnuT     ITe  cnnfciTcd   rm  |hi\\ci-  upon 
the  party  who  comniittnd  the  crime  to  use  if    for  anv  sncb  purpose. 
He  was  not  guilty  of  negligence  in  thus  giving  it.  for  il  is  no!  unusual,/ 
In  orner  to  identify  signatures,  and  fof'ofher  purpnsr^,  \nv  men  tlius/ 
to  innke  (heir  TTulnninphH.    The  fTefc-nrTant  cannot  be  regarded  as  beina 
so  fa r  i n   fault   in  Ibe  Iransaetion  that  be  oni:lit  to  be  rerpiired  to  beat 
the  loss  resulting'  from  Ibe  crime. 

fn  otir  opinion  the  decision  of  the  (.'ircuil  Courl   is  in  accord  with 
the  law,  and  is  therefore 


a  Rop  Walkrr  v.  Bbrrt,  20  VVih.   !!»},  post;  Vhnpman  v.  Nost;  5(i  ^.  Y.   137, 
poat.  —  H.U 


170  INTKWrHKTATlON.  [aRT.    II. 

§33  MARKET  AND  FUI/rON   NATIONAL 

BANK    r.  SAKOENT. 
85  Maim;,  .Mil.—  1803. 

WiiiTBiiOUSK,  .1.  —  This  was  an  action  on  a  promissory  note  for 
sevi'n  hundred  and  eijjlity-five  dollars,  brought  by  the  plaintill'  Itank 
as  indorsee  of  J'^arl  H.  C'liaee  &  Company  aji;ainst  the  defendant  as 
maker  of  the  note.  • 

Thqdefendant  seasonably  iihd  his  atTidavit  that  the  i)aper  declared 
on  had  beerTinaterially  altered  since  it  was  exeeuted. 

Tiie  faets  were  not  controv\'ried.  The  defendant  had  sij^Mied  a 
prior  note  for  the  accommodation  of  Chacc  &  Company  which  was 
outstanding  and  overdue  at  the  time  of  the  signing  of  the  note  in 
question.  At  Chace's  request  he  agreed  to  sign  three  other  accom- 
modation' notes  to  take  up  the  overdue  note,  each  to  be  for  one-third 
of  the  amount.  But  when  the  parties  met  for  the  purpose  of  exe- 
cuting this  agreement,  the  amount  of  tlie  overdue  note  was  not 
definitelv  known  to  either  of  them,  hut  was  understood  to  be  between 
six  liundred  dollars  and  siv  hundred  and  fifty  dollars.  There\i[)on. 
at  Chace's  suggestion,  the  defendant  signed  throe  printed  blank  notes 
and  delivered  them  to  Chace,  wlio  agreed  to  (ill  them  out  with  the 
requisite  amount  specified  in  each,  when  ascertained,  and  use  them 
for  the  purpose  of  taking  up  the  overdue  note.  The  note  in  suit  is 
one  of  the  three  notes  thus  signed^  B'lit  iiri?!!ea(r"of  making  it  for  one- 
third  of  the  overdue  note  according  to  his  agreement,  Chace  fraudu- 
lently wrote  in  *'  Seven  hundred  and  eighty-five  dollars  "  and  indorse<l 
the  note  to  the  plaintiff  bank  before  maturity  in  the  ordinary  course 
cf  business,  receiving  therefor  the  full  amount  of  the  note  less  fifteen 
dollars  and  ninety-six  cents  discount  thereon.  It  is  not  claimed,  how- 
ever, that  Chace  made  any  alteration  in  the  printed  terms  of  the  blank 

thus  delivered  to  him„ jHe  simply  inserted  in  the  blank  spaces  such 

words  and  figures  as  were  necessary  to  constitute  the  instrument  a 
complete  promissory  note.  There  is  also  positive  testimony  from  the 
plaintiff's  discount  clerk  that,  at  the  time  the  note  was  discounted, 
the  l;ank  had  no  knowledge  of  any  equities  existing  between  the 
defendnnt  and  Chace,  but  took  the  note  in  the  u^ual  course  of  business. 
Upon  this  evidence  the  presiding  justice  directed  the  jury  to  return  a 
vcrdiet  for  the  plaintiff  for  the  amount  of  the  note  in  suit. 

This  .JTistruction  was  correct.  The  court  may.jiroperly  instruct 
the  4ury^ to,  return  a  verdict  for  either  party  when  it  js  apparent  that 
a  contrary  verdict  could  not  be  sustained.  (Heath  v.  Jaquith,  68 
Maine,  433 ;  Jewell  v.  Gagne,  82  Maine  431 ;  Moore  v.  McKenney,  83 
Maine,  80.) 

Lt-4s-JiTllsettled  and  familiar  law  that,  if  one  affixes^  his  signature 
to  a  printed~^ank  loTa  promissory  note  and  intrusti^t  to  the  custoiiy 


IX.]  BLANKS.  171 

of  another  for  the  purpose  of  having  the  blanks  filled  up  and  thus 
becoming  a  party  to  a  negotiable  instrument,  he  thereby  confers  the 
~Tight,  and  such  instrument  carries  on  its  face  an  implied  authority 
to  fill  up  tlio  lilanks  and  complete  the  contract  at  pleasure,  as  to 
names,  terms  laid  amount,  so  far  as  consistent  with  its  printed  words. 
As  to  all  purchr.sers  for  value  without  notice,  the  person  to  whom  a 
blank  note  is  thus  intrusted  must  be  dccuied  tht-  agent  o(  the  signer, 
and  the  act  of  perfecHngtli'e  instrument  is  deemed  the  act  of  the 
principal.  An  oral  agreement  betAveen  such  principal  and  agent 
limiting  the  amount  for  which  the  note  shall  be  perfected,  cannot 
affect  the  rights  of  an  indorsee  who  takes  the  note  before  maturity 
for  value,  in  ignorance  of  such  agreement,  with  a  different  amount 
written  in  it.  {Banl-  of  Pitfshurfjh  v.  Nenl,  22  Howard,  07;  Avfjlr  v. 
Jns'.  Co..  93  U.  S.  330;  Bank  \.'  StowelJ,  123  Mass.  196;  KeUogg  v. 
Curtis,  65  Maine,  59;  Abbott  v.  Rose,  62  Maine,  194;  Breckenridqe  v. 
Lewis,  84  Maine,  S4d ;  Bigelow's  Bills  and  Notes,  571.)*     *     *     * 

Exceptions  overruled.^ 


AJ\..^^lrr    1^4 vtT'^- 


§  33  SMITH  V.  PROSSEE. 

[1907]     2  King's  Bench    (Court  of  Appeal)    735. 

The  defendant  in  Sgjjijjjj^^jica,  being  about  to  leave  for  England,    A/ ^ 
gnve  to  'I'yllei'  J! lid  another  person  a  [)owor  of  attorney  to  act  for  him  ' 

in  his  absence.  He  further,  in  anticipation  of  tlie  possibility  of  funds 
being  suddenly  re(|uircd  (hiring  liis  absence,  signed  his  name  on  two 
blank  unstamped  pieces  of  paper,  which  were  litlioifraphed  forms  of 
jtroniissorv  notes,  and  banded  tliem  to  'I'dfer  with  instructions  that 
tiiev  shouhi  l»e  retained  in  his  custody  until  the  defendant  should,  by 
(elegram  or  letter  from  England,  give  instructions  for  their  issue  as 
promissory  notes  and  as  to  the  amounts  for  which  they  should  be 
filled  up.  After  the  defendant  had  left  South  Africa,  Telfer,  without 
v.jiiTTTrf»^44+4:- instructions  from  the  defendant   (which  were  in  fact  never 

*  If  a  blank  noto  is  ontnistod  to  A.  by  H.,  and  A.  fills  tlio  blanks  but  also  / 
nrlHs  "with  intfrt-st.  ftc."  at  tbo  ond,  there  boinp  no  bbank  sj)ac<'  indicafcd  for 
mich  piirpow,  H.  is  not  liable.  «inre  this  nnionnts  tf»  a  material  alteration 
Farmrrn',  etc.,  \.  It.  v.  \ovirli,  KH  Tex.  .1S1  ;  Weyrrhnv.srr  v.  Diin.  100  N.  Y. 
150.  Se«!  Nep.  In.st.  L.,  §  2()(i.  past.  So,  also,  the  distinction  must  be  clearly 
drawn  In-tween  issninj;  an  iiistrnment  with  blanks  and  issuinp  one  in  which 
the  blanks  have  been  so  inifx'rfeetiy  filled  as  to  leave  nnoeeiipied  spaces.  Tn 
the  latter  case  to  fill  the  spaces  would  be  an  alteration  and  would  destroy  the 
Instrument  unless  the  maker  were  held  to  lie  estopped  by  the  negligent  manner 
in  which   he  sent  the  instrument  info  the  world.     See  po.it.  Art.  IX,  Div.   I., 

3.  —  n. 

5  See  note  on   "instruments  executed   in   blank   and   wrongfully   filled   up"  in 
11   Am.  St.  Rep.  310.  — C 


172  INTERPRETATION.  [aRT.    II. 

given),  and  in  fraud  of  the  defendant,  (illcd  in  (lie  blanks  in  Iho 
documents  so  as  to  make  tlieni  a[)|)('ar  to  !)»'  [iioniissorv  nok'.-i  and  sold 
them  to  tlie  phiintill",  who  look  them  honestly  and  in  ;;(H)d  faith,  anil 
without  notice  of  the  I'l-aud,  and  i;avc  full  value  for  them.  For  the 
purpose  of  suing  upon  them  in  England,  the  notes  were  stamped  as 
foreign  lulls. 

The  trial  judge  found  that  the  notes  had  not  heen  properly  nego- 
tiated to  the  plaintifT,  and  that  he  was  not  entitled  to  recover.  The 
plaintiff  appealed.  - —  //HM'^^f 

Fli:tciier  jMoui.ton,  Tj.  J.     *     *     *  '"    "    '    i  ' 

The  law  stands  thus.  If  a  person  signs  a  piece  6f  paper  and  gives 
it  to  an  agent  with  the  intention  that  it  shall  in  his  hands  form  the 
basis  of  a  negotiable  instrument,  he  is  not  permitted  to  plead  that  he 
limited  the  power  of  his  agent  in  a  way  not  obvious  on  the  face  of 
the  instrument.  Notice  of  such  limitation  may  be  given  in  various 
ways  by  the  instrument  itself.  For  instance,  if  in  the  country  where 
the  negotiable  instrument  is  made,  a  negotiable  instrument  can  only 
be  nuide  on  paper  liearing  an  impressed  ad  vnlorem  stamp,  the  presence 
of  a  stamp  on  the  piece  of  paper  would  be  a  notice  of  limitation  of 
the  agent's  authority  as  to  the  amount  of  the  instrument. 

But,  in  the  absence  of  notice  appearing  on  the  face  of  the  instru- 
ment, so  soon  as  there  is  an  intention  on  the  part  of  the  signer  that 
the  piece  of  paper  shall  form  the  basis  of  a  negotialde  instrument,  no 
limitation  of  the  agent's  authority  can  be  allowed  to  affect  third  parties 
taking  it  without  notice.  But  in  my  opmion  there  was  nonsuch  inten- 
tion here,  and  the  adion  fails  for  that  reason.  I  tHInk  that  the 
defendant  delivered  the  documents  to  Telfer  (as  representing  his  two 
attorneys)  for  safe  custod}^  only.  No  doubt  both  parties  contemplated 
that  the  defendant  might  change  his  mind,  and  might  rlirect  that  the 
documents,  which  physically  were  iri  the  possession  of  the  agent  might 
at  some  future  time  be  used  as_the  basis  of  two  promissoryj^wytcs:  But 
that  fact  does  not  qualify  the  purpose  for  whicli  ITie  instruments  were 
consigned  to  Telfer.  They  were  handed  to  him  as  custodian  only, 
and  it  is  immaterial  whether,  when  thev  were  sn  handcfl.  the  defendant 
said  that  the  time  mis:ht  come  when  he  might  desire  to  chancre  their 
character,  or  whether  he  made  no  remark  on  the  subject.  Both  parties 
knew  that  they  were  delivered  for  safe  custody  only.  The  esseiTlial 
fact  which  is  necessary  to  FmtWe- ib«-piain4*fl^-to-estTdjtish  his  case  is 
therefore  absent.  The  defendant  never  issued  the  documents  with  the 
intention  that  they  should  become'  negotiable  instru-nieTTtr.--  We  were 
pres.sed  with  the"arguii»ent  tha+,'as~i'egards  third  parties,  the  question 
of  tlie  defendant's  intention  that  Telfer  should  be  the  mere  custodian 
of  the  documents  or  that  he  should  have  poAver  to  issue  them  as  notes 
does  not  affect  his  liability,  because  in  either  view  the  possession  of 
the  documents  enabled  Telfer  to  put  them  in  circulation  as  promissory 


IX.]  BLANKS.  173 

notes.  Therefore  Mr.  Lush,  quoting  LicTcbarrow  v.  Mason  (5  T.  K. 
(i83)  §ajs  that  tlino  is  an  estoppel  on  tlie  defendant  independent  of  1  (Jlk_, 
any  intention  tliat  (h«n-  should  hecnmc  promissory  notes.  In  my  /  ■ 
opiiiioTT  fliis  arLMiiiirni  iroes  much  too  far.  If  we  are  to  measure  the/ 
estoppel  by  the  physical  possihility  of  deception,  s.  20  of  the  Bills  of 
Exchange  Act  would  contain  something  which  would  be  absolutely 
irrelevant,  and  which  yet  is  a  condition  of  the  section  being  applicable. 
That  section  commences  with  the  words  "  Where  a  simple  signature 
on  a  blank  stamped  paper  is  delivered  by  the  signer  in  order  that  it 
may  be  converted  into  a  bill ;  "  in  other  words,  the  intention  that  it 
shall  be  converted  into  a  bill  is  made  a  condition  of  the  operation  of 
the  section.  In  my  opinion  section  20  is  based  upon  the  doctrine  of 
common  law  estoppel  as  it  existed  at  the  date  of  the  act,  and  there- 
fore the  presence  of  the  condition  as  to  its  operation  shows  that  the 
Legislature  realized  that  the  intention  that  the  document  should  be 
CfinverteJjBJLii-a  bill  of  exchange  was  essential  in  order  to  render  the 
maker  liable.  Li  other  words,  both  the  common  law  and  the  statute 
realizerPthe  possibility  of  two  rival  dangers  —  on  the  one  hand,  a 
person  who  did  nothing  more  than  sign  a  blank  stamped  paper  might 
find  himself  in  the  position  of  Jjeing^the  maker  of  a  bill  or  note,  on 
the  other  hand,  a  man  might  issue  an  rncbTnplctFl5ttl  or  note  and  place 
it  in  the  hands  of  an  agent  with  a  limited  authority  to  fill  it  up,  and 
the  agent  might  fill  it  iip-n  if  limit  due  regard  to  the  limitations  of  his  ^c^i^^.^^ 
authority  aiul  pul   it   in  ciivulalion  and  thereliy  injure  innocent  ppr^-"  ^"^^ 

80jis^_,JPhey  therefoi-e  drew  the  line  as  regards  the  protection  of  third  ,  /^ 

parties  in  the  following  very  reasonable  and  intelligible  way:  if  the 
signer  intended  it  to  become  a  bill,  it  was  for  him  to  see  that  it  was 
issued  in  accordance  with  his  intentions,  and  if  he  did  not  do  this, 
third  parties  would  not  lie  afTected  ;  on  the  other  hand,  if  he  did  not 
intend  it  to  become  a  bill,  there  would  be  no  such  duty  incumbent  upon 
him,  and  he  would  be  in  the  same  position  as  if  he  had  merely  si.mpd  _ 
it  as  an^3iitofrrjfptr — Thrrr  -^ould  in  that  rase  he  no  aniwiin  emUlcndi, 
anri  Hp  htwUI  therefore  not  be  liable  for  the  act  of  a  bailee  who  turned 
the  document  into  a  negotiable  instrument.  The  present  case  sharply 
raiaes  the  question  tfT the  line  of  demarcafUm.  and  as  I  lliink  that  the 
signed  forms  were  in  the  possession  of  Telfer  as  custodian  only,  and 
not  as  the  flefcndant's  agent  with  an  intention  on  the  defendant's  part 
that  he  should  issue  them  as  promissory  notes,  the  defendant  is  not 
estopped  from  saying  that  he  was  not  the  maker  of  the  notes  sued 
upon.     I  agree  that  the  appeal  slioijJ.d_Lc- dianufiaedi 

BrCKLKY,  L.  J.      *     *      * 

The  recent  decision  of  fhi^  <()urt   in   Lhn/d's  Bnnl:  v.  Cooke   \post, 
p.  1H")|  has  no  application  to  the  present  case.     There  the  person  waR_-|^7 
entrusted  with  authority  to  fill  up  two  promissory  TTntrs-fnr-jr^crTain  ^-^u^ 

amount,  and  he  fil^lcd_them  i^i^icr^ tfwJhii^c^aTialnbunt.     But  the         <"^     . 


174  INTERPRETATION.  [ahT.    II. 

documoiits  were  handed  to  liim  for  tho  purpose  of  issue  as  promissory 
notes,  while  here  there  luis  luvcr  lucii  m  negotiable  instrument  at  all, 
and  the  nutliorities  as  to  negoliahU"  instruments  have  no  applieation. 
The  ajijieal  must  tlierefore  he  dismissed. 

Appeal  dismissed." 
\"au<:han  Williams.  L.  .7.,  also  wrote  an  opinion. 


§  33  BOSTON  STEEL  AND  IRON  CO  v.  STEUER. 

183  Massachusetts,  140.  —  1903. 

Contract  for  $1,823.25  for  work  done  and  materials  furnished  for 
a  building  of  the  defendant  numbered  811  on  Beacon  street  in  Boston. 

At  the  trial  before  Bishop,  J.,  without  a  jury,  the  Judge  excludod 
certain  evidence  offered  by  the  defendant  and  refused  to  make  certain 
rulings  requested  by  the  defendant.  He  found  for  the  plaintiff  for 
$2,043.86,  and  the  defendant  alleged  exceptions. 

IjORING,  J.  The  only  question  in  issue  between  the  parties  in  this 
case  was  the  right  of  the  defendant  to  he  cnnlited  with  two  sums,  of 
$200  and  $400  respectively,  under  the  following  circumstiliices:  On 
December  31,  1898,  the  defendant's  husl)and  owed  the  plaJTitilT 
$1,781.30,  for  ironwork  furnished  by  it  to  him  in  the  construction  of 
a  house,  No.  819  Beacon  street.  On  being  pressed  for  payment,  the 
defendant's  husband,  on  January  21,  1899,  delivered  to  the  plaintiff 
the  defendant's  check  for  $200  payable  to  the  plaintiff.  It  is  stated 
in  the  bill  of  exceptions  that  on  February  2,  1899,  "he  paid  the 
plaintiff  tlie  further  sum  of  $100  in  a  check  made  by  said  Jennie  D. 
Steuer."  But  it  appears  from  the  auditor's  report,  which  was  before 
the  court  and  is  referred  to  in  the  l)ill  of  exceptions,  that  the  plaintiff's 
manager's  name  was  Newcomlt,  and  that  his  story  was  that  the  check 
for  $400  "was  brought  to  liini  at  his  (ifTicc  on  Devonshire  street  by 
"M^r.  Steuer  in  response  to  further  demands  for  money,  and  that  it  was 
made  out  in  blank  and  filled  \\\)  by  himself.  Air.  Steuer  being  unwilling 
that  it  should  be  made  for  more  than  $200,  while  ]\Tr.  Newcomb  in- 
sisted that  it  should  be  for  the  larger  amount,  and  so  made  it,  with 
Mr.  Steuer's  consent,  and  applied  it  to  his  debt."  The  defendant's 
story  was  "  that  she  gave  the  check  to  Mr.  Newcomb  at  her  house," 

Tn  addition  to  the  iron  furnished  the  defendant's  husband  for  8T^ 
Beacon  street,  the  defendant's  husband  had  ordered  two  iron  columns 
and  a  base  plate  from  the  plaintiflF  for  another  house.  No.  811  Beacon 
street,   which   the   plaintiff  supposed   was   Steuer's  until   he  told   the 

«Thi«  casp  is  rpportpfl  in  11  A.  &  E.  Ann.  Cas.  191,  with  note  entitled 
"  Liability  of  makpr  of  blank  nfjrotiablp  instrument  to  hona  fide  holder  where 
blanks  are  fraudulently  filled  in."  —  C, 


IX.]  BLANKS.  175 

plaintiff's  manager  on  March  10th  that  it  belonged  to  his  wife.  These 
two  columns  and  base  plate  were  delivered  on  December  22,  1898,  and 
at  the  rate  charged  in  the  bill  of  items  were  worth  $150.35.  From 
December  to  March  there  were  negotiations  between  the  defendant's 
husband  and  tbe  plaintiflP  for  a  contract  by  which  all  the  ironwork  for 
811  Beacon  street  should  be  furnisbed  by  tbe  plaintiff  for  a  fixed  sum, 
payments  on  account  to  be  made  as  each  floor  was  finished ;  and  on 
or  about  Marcb  1,  1899,  the  plaintiffs'  manager  submitted  to  the 
defendant  a  written  contract  to  this  effect.  On  Marcb  10th  this  was 
returned  by  the  defendant's  husband  with  the  statement  already 
referred  to,  that  811  Beacon  street  belonged  to  his  wife,  and  the  con- 
tract should  be  made  with  her.  No  written  contract  was  ever  made 
between  the  plaintiff  and  the  defendant,  but  the  plaintiff  went  forward 
and  delivered  the  ironwork  for  two  of  the  si.x  stories  of  the  house,  part 
being  delivered  before  March  10th  and  part  after  that  date.  The  last 
was  delivered  on  March  18th,  when  the  plaintiff  stopped  because  it  had 
not  been  paid  for  what  it  had  done.  Thereupon  this  action  was 
brought  to  recover  the  reasonable  value  for  the  materials  furnished 
and  work  done.  -•_    '  -  ' 

At  the  trial  the  defendant  contended  "  that  the  amount  of  said  pay- 
ments should  be  credited  to  bor  in  this  action,  on  the  ground  that  they 
were  payments  required  by  Ibc  plnintiff  to  be  made  in  advance  on 
account  of  her  said  building  numberod  811  Beacon  street,  and  that  the 
checks  were  given  to  her  said  bushand,  as  her  agent,  to  make  such 
payments,"  and  "  offered  evidence  of  her  instructions  to  her  husband 
as  to  the  use  and  application  of  said  checks,  not  made  in  tlie  presence 
of  the  plaintiff  or  anvone  representing  him,  and  claimed  that  the  same 
should  be  admitted  in  evidence.  The  court  declined  to  admit  the 
same,  and  the  defendnnt  duly  excepted  to  the  exclusion."  Tbe  other 
exceptions  taken  at  tbe  trial  have  been  waived,  nud  the  rpiestion 
raised  by  this  exception  is  the  only  matter  now  before  us.     *     *     * 

Tho  judge  before  whom  the  case  was  tried  withoiil  ii  jiirv  found 
'•that  neither  of  said  payments  was  required  by  the  plaintiff  to  be 
made  in  advance  on  account  of  her  said  building  numbered  811 
Beacon  street,  and_jhat  neither  of  them  \\;is  iti.ide  according  to  any 
agM»«t<nrt'''Tofpayui('ril  to  be  made  on"  account  of  said  87  T  Beacon 
ctreet.  and  thai  no  floor  in  said  building  was  completed  at  the  (imo 
either  of  said  payments  was  made  by  said  Bernard  Steuer  on  account 
of  his  building  numbered  81,9  Beacon  street,  and  were  received  by 
the  plaintiff  on  account  therefolv''  ~* 

This  finding  makes  tbe  evidence"  pxcluded  inmiaterial  so  far  as  tbe 
check  for  $200  is  concerned.  If  this  evidence  ha  I  been  admitled, 
the  defendant's  case  on  tbe  $200  check  would  have  been  ibis:  A 
check  payable  to  the  plaintiff  is  banded  })y  the  drawer  f<.  her  liusband, 
to  be  delivered  by  him  to  the  plaintiff  in  payment  of  a  debt  to  become 


176  INTKlil'liKIAl'lON.  [art.    II. 

due  from  the  drawer  of  the  eheck  to  the  payee,  and  is  frauduleiitiy 
liaiided  by  the  huphand  to  the  payee  of  llie  ehiH'k  in  payment  of  a  del)t 
thie  from  him  to  tlie  payee,  and  is  aee(>pled  hy  Ihe  payee  in  good  faith 
in  jiayment  of  that  debt.  In  such  a  i-ase  ihe  payee  of  the  check  is  a 
hoiKi  fide  purchaser  of  the  cheek  for  valne,  without  notice,  and  the 
drawer  couhi  not  set  up  her  liushand's  fraud  in  defense  of  the  check, 
nor  maintain  an  action  for  money  had  and  received  after  payment  of 
it  on  discovering  the  Irand. 

The  fact  tliat  the  plaintitf  is  the  payee  of  a  negotiable  security  does 
not  prevent  him  from  becoming  a  bona  fide  purchaser  of  it,  with  all 
the  rights  incident  to  a  purchaser  for  value  thereof  without  notice. 
That  was  decided  in  Walson  v.  Russell  (3  B.  &  S.  34),  and  affirmed 
in  the  Exchequer  Chamber  in  the  same  case  (5  B.  &  S.  968).  To  the 
same  etTect  is  Foirier  v.  Morris,  2  E.  &  B.  89,  and  Nelson  v.  Cowing, 
6  Plill,  336,  339.  Munroe  v.  Boidier,  8  C.  B.  86'3,  and  Armsirong  v. 
American  Bank,  133  U.  S.  433,  453,  seem  to  go  on  this  ground.  Fair- 
hanks  V.  Snow,  145  Mass.  153,  might  have  been  decided  on  this 
ground,  but  was  disposed  of  on  common-law  principles. 

That  payment  of  the  pre-existing  debt  makes  the  plaintiff  a  pur- 
chaser for  value  in  this  commonwealth  was  settled  law  before  the 
negotiable  instruments  act  was  enacted.  BJanrhard  v.  Stevens,  3 
Cush.  162 ;  Stoddard  v.  Kimhall,  6  Cush.  469 ;  Goodwin  v.  Massachu- 
setts Loan  &  Trust  Co.,  152  Mass.  189,  199;  National  Revere  Bank  v. 
Morse,  163  Mass.  383;  Eolden  v.  Fhoenix  Rattan  Co.,  168  Mass. 
570. 

The  checks  in  question  in  the  case  at  bar  were  given  after  the 
Negotiable  Instruments  Act  (St.  1898,  c.  533;  Eev.  Laws,  c.  73) 
went  into  effect,  and  are  governed  by  its  provisions.  The  plaintiff 
is  a  holder  in  due  course  of  the  $200  check,  within  Rev.  Laws,  c.  73, 
g  69.^  This  section  is  taken  from  section  29  of  the  Bills  of  Exchange 
Act  of  1882,  and  Watson  v.  Russell  is  cited  in  Chalmers,  Bills  of 
Exchange  (5th  ed.)  89,  as  an  example  of  a  person  who  is  a  holder 
in  due  course  within  that  section.  It  was  stated  by  Lord  Russell  in 
Lewis  V.  Clay,  67  L.  J.  Q.  B.  224,  that  a  payee  of  a  promissory  note 
cannot  be  a  holder  in  due  course  within  section  29  of  the  English 
Bill  of  Exchange  Act  of  1882.  In  Ilardnian  v.  Wheeler,  (1902)  1 
K.  B.  361,  372,  it  was  pointed  out  that  this  statement  of  Lord  Russell 
was  obiter,  and  it  was  also  pointed  out  that  in  that  case,  as  in  Lewis 
V.  Clay,  it  was  not  necessary  to  pass  on  that  point.  The  case  of 
Watson  V.  Russell,  3  B.  &  S.  34,  5  B.  &  S.  968,  does  not  seem  to  have 
been  before  the  court  in  either  of  these  cases;  and  in  neither  case  does 
the  court  seem  to  have  taken  into  consideration  the  practice  of  a  check 
beins:  procured,  drawn  by  another,  to  be  used  in  paying  a  debt  due 

TN.  Y.,  §91.  — C, 


I-X^.j  BLANKS.  177 

from  the  person  procuring  the  check  to  the  person  to  whom  the 
debtor  has  had  the  check  made  payable.  The  practice  is  recognized 
in  the  case  of  foreign  bills  of  exchange,  and  the  person  procuring  the 
bill  is  known  technically  as  the  "  remitter  "  of  it.  See  Munroe  v. 
Bordier,  8  C.  B.  862,  where  it  was*  held  that  the  payee  of  a  foreign 
bill,  who  took  it  from  the  remitter  of  it  for  value,  was  a  boria  fide 
purchaser  for  value;  and  this  rule  was  applied  in  Watsori  v.  Russell, 
3  B.  &  S.  34.  in  case  of  a  check.  In  our  opinion,  a  cheek  received  by 
the  payee  named  in  it,  in  payment  of  a  debt  due  from  the  remitter 
of  the  check,  is  a  holder  in  due  course  within  section  69  of  the 
Negotiable  Instruments  Act  (St.  1898,  c.  5;^3 ;  Rev.  Laws,  c.  73), 
even  if  we  should  follow  the  decision  made  in  Herdman  v.  Wheeler, 
(1902)  1  K.  B.  361,  and  hold  that  a  payee  never  can  be  a  holder 
in  due  course  to  whom  the  bill  has  been  "  negotiated,"  within  the 
last  clause  of  section  31  «  of  our  act  (Rev.  Laws,  c.  73)  which  is 
taken  from  section  20  of  the  P]nglish  Bill  of  Exchange  Act  of  1882 
(45  &  46  Vict.  c.  61).  The  rule  that  payment  of  a  pre-existing  debt 
is  value  was  adopted  in  Rev.  Laws,  c.  73,  §  42.^ 

But  so  far  as  the  check  for  $400  is  concerned,  we  are  of  opinion 
that  the  evidence  should  have  been  admitted.  If  the  defendant's  story 
were  found  to  be  true,  namely,  that  she  handed  the  check  to  the 
plaintiff's  manager  at  her  house,  this  check  would  stand  on  the  same 
footing  as  the  other.  But  the  story  of  tlie  ])lainiill"s  manager  was 
that  the  check  was  brought  to  him  by  the  (lofondiinl's  busbaiid,  signed 
in  blank  by  the  defendant,  and  that  it 'was  fillcMl  nj)  by  him  (or  the 
sum  of  $400,  with  the  husband's  consent.  We  assume,  in  favor  of  the 
plaintiff,  that  this  is  to  l)e  interpreted  to  mean  that  the  only  blank 
in  the  check  when  it  was  l)ronght  to  the  plaintiffs  manager  by  the 
defendant's  husband  was  in  the  amount  for  which  it  was  to  be  drawn. 
It  has  been  held  in  England  that  such  a  piece  of  paper  is  not  a  clieek  ; 
that  one  who  buys  it  buys  an  incouiplete  instrument,  and  bis  riL,dits 
depend  upon  the  real  authority  which  the  signer  bad  in  fact  given  in 
the  matter.  Avde  v.  Dixon,  6  Ex.  869.  Sec,  also,  f/nhli  v.  Searles, 
2  Sm.  &  0.  147;  Hof/arih  v.  Lniham,  3  Q.  B.  I).  WW);  Watlnn  v. 
Lamb,  85  L.  T.  (N.  S.)  483;  France  v.  Clarh,  26  Ch.  I).  257,  262; 
Ledwich  v.  McKim,  53  N.  Y.  307.  Sn.b  an  incomplete  instrument- 
is  j)rhna  fade  authority  to  fill  in  llie  blinl<.  Cnttililii  v.  Mann.  5 
Taunt.  529;  Swiin  v.  North  lirilish  A  nslralnsinn  Co.,  2  FL  k  C.  175 
184.  But  this  prima  facie  authority,  as  we  have  said,  may  be  met  by 
evidence  of  what  authority  was  in  fact  given,  as  was  done  in  A  irdr  v. 

Dixon,  6  Ex.  869.     If  the  blanks  are  filled  up  before  the  instrument 

is  negotiated,  it  does'rrm--tl7^n'Tlu'"  mak('r^  inoufFln  set  up  that  it 

was  incomplete  when  delivered  by  him.     In  siich   a  ease,  a   idai?ilifl 


12 


«N. 

Y. 

.  §  3.3. 

—  (\ 

•  N. 

Y. 

.§51. 

—  V. 

NBOOT. 

INSTRUMENTS 

ItH  INTKUl'UKTATlON.  [aUT.    II. 

who  buys  for  value  witliout  nolico  <ft'ts  (he  rights  of  a  bona  fide  pur- 
rhasor  for  valm*  of  a  urgotialtlo  instniiiicnl  ;  and  the  fact  that  tliere 
was  no  authority  (ov  lilling  up  tiic  Maiiks  as  they  were  filled  up,  or 
for  otherwise  wrongfully  dealing  with  the  paper,  is  no  defense. 
Schultz  V.  Astley,  2  Ring.  N.  C.  544;  Foster  v.  MacKinnon,  L.  R.  4 
C.  P.  704,  ri-2. 

In  this  connnonwt'alth  it  was  lu'ld,  on  the  other  hand,  tliat  a  note 
with  a  blank  for  the  payee's  name  was  a  promissory  note,  and  not  an 
incomplete  paper,  which  might  be  made  into  a  promissory  note.  Ives 
V.  Farmers'  Bank,  -^  Allen,  '.'3G.  And  in  Franlc  v.  Lilienfehl,  33  Grat. 
377,  it  was  held  that  the  purchaser  in  good  faith  of  a  note  in  printed 
form,  indorsed  by  ^he  defendant,  where  the  date,  payee's  name,  and 
amount  had  been  lefn^anlc;  had  aii  absolute  right  to  till  in  the  amount 
advanced  thereon  and  to  fill  up  the  other  blanks.  It  also  has  been 
held  here,  as  it  has  been  held  in  England,  that  such  a  blank,  in  the 
absence  of  other  evidence,  might  Ije  filled  in  by  a  bona  fide  purchaser 
(see  Androscoggin  Bank  v.  Kimhall,  10  ("ush.  373),  and  that  a  bona 
fide  purchaser  of  such  a  paper,  which  is  tilled  before  it  is  negotiated, 
has  the  rights  of  a  purchaser  for  value  without  notice.  See  Whitmore 
V.  Nicker^son,  125  Mass.  496,  28  Am.  Rep.  257;  l^iniiey  v.  Globe 
National  Bank,  150  Mass.  574. 

It  is  not  necessary  to  consider  how  a  blank  check  would  be  dealt 
with  in  Massachusetts  at  common  law,  where  the  amount  in  place  of 
the  name  or  date  is  lacking.  The  N^egotiable  Instruments  Act  (Kev. 
Laws,  c.  73,  §  31')  aclopted  the  English  law  on  this  point,  and  it 
follows  thatj.  il -Neweomb'a  sEoryTs^to'be  believed,  the  blank  check 
brought  to  him  must  be  ireated  as  an  incomplete  instrument,  and  not 
as  a  check. 

The  defendant  further  contends  that  it  was  inadmissible  to  show 
the  real  authority  given  to  the  husband,  in  the  absence  of  the  plaintiff, 
and  cites  in  support  of  that  contention  Markey  v.  Mutual  Benefit  Ins. 
Co.,  103  Mass.  79,  93,  and  Byrne  v.  Massasoit  Parking  Co.,  137  Mass. 
313.  These  are  cases  where  the  act  done  was  within  the  ostensible 
Bcope  of  the  authority  given  an  agent,  and  for  that  reason  the  real 
authority  could  not  be  invoked.  The  only  act  relied  on  as  giving 
ostensible  authority  to  the  husband  in  the  case  at  bar  was  putting  him 
in  possession  of  the  blank  check.  There  was  no  more  ostensible 
authoritv  here  than  there  was  in  Awde  v.  Dixon,  6  Ex.  869;  Hogarth 
V.  Latham,  3  Q.  B.  D.  643,  or  Watkin  v.  Lamb,  85  L.  T.  (N.  S.)'  483. 
It  was  held  lately  by  this  court,  in  Commercial  National  Bank  v. 
Bemis,  177  Mass.  95,  58  N.  E.  476,  that  putting  goods  in  the  name 
of  another  in  a  warehouse,  and  issuing  to  the  other  a  warehouse 
receipt  therefor,  did  not  give  that  other  ostensible  authority  to  sell, 

IN.  Y.,  §  33.  — C. 


IX.j  BLANKS.  179 

but  only  held  the  other  out  as  having  possession  of  the  goods  repre- 
sented by  the  receipt,  and  that  his  authority  to  transfer  a  title  de- 
pended upon  the  real  authority  given  by  the  owner.  Although  the 
posges:-ion  of  an  i;K-ompk'te  elR'ck_givos^  prima  facie  authority  to  fill 
it  up,  it  no  nioie  imports  ostensible  auihority  tlian  the  possession  of  a 
va rehouse  rt'Sii^AU — 

The  plaintilT's  ri<ihts  under  the  blank  check  for  $400,  and  to  the 
money  received  for  it,  dejiend  u])on  the  authority  actually  given  by  the 
defendant  when  she  signed  it,  and  the  evidence  offered  should  have 
been  admitted  in  respect  of  the  credit  claimed  for  the  $400  paid  under 
the  blank  chock. 

The  entry  must  be: 

/     "Vc*  Exceptions  sustained. 


u<  

§  33  VANDER  PLOEG  v.  VAX  ZUUK. 

135  Iowa,  350. —  1907. 

Action  on  a  promissory  note.  Plaintiff  appeals  from  judgment  on 
a  directed  verdict  in  favor  of  dcfendants.^_ .,_ 

McCl.'VIN,  J.  The  facts,  established  practically  wfthout  dispute, 
are  that  the  nf)te  for  $'^,000,  naming  the  plaintiff  as  payee,  and  the 
two  defendants  as  joint  makers  with  one  Pothovon,  on  which  this 
fiction  is  Itrought,  'WTiTr  T^rgnrrt-hy  these  two  defendants  before  it  was 
fully  completed,  being  at  the  time  their  signatures  were  aflfixed 
thereto  a  mere  blank  printed  form;  that  these  defendants  so  signed 
their  names  at  the~r(~(|Mesl  of  Pothoven,  who  was  a  partner  of  one  of 
them  ill  }i  mercantile  business,  on  the  representation  that  he  might 
within  a  short  time  liml  it  neceesary  to  raise  $l.'i()  or  $200  for  tem- 
))orary  use  in  the  luisiiiess;  that  Potboven,  being  indebted  on  his 
individual  account  lo  jilaintifr  on  a  note  for  about  $,.'.()(»(»,  inserted 
plaintiff's  name  as  payee.  $'^,000  as  the  amount  to  be  |ini(l.  and  llie 
rate  of  interest,  and  delivered  the  instrument,  (illed  oiil  b\'  him  uilh- 
out  authority,  to  th"  |ilaiiiliir,  who  Ihcreiipon  suri'cndei'ed  to  iiini  the 
just-diie  (jbligal  ion.  It  appears  in  the  evidence  thai  the  date  was 
filli'd  in  by  one  W.  (i.  Winder  I'loeg.  who  rre(|uenlly  transacled  busi- 
ness for  the  plainlilV,  his  father,  and  who  knew  of  the  tilling  of  the 
name  of  the  payee  and  the  amount  by  Pothoven  before  the  note  was 
delivered  to  jjlaintiff;  luit  the  final  delivery  was  made  direcllv  by 
Potlu)ven  to  plaintilT,  and  there  is  a  conflict  in  the  evidence  as  to 
whether  the  son  had  any  authority  to  act  for  the  plaintiff  in  this 
j)articular  transactif)n.  or  wbelher  rtlaintilf  had  anv  knowledge  that 
bis  sf)n  had  so  acted  for  him.  If  it  were  material  to  charge  the  plain- 
tiff with  the  knowledL'e  \vlii(b  bis  son  had  as  to  the  act  of  Pothoven 
in  filling  out  the  note,  the  (piestion  should  have  been  submitted  to  tliQ 


180  IN  TKuriaaAiiox.  L-^i'i-  h. 

jury,  jiud  we  shall  tli(.'rL'foit'  dispose  of  (he  ease  without  takinji'  into 
aeeouiit  any  knowleilye  of  or  partieipation  in  the  aet  of  I'oL.w.in 
in  lilling  out  the  note,  on  the  part  ot  \\ .  (1.  \'ander  lM_oeg. 

We  have,  tlien,  the  simple  ease  of  a  note  wrongfully  filled  out  and 
delivered  by  onc"of  the  makors  to  the  payee,"  wrfliotif  notice  to  liTe 
payee  thnt  tlie  rnstrunient  as  delivered  is  not  filled  out  in  aeeordamc 
with  the  authority  given  hy  the  otiier  makers  to  the  one  wlio  thus  tills 
it  out  aiid" delivers  it.  With  reference  to  the  filling  of  blanks  in  an 
instrument  aftertTie^afTixing  of  his  signature  by  the  maker  sought  to 
be  eliargcMl,  the  Negotiable  Instruments  Aet  (Acts  29th  Gen.  Assem. 
p.  81,  c.  130;  Code  Supp.  1902,  §  30fiOfO  contains  the  following  sec- 
tion :  "  Sec.  14,^  Blanks  —  when  may  be  filled.  Where  the  instru- 
ment is  wanting  in  any  material  particular,  the  person  in  possession 
thereof  has  a  prima  facie  authority  to  eom])]ete  it  by  filling  up  the 
blanks  therein.  And  a  signature  on  a  blank  paper  delivered  by  the 
person  making  the  signature  in  order  that  the  paper  may  be  converted 
into  a  negotiable  instrument  operates  as  a  prima  facie  authority  to  fill 
it  up  as  such  for  any  amount.  In  order,  however,  that  any  sndx 
instrument  when  completed  may  be  enforced  against  any  person  who 
became  a  party  thereto  pmr  to  its  eompletion,  it  must  be  tilled  up 
strictly  in  accordance  with  the  autliority  given  and  within  a  reasonable 
time.  But  if  any  such  instrument,  after  eompletion,  is  negotiated  to 
a  holderln  due  course  it  is  valid  and  effectual  for  all  purposes  in  liia 
hands,  and  he  may  enforce  it  as  if  it  had  been  filled  up  strietly  in 
accordance  with  the  authority  given  and  within  a  reasonable  time." 

It  is  apparent  from  the  last  sentence  of  this  section  that,  if  plaintiff 
is  to  be  regarded  as  "  a  holder  in  due  course,"  then  the  instrument  is 
effectual  in  his  hands  for  all  purposes  as  though  it  had  been  filled  up 
strictly  in  areordanee  with  the  authority  given  by  defendants  to 
Pothoven,  i.  e.,  defendants  would  not  be  allowed  to  contend  as  against 
a  holder  in  due  course  that  Pothoven  did  not  have  authority  to  fill 
the  instrument  out  for  $2,000;  but,  under  the  sentence  immediately 
preceding  the  last,  if  plaintiff  is  not  to  be  treated  as  a  holder  in  due 
course,  then,  as  defendants  became  parties  thereto  prior  to  its  enm 
pletion,  they  are  not  liable  to  plaintiff,  because  it  was  not  filled  up  in 
accordance  with  the  authority  given.  By  section  191,*  the  term 
"holder"  is  defined  as  meaning  "the  payee  or  indorsee  of  a  bill  or 
note  who  is  in  possession  of  it,  or  the  bearer  thereof,"  and  by  section 
52  *  a  "holder  in  due  course"  is  defined  as  one  who  has  taken  the 
instrument  complete  and  regular  upon  its  face,  before  maturity,  with- 
out notice  of  previous  dishonor,  in  good  faith  and  for  value,  and 
without  notice  that  at  the  time  it  was  negotiated  to  him  there  was 

2  N.  Y.,  §  33.  —  C. 
8N.  Y..  §2.  —  C. 
♦  N.  Y.,  §91.  — C. 


iX.]  BLANKS.  181 

any  infirmity  or  defect  in  the  title  of  the  person  negotiating  it.  By 
section  59,^  "  every  holder  is  deemed  prima  facie  to  be  a  holder  in  due 
course,"  and  by  section  57  **  "a  holder  in  due  course  holds  the  instru- 
ment free  from  any  defect  of  title  of  prior  parties  and  free  from 
defenses  available  to  prior  parties  among  themselves,  and  may  enforce 
payment  of  the  instrument  for  the  full  amount  thereof  against  all 
parties  liable  thereon." 

It  seems  to  us  under  these  definitions  and  the  applications  thereof 
the  plaintiff  was  a  holder  of  the  note,  but  not  a  holder  in  due  course. 
The  latter  term  seems  unquestionably  to  be  used  to  indicate  a  person 
to  whom  after  completion  and  delivery  the  instrument  has  been  nego- 
tiated  In  the  ordinary  case  the  payee  of  the  instrument  is  the  person 

with  whom  the  contract  is  made,  and  his  rights  are  not  in  general  de- 
pendent on  any  peculiarities  in  the  law  of  negotiable  instruments.  The 
peculiarities  of  that  law  distingurshtrTprncgotiftblo  instruments  from 
other  contracts  relate  to  a  holder  who  has  taken  by  negotiation,  and 
not  as  an  original  party.  This  is  the  construction  put  on  the  same 
phrase  used  in  the  English  Negotiable  Instruments  Act  by  Lord 
Russell,  C.  J.,  in  Lewis  v.  Clay,  67  L.  J.  Q.  B.  224,  in  which  he  says: 

"  A  holder  in  due  course  is  a  person  to  whom  after  its  completion 
by  and  as  between  the  immediate  parties  the  bill  or  note  has  been 
negotiated.  In  the  present  case,  the  plaintiff  is  named  as  payee,  on 
the  face  of  the  promissory  notes,  and  therefore  is  one  of  the  immediate 
parties.  The  promissory  notes  held  and  sued  on  (by  the  person 
named. as  payee  therein)  have  in  fact  never  been  negotiated  within 
the  meaning  of  the  actr"- .In  TJerdman  v.  Wheeler,  1  K.  B.  (1902)  301, 
this  language  of  Lord  Russell  is  said  to  be  dictum,  and  it  evidently 
is  so,  for  in  the  further  course  of  the  opinion  he  points  out  that,  with- 
out regarrl  to  the  dofinition  of  that  form  which  he  gives,  the  rosult 
would  be  the  same.  But  the  court,  in  TJerdman  v.  Wheeler,  holds  that 
if  the  delivery  of  a  note  by  one  to  whom  it  has  been  intrusted  liy  the 
maker  for  the  purpose  of  delivery  after  the  filling  in  of  the  n.nne  of 
the  pavee.  whieb  has  been  left  filnnk  at  the  time  of  the  nfTlxing  of  the 
maker's  signature,  does  not  conslitnte  n  negotiation,  then  the  payee 
whose  name  is  thus  filled  in  cannot  be  a  bohlcr  in  due  course.  In 
other  words,  we  think  tliat  "bolder  in  dur-  course"  sbould  be  con- 
strued as  applicable  oidy  tf)  one  who  takes  llie  instrument  by  negotia- 
tion from  anotlier  wlu)  is  a  bolder.  Certainly,  in  the  case  before  us, 
Pothoven  was  not  a  holder  of  a  promissory  note,  for  as  tlie  instrument 
was  delivered  to  him  it  was  not  a  note  at  all.  but  ordy  a  lilank  form 
of  a  note  with  tlie  makers'  names  affixed.  In  (lurrraiil  v.  (liirrrant 
7  Va.  Law  Keg.  (\?>'.K  a  ca.se  at  nisi  priii.s,  it  is  held  that  the  holder 
filling  a  blank  left  in  the  instrument  at  the  time  of  delivery  acts  at 


8  N.  Y..  §  ns.  —  r. 

«  N.  Y.,  §  96.  —  C. 


18'3  INTi:Ul'l!KTATlON.  [akT.    II. 

liis  peril  as  to  the  authority  given  by  the  maker  signing  the  instru- 
ment with  the  name  of  tlie  jjayee  left  blank,  and  putting  it  in  the 
liands  of  another  for  final  delivery,  and  says  that,  while  this  interpre- 
tation of  the  Negotiable  Instruments  Act  involves  a  change  in  the 
law  as  recognized  in  that  state  before  the  act  was  passed,  such  interpre- 
tation is  required  by  the  language  of  the  act  itself.^  In  Boston  Steel 
t£-  Iron  Co.  v.  Sfeurr,  IS;^  :\fass.  1-10,  a  case  decided  under  the  iSTego- 
tiable   liistniini'nts  Act  as  adopted   in   tliat  st.ite.  it    is  hebl   that  one 


^  The  following  inatructive  note  to  the  Ouerrant  case  appears  in  7  Va.  Law. 
Reg.  at  p.  G42: 

"  NOTK.  —  The  point  iliciilt'il  in  tliis  case  is  one  of  nincli  importance  to 
banlcers  and  other  dealers  in  coniniercial  paper.  Tiie  construction  here  placed 
upon  the  Nejrotiable  Instriinients  Law  materially  qualifies  the  familiar  rule  of 
the  law  merchant,  that  one  who  issues  negotiable  paper  in  an  incomplete 
condition  gives  the  person  to  whom  he  intrusts  it  implied  authority  to  fill  the 
blanks  and  perfect  the  instrument;  and  a  transfer  thereof  to  a  bona  fide 
holder  in  due  course  will  elTectually  bind  the  maker  according  to  the  terms  of 
the  completed  instrument,  even  Ihougli,  as  between  the  original  parties,  there 
may  have  been  a  breach  of  trust  in  filling  the  blanks.  See  1  Daniel  on  Neg.  Inst. 
142;  Bank  of  Pittsburg  v.  :<cal,  22  How.  96;  Frank  v.  Lilienfeld,  33  (iratt.  577. 
"The  point  decided  is  tliat  this  rule  is  altered  to  this  extent,  namely,  that 
if  a  purchaser  takes  the  paper  before  the  blanks  hare  been  aetiially  filled  by 
the  quasi  agent,  or  by  a  subsequent  holder,  he  is  put  on  notice  that  the  instru- 
ment was  delivered  in  an  incomplete  state,  and  lience  that  there  may  have 
been  some  agreement  between  the  maker  and  the  person  to  whom  the  instru- 
ment was  intrusted,  by  wliieh  the  authority  of  tlie  latter  was  limited  —  and 
therefore  it  is  his  duty  to  inquire  wliat  these  instructions  are.  Hence  he  takes 
the  paper  at  his  peril. 

"This  construction  seems  inevitable  from  tli<!  language  of  section  14  of  the 
Negotiable  Instruments  Law  [N.  Y.,  §  33],  (juoted  in  tlie  opinion.  The  con- 
clusion is  strengthened  by  the  circumstance  that  tliat  jiortion  of  section  14  here 
construed  is  a  literal  reproduction  from  section  20  of  the  English  Bills  of 
Exchange  Act,  where  it  merely  embodies  the  rule  of  the  law  merchant  as 
expounded  by  the  English  courts  prior  to  the  enactment  of  the  Hills  of 
Exchange  Act.  See  1  Daniel  on  Neg.  Inst.  (4th  ed.),  147;  Ilateh  v.  Searles, 
2  Small  &  Gif.  147;  Awde  v.  Dixon,  G  P^xch.  8f)«.  Norton  [Bills  and  Notes 
(3d  ed.),  259 J,  after  stating  the  general  American  doctrine  on  the  subject, 
says:  'Such  is  the  general  rule,  at  least  in  the  United  Stales,  although  in 
England  it  is  held  that  an  unfilled  blank  charges  the  purchaser  with  notice, 
and  that  he  must  at  his  peril  ascertain  the  extent  of  the  authority  conferred.' 
Since  the  enactment,  by  the  English  Act,  of  the  rule  that  notice  of  an  unfilled 
blank  is  notice  of  a  possible  e(|uity,  putting  the  purchaser  on  inquiry,  was  but 
declaratory  of  the  already  existing  rule  of  the  law  merchant,  as  understood 
in  England,  it  necessarily  follows  that  in  borrowing,  in  our  Negotiable  Instru- 
ments" Law,  the  language  of  the  English  Act,  we  adopted  also  the  English 
interpretation  of  it. 

"Judge  Aiken's  ruling  seems  eminently  sound,  and  the  banking  community 
should  make  a  careful  note  of  it.  The  decision  in  no  wise  afTects  the  rights  of 
a  holder  in  due  course,  who  takes  the  paper  after  the  blanks  have  been  filled, 
without  notice  of  the  situation.  How  far  such  a  holder  would  be  affected  by 
mere  knowledge  that  blanks  ha<l  been  filled  by  a  previous  party  to  the  instru- 
ment remains  to  be  decided."  —  C. 


IX.]  BLANKS.  183 

who  signs  a  check,  leaving  the  name  of  the  payee  blank,  and  instructs 
another  to  fill  in  the  proper  amount  necessary  to  satisfy  the  debt  of 
such  signer  to  the  payee  named,  is  not  bound  by  the  check  in  the 
hands  of  such  payee,  if  it  is  used  by  the  person  thus  intrusted  with  it 
for  the  payment  of  his  own  debt  to  the  creditor;  the  amount  of  such 
debt  being  correctly  filled  in  by  the  creditor.  In  that  case,  the  person 
to  whom  the  jcJu'ck  \\:as  Jntrusted  exceeded  his  auth'Oritj  in  using  it 
^Tor  the~pfiy^"«-Tit  nf  his  oftn  d^^^^l  'TTitparl  of  tlio  debt  of  the  Signer  of 
-"^iift  cheeky  nnd  in  this  rpf;j>ppf  jvp  think  the  (  asc  is  analogous  to  the 
~^sue__before  us.  There  is  language  in  the  opinion  with  reference  to 
anothei'  cfieck  which  was  fully  completed  as  to  name  of  payee  and 
amount,  but  was  also  used  by  the  person  to  whom  it  was  intrusted  in 
violation  of  his  authority  in  the  payment  of  his  own  debt,  which  is 
not  in  harmony  with  our  conclusion  that  the  payee  to  whom  the  instru- 
ment is  first  delivered  cannot  be  a  holder  in  due  course;  but  in  this 
respect  we  are  not  inclined  to  follow  the  Massachusetts  case. 

We  do  not  mean  to  say  that  in  no  case  can  the  person  named  as  payee 
in  a  negotiable  instrument  be  the  holder  thereof  "  in  due  course."  If 
A.,  purchasing  a  draft  to  be  transmitted  to  B.  in  payment  of  A.'s 
debt  to  B.,  causes  the  draft  to  be  drawn  payable  to  B.,  no  doubt  A. 
is  the  holder  of  such  draft,  and  B.  taking  it  for  value  becomes  a  holder 
in  due  course.  This  was  true  before  the  passage  of  the  Negotiable 
Instruments  Act.  ArmMrong  v.  American  Exchange  Nat.  Bank,  133 
U.  S.  433;  Watson  v.  Riu'iseli,  3  B.  &  S.  34,  aflflrmed  in  5  B.  &  S.  968. 
There  is  no  reason  to  think  the  situation  of  the  parties  to  such  a 
transaction  is  different  under  the  act.  Xo  doubt,  the  payee  named 
in  the  promissory  note  might  under  similar  circumstances  be  a  holder 
in  due  courae.  This  is  the  theory  on  which  the  court  in  Boston  Steel  ,(• 
Iron  Co.  V.  Stener,  supra,  holds  the  payee  named  in  the  first  of  the 
'•hecks  considered  in  that  case  to  be  a  holder  in  due  course;  but  we 
are  unable  to  understand  how  the  rule  is  applicable  und(>r  the  facts  of 
the  case,  for  tlic  check  wns_Tint  dotiviTd  by  flic  drawer  as  a  vnlid  and 
com[)lete  instrument  to  the  person  intrusted  with  it,  hut  it  was  given 
into  his  hands  only  for  delivery  to  the  payee  in  extinguisliincnt  of  the 
drawer's  debt  tu  Uw  payfp — Until  thus  deTrvered'to  iTTe  p;i\v,,  it  had 
tin  validity  for  any  f»urj>ose.  Before  such  delivery,  the  person  in- 
trusted with  it  was  not  a  bolder.  After  such  (hdivery,  the  payee  was 
a  holder,  hut  not,  as  we  think,  a  lioldep  irTTTiiQ^^^^irer. 

'i'he  conclusion  which  we  reach  is  perhaps  different  from  what  it 
would  have  been  had  the  Negotiable  Instruments  Act  not  been  passed. 
It  has  been  regarded  as  well-settled  law  that  one  who  intrusts  jui 
incomplete  instrunieiit  to  another  to  be  comy)leted  bv  liim  and  delivered 
is  bound  to  any  one  who  relies  in  good  faith  on  the  gen\iineness  of 
such  instrument,  although  the  person  intrusted  with  cf»in|>let ing  and 
delivering  the  instrument  has  exceeded  his  authority,  and  this   rule 


184  INTEUl'UKTA'l'lON.  [aKT.    II. 

has  beeu  lielil  appliial)k'  in  favor  of  tlie  payee  as  well  as  the  trans- 
feree of  suili  an  insUuiiK'iit.  Cliarilon  I'loiv  Co.  v.  Davidson,  IG  Neb. 
374,  20  N.  W.  256;  Androsroyyin  Ihink-  v.  Kimball,  10  Cush.  373; 
Johnson  Ilarvester  Co.  v.  McLean,  57  Wis.  258;  Fullerton  v.  Sturyes, 
4  Ohio  St.  530;  I>ie;TZvs-  v.  Robcrls,  13  S.  C.  338;  FranA:  v.  Lilicn- 
feld,  33  drat.  (Va.)  377;  Paris  v.  />ce,  2G  Miss.  505,  59  Am.  Dee. 
267;  Russell  v.  Lanyslajjc.  2  Dong.  (K.  B.)  514;  1  Daniel,  Negotiable 
Inst.  (5th  ed.)  §^  112-117,  760-76f)a;  1  Eandolph,  Commercial 
Paper  (2d  ed.)  i^  ISl  ;  2  Randolph,  Commercial  Paper  (2d  ed.) 
§  '^)i<o\  3  Randolph,  Commercial  Paper  (2d  ed.)  §  1875;  Norton, 
Bills  &  Notes  (2d  ed.)  181  ;  Clarl-  d-  Skyles.  Agency,  §  60.  Indeed, 
it  seems  to  have  been  thought  immaterial  whether  or  not  the  person 
to  whom  the  instrument  is  made  payable  and  delivered  had  knowl- 
edge that  it  had  been  filled  out  so  as  to  make  it  an  effectual  instru- 
ment, by  one  to  whom  it  was  intrusted  by  a  maker  who  had  signed  it 
to  be  filled  out  and  delivered,  for  it  is  said  that  the  holder  is  entitled 
to  assume  that  tlie  person  in  whose  hands  it  was  placed  for  final 
execution  had  authority  to  dojghAt-M^'dlEido  in  making  it  an  effectual 
instrument,  and  is  not  cHarged  with  knowledge  of  "any  limitations 
upon  such  authority.  Johnson  v.  Blasdale,  1  Smedes  tC  j\1.  (Miss.) 
17,  40  Am.  Dec.  85;  Joseph  v.  First  National  Banl-,  17  Kan.  256; 
Huntinyton  v.  Branch  Bank,  3  Ala.  186;  1  Daniel,  Negotiable  Inst. 
(■5th  ed.)  §  843;  Mechem,  Agency,  §  394.  This  principle  is  well 
illustrated  by  the  rule,  well  settled  in  this  state  and  elsewhere,  that  a 
surety  who  signs  an  instrument  and  intrusts  it  to  the  principal  maker 
for  delivery  is  bound,  although  the  principal  delivers  it  in  violation 
of  conditions  or  instructions  imposed  by  the  surety  on  the  principal 
which  were  not  known  to  the  payee.  Sawyers  v.  Campbell,  107  Iowa, 
397,  56;  Micl-lev'nitv.N-od:^\6wk,  344;  Davis  Seiviny  Machine  Co. 
V.  Buckles.  89  111.  237;  Smith  v.  Mobcrly,  49  Ky.  266;  Ward  v. 
Hackett  30  Minn.  150;  Craiy  v.  Hobbs,  44  Ind.  363;  Brandt,  Surety- 
ship (3d  ed.)  §  457. 

But  we  must  take  the  Negotiable  Instruments  Act  as  it  is  written, 
and,  while  the  general  purpose  was  to  preserve  the  existing  law  so  far 
as  it  was  uniform,  yet  in  many  re.spects  in  wliich  there  was  a  conflict 
or  doubt  under  the  authorities  the  language  of  the  statute  lays  down 
rules  which  are  not  to  be  ignored  simply  because  in  some  respects  a 
change  in  the  law  is  effected.  With  reference  to  the  language  which 
we  have  been  considering  in  this  very  case,  taken  substantially  from 
section  20  of  the  English  Bills  of  Exchange  Act,  the  court  says,  in 
Ilerdman  v.  Wheeler,  supra:  "We  have  been  very  reluctant  to  come 
to  the  conclusion  that  the  judgment  in  favor  of  the  defendant  in  t1iis 
case  was  right,  because  it  appears  dangerous  even  to  cast  any  (lout)t 
upon  a  payee's  right  to  recover  when  he  has  taken  a  bill  or  note  com- 
plete and  regular  on  the  face  of  it,  honestly  and  for  value ;  but,  after 
carefully  considering  the  matter,  we  have  come  to  the  conclusion  that 


IX.]  BLANKS.  185 

we  should  be  unfairly  straining  the  words  if  we  did  not  hold  that 
'negotiated,'  in  its  proviso  at  the  end  of  the  twentieth  section,  meant 
transferred  bygone  holder  to  another.  It  is  to  be  observed  that  the 
Bills  of  Exchange  Act,  rn""^?r.'lion  S  [section  191  of  our  act]  defines 
'  issue  "  as  meaning  '  the  first  delivery  of  a  bill  or  note,  complete  in 
form,_to_a  person  who  take?  it  as  holder.  *  *  *  '  There  is  there- 
fore a  technical  word  defincrl  and  used  in  the  act  to  mean  that  which 
[the  person  intrusted  with  the  completion  and  delivery  of  the  instru- 
ment] did  here,  and  the  appropriate  words  to  have  used  in  the  proviso 
of  section  20,  if  it  had  been  intended  to  include  this  case,  would  have 
been,  '  if  such  instrument  after  completion  is  issued  or  negotiated  to 
a  holder  in  due  course.'  Those  are  not  the  words,  and,  although  we 
think  that  the  present  case  might  possibly  have  been  decided  in  the 
plaintiff's  favor  before  the  Bills  of  Exchange  Act  was  passed,  we  think 
that  we  cannot  consistently  with  the  meaning  of  '  issue  '  and  '  nego- 
tiate '  in  the  act  hold  that  the  present  case  is  covered  by  the  words 
used  in  the  proviso.  That  being  so,  it  falls  within  the  first  part  of  the 
secona  sunseciion  ot  section  20  [i.  e.,  the  sentence  of  our  section  pre- 
ceding the  last]  ;  andj,  as  the. authority  of_tb£- def€nda.nt  was  not 
strictly  followed,  he  is^^oLJiable." 

We  see  no  escape  from  the  conclusion  that,  under  tlie  statute, 
plaintiff,  being  not  a  holder  in  due  course,  but  the  person  to  whom 
the  note  was  made  payable,  and  to  whom  its  delivery  as  an  effective 
instrument  was  first  made,  took  it  subject  to  the  defense  that  Pothoven 
had  no  authority  to  fill  in  $2,000  as  the  amount  of  the  note  and  deliver 
it  to  plaintiff. 

The  judgment  of  the  trial  court  is  therefore  affirmed." 


,'V- 


§  33  LLOYD'S  BANK,  LIMITED,  v.  COOKE. 

[19071  1  King's  Bench  (Court  of  Appkal)  7fl4. 

Attton  upon  a  joint  and  several  promissory  note  for  1,000  pounds 
bv  the  plaintiffs  as  payeos  against   the  defendants,  as,  makers. 

The  defendant  f'ooke  bad  an  aeronnt  with  the  plaintiffs'  bank,  and 
the  note  had  been  given  to  the  plaintiffs  by  him  as  security  for  an 
overdraft  for  1,000  pounds.  On  applying  to  them  for  the  overdraft, 
he  had  suggested  that  he  could  proeure  the  firm  of  which  he  was  a 
member  and  a  relative  named  Sanbrook  to  join  with  him  in  signing 

•  This  CHHP  ifl  reported  in  \'\  \..  N.  S.  400.  witli  note  nntitletl  "Right  of  an 
innocent  payee  to  recover  on  a  note  signed  in  lilank  and  int runted  to  a  third 
person  who  pxreedH  his  atithority  in  filling  np  the  hlankR  hefore  delivery  to  the 
payee." 

See  comment  op  this  ca"»e  and  on  lAnyd'n  Hank  v.  Cooke,  pout,  p.  IH."),  in 
15  Case  and  Comment,  25   (July,  1908).  — C. 


186  INTKRI'KKTATION.  [aHT.    II. 

a  promissory  note  as  seourily  for  the  advance,  and  the  plaintifTs  }i{,'recd 
to  advaiire  the  money  on  that  security.  It  appealed  that  tiie  defendant 
(.\ioke  had  thereupon  _u:on(>  to  defen(h»nt  Sanhrook,  and,  stating  that 
l)e  was  applyinjf  for  an  advance  of  ')()()  pounds  from  the  plaintiffs' 
l^ank,  asked  Sanhrook  to  join  in  giving  promissory  notes  as  seiuirity 
for  it.  On  Sanhrook's  agreeing  to  do  so,  Cooke  produced  two  l)lank 
stamped  pieces  of  paper,  to  which  he  induced  Sanhrook  to  put  his 
signattwer—and^  which  wen*  then  handed  over  to  Cooke,  it  heing 
arranged  that  he  was  to  till  each  of  them  up  as  a  promissory  note 
payahle  to  the  plaint  ill's  for  the  amonnt  of  250  pounds.  It  did  not 
appear  what  liad  hecome  of  one  of  these  pieees  of  paper;  but  the 
other,  which  was  the  instrument  upon  which  the  action  was  brought, 
was  filled  up  by  Cooke  as  a  promissory  note  for  1,000  pounds,  payable 
to  the  plaintitl's,  the  stamp  heing  sufficient  to  cover  that  amount,  and 
was  signed  by  liim  with  his  own  and  his  firm's  name,  lie  then  handed 
it  to  the  plaintiffs,  who  thereupon  made  the  required  advance.  The 
defendant  Cooke  did  not  defend  the  action.  It  appeared  that  he  had 
no  authority  to  sign  the  note  on  helialf  of  the  other  members  of  his 
firm,  and  judgment  was  accordingly  giv(>n  for  them;  and,  on  the 
authority  of  Ilcrdman  v.  WheeU'r,  ([1902]  1  K.  B.  361),  the  trial 
judge  gave  judgment  for  the  defendant  Sanhrook. 

This  is  an  application  by  the  plaintiffs  for  judgment  or  for  a  new 
trial. 

Collins,  M.  R.  This  is  a  case  of  some  importance  and  difficulty, 
more  especially  having  regard  to  the  fact  that,  from  one  point  of 
view,  it  might  involve  the  question  whether  the  considered  judgment 
of  the  Divisional  Court  in  Jlerdwnn  v.  Wlippler,  [1902]  1  K.  B.  361, 
upon  the  authority  of  which  the  learned  judge  at  the  trial  acted,  was 
correct.     *     *     * 

The  question  appears  to  me  to  be  purely  one  of  estoppel  at  common 
law.  It  has  been  contended  that  the  common  law  doctrine  of  estoppel 
does  not  apply,  and  that,  in  the  case  of  a  negotialjle  instrument,  the 
rights  of  the  parties  must  he  ascertained  solely  by  reference  to  the 
provisions  of  tlie  statute  relating  to  such  instruments,  and  that,  upon 
the  true  construction  of  tliose  provisions,  the  plaintiffs  cannot  main- 
tain the  action  against  the  defendant   Sanhrook.     *     *     * 

That  the  doctrine  of  estoppel  is  applicahle  to  circumstances  such 
as  existed  in  this  case  appears  to  me  to  he  conclusively  established 
by  *  *  *  the  decision  of  the  House  of  Lords  in  BrncMeshy  v. 
Temperance  Permanent  Building  Society,  [189.5]  A.  C.  173.  The 
headnote  in  that  case  is  as  follows :  "  Where  a  principal  intrusts  an 
agent  with  securities,  and  instructs  him  to  raise  a  certain  sum  upon 
them,  and  the  agent  borrows  a  larger  sum  upon  the  securities,  and 
fraudulently  appropriates  the  difference  (the  lender  acting  l)nna  fide 
and  in  ignorance  of  the  limitation),  the  principal  cannot  redeem  the 


IX.]  BLANKS.  187 

securities  without  paying  the  lender  all  he  has  lent,  although  the 
agenKlias  obtained  the  loan  by  fraud  and  forgery,  and  although  the 
leHaer  did  not  know  that  the  agent  had  authority  to  borrow  at  all, 
and  made  no  inquiry."  That  ease  seems  to  me  to  be  a  stronger  one 
than  the  present ;  and,  unless  the  doctrine  of  estoppel  is  excluded  here 
by  reason— of  the  fact  that  in  this  case  the  document  was,  or  was 
intended  to  become,  a  negotiable  instrument,  it  appears  to  me  to  be 
conclusive  of  the  present  case.     *     *     * 

80  far  from  the  fact  that  the  document  which  was  handed  to  the 
agent  for  the  purpose  of  being  used  as  a  security,  was  a  negotiable 
instrument,  or  was  intended  to  become  one,  being  a  rea.son  why  the 
lender  of  money  should  be  placed  in  a  worse  position  for  asserting 
a  right  on  tiie  ground  of  estoppel,  it  appears  to  me  to  be  quite  the 
contrary.     1  think  _that  all  the  elements  which  form  the  foundation 
of  the  estgppel  aii'  iimir  easily  \isiblo  where  the  instiuiiicnt  which  is 
haiicledover  to  lie  used  as  a  security  for  an  advance  is  in  (lie  form 
of, a  negotiable  instrument  than  where  it  is  otherwise;  for  thi-  inten-//     ^   / 
tion  thai ihe security  should  be  used  as  a  means  of  raising  money  is/   "^ 
more  clearly  indicated  where  the  document  is  in  its  very  nature  one/ 
which  is  intended  to  be  transferable  from  hand  to  hand  as  a  security/ 

!or  money.     *     *     *  j 

There  is  nothing,  in  my  opinion,  in  the  law  as  to  negotiable  instru- 
hients  as  contained  in  the  Bills  of  Exchange  Act,  18.^2,  to  prevent 
the  transaction  in  the  present  case  from  being  sul)ject  to  this  common 
law  doctrine  of  estoppel,  bpcause  the  document  which  was  handed 
over  for  the  purpose  of  procuring  the  advance  was  in  the  form  of  a 
negotiable  instrument.  *  *  *  ronsequentiy  T  will  pronounce  no 
opinion  on  the  i|nestion  whether  the  plaintiffs  were  entitled  to  suc- 
ceed as  against  the  defendant  Sanbrook  by  virtue  of  the  provisions 
of  the  Hills  of  Kxcbanpe  Act,  1HH2.  On  these  grounds  I  think  that 
the  application  of  the  plaintiffs  for  judgment  must  be  allowed.* 

Fi.ETCHKit  MoirLTON.  L.  J.  I  am  of  the  same  opinion,  and  1  agree 
with  the  reasons  given  by  the  Master  of  the  h'olls  and  ( "o/.ens-Ilardv, 


•  The  vipw  tflken  in  this  opinion  that  tho  Bills  of  Exchange  Act.  1882.  does 
not  opprat*'  lo  prfvcnt  Uic  a[)plirali(in  t(t  iicj,'otial>lc  instruments  of  common 
law  princifiirs,  i-  ;i|. proved  in  12  I.nw  Nofcs.  12.T  ( Octolu.r.  IftOK ) ,  where  it  is 
maintained  that  the  Kame  dortrine  should  ho  applied  with  respect  to  the 
American  Neu'otiahle  Instruments  Law.  To  the  same  effect,  see  15  Case  and 
Comment,  25,  2i>  (.Inly,  I9()S),  where  it  is  said:  "In  expn-ssly  saving  the 
rules  of  the  law  merchant  in  cases  not  ftrovided  for  in  the  act,  the  .American 
statute  does  not,  like  the  Enplish  act,  mention  common  law  rules;  Imt  this 
seems  immaterial  for  the  reason  that  neither  statute  was  intended  to  codify 
rules  of  the  common  law  Iieyond  the  scope  of  the  law  merchant."  See  also 
Marlinq  v.  Fitzjirrahl.  1.18  Wis.  fl.T.  where  the  court,  in  answer  to  the  contention 
of  counsel  that  a  certain  section  of  the  N'epotialilc  Instruments  Law  controlled, 
said  that  "  Those  rules  give  way  to  the  stipreme  rule  of  r.ttopprl  m 

pais."     P.  100.  — C. 


188  iNTKui'itioTArioN.  [art.  n. 

L.  J. ;  but  I  wish  to  add  a  few  observations  with  reference  to  the 
argument  based  upon  sod  ion  20  of  ilio  Bills  of  Exchange  Act,  1882, 
which  was  pressed  upon  us  \)\  \\\o  counsel  for  the  defendant  Sanbrook. 
In  cases  in  which  a  blaid\  sianipi'd  ])apor  lins  boon  signed  and  delivered 
by  the  signer  in  order  tliai  it  may  bo  converted  into  a  bill,  subsection 
2  of  section  "^0  provides  that  "  in  order  that  any  such  instrument  when 
completed  may  be  enforceable  against  any  person  who  became  a  party 
thereto  prior  to  its  completion,  it  must  be  filled  up  within  a  reasonable 
time,  and  strictly  in  accordance  with  the  authority  given."  It  was 
urged  that  this  provision  is  an  absolute  limitation  upon  all  (claims 
based  on  such  an  instrument  (whether  by  way.  of  estoppel  or  other- 
wise), and  that  the  only  way  in  which  a  person  so  claiming  can  escape 
from  that  limitation  is  by  bringing  himself  within  the  proviso  to  tiie 
subsection,  which  provides  that  "  if  any  such  instrument  after  com- 
pletion is  negotiated  to  a  iiolder  in  due  course  it  shall  be  valid  and 
eifectual  for  all  purposes  in  his  hands,  and  he  may  enforce  it  as  if  it 
had  been  filled  up  within  a  reasonable  time,  and  strictly  in  accord- 
ance with  the  authority  given,"  and  it  was  contended  that  the  plain- 
tiffs had  failed  to  bring  themselves  within  the  words  of  this  proviso 
because  they  were  not  "  holders  in  due  course." 

In  order  to  agree  with  this  view,  one  would  have  to  come  to  the 
conclusion  that  it  was  intended  by  the  Bills  of  Exchange  Act,  1882, 
to  make  an  essential  change  in  the  law  with  regard  to  negotiable 
instruments  by  shutting  out  the  payee  of  such  an  instrument,  who 
had  given  full  value  without  notice  of  anything  wrong,  from  the 
advantages  of  the  position  of  a  bona  fide  holder  for  value. — Before  the 
Bills  of  Exchange  Act,  1882,  it  would,  in  my  opinion,  have  been 
impossible  to  contend  that  a  payee  of  a  promissory  note  who  took  it 
under  circumstances  such  as  existed  here  was  not  entitled  to  recover 
the  full  amount  of  the  note  from  the  maker  of  it.  A  long  line  of 
most  emphatic  judgments  shows  that,  before  the  Act,  a  person  who, 
like  the  defendant  Sanbrook,  chose  to  sign  a  bill  or  note  in  blank,  and 
hand  it  to  another  person  to  be  filled  up,  would,  under  circumstances 
such  as  exist  in  this  case,  be  liable  to  the  payee  for  the  full  amount 
for  which  the  instrument  was  filled  up,  provided  that  it  was  not 
greater  than  the  stamp  would  cover,  so  that  an  action  such  as  this 
would  then  have  been  an  undefended  action.  The  contention  of  the 
counsel  for  the  defendant  amounts,  therefore,  to  saying  that  the  Act 
has  made  this  important  change,  namely,  that  it  has  taken  away  the 
right  of  a  payee  to  recover  under  such  circumstances,  leaving  only 
the  rights  of  an  indorsee  in  this  respect  unchanged. 

I  cannot  accept  that  view.  T  can  see  no  indication  in  the  Act  of 
any  intention  to  make  such  n  radical  change  in  the  law,  a  change 
which  does  not  commend  itself  to  one's  sense  of  justice,  and  which, 
if  intended,  would  surely  have  been  made  formally  and  explicitly,  and 
not  left  to  be  gathered  by  mere  implication.     And,  apart  from  the 


IX.]  BLANKS.  189 

absence  of  any  indication  that  such  a  serious  change  in  the  law  is 
intended  to  be  itiade,  tliere  are  many  things  in  the  Act  which  lead  me 
to  the  opposite  conclusion.  In  the  first  place,  I  am  satisfied  that  the 
term  'bolder  in  due  course,"  which  is  used  in  the  Act,  is  intended 
to  be  the  equivalent  of  the  term  "  honajide  holder  for  value"  which 
was  used  prior  to  the  Act,  and  which  would,  in  my  opinion,  have 
included  a  payee  who  had  given  full  value  for  the  bill  or  note  in  good 
faith.  This  appears  from  the  judgment  of  Lord  Selbourne  in  Frnnre 
V.  Clarl-  (26  (ii.  D.  257,  at  p.  262),  in  which  he  uses  the  expression 
"  bona  fide  holder  for  value  "  in  a  sense  which  must  include  a  payee 
who  has  given  value  in  good  faith.  He  says:  "The  person  who  has 
signed  a  negotiable  instrument  in  blank  or  with  blank  spaces  is  (on 
account  of  the  negotiable  character  of  that  instrument)  estopped 
by  the  law  merchant  from  disputing  any  alteration  made  in  the  docu- 
ment after  it  has  left  his  hands  by  filling  up  blanks  (or  otherwise  in 
a  way  not  ex  facie  fraudulent)  as  against  a  bona  fide  holder  for  value 
without  notice;  but  it  has  been  repeatedly  explained  that  tliis  estoppel 
is  in  favor  only  of  such  a  bona  fide  holder."  Now,  as  I  have  said,  the 
courts  always  held  a  payee  entitled  to  the  benefit  of  this  estoppel  if  he 
took  the  instrument  bona  fide  and  without  notice,  and  therefore  we 
have  the  authority  of  Lord  Selborne  in  favor  of  the  view  that  the 
term  "bona  fide  holder  for  value"  may  include  a  payee;  and,  if  the 
term  "holder  in  due  course"  in  the  Bills  of  Exchange  Act,  1882,  is 
intended  to  be  the  equivalent  of  "  hnua  fid4^ -holder  ior  value,"  it  must 
include  such  a  payee. .- 

Rut  it  will  perhaps  be  said  that  one  ought  not  primarily  to  be 
guided  in  the  interpretation  of  such  an  Act  by  considerntiniis  of  what 
was  the  previous  state  of  the  law.  The  Act  in  its  definition  clause 
defines  in  a  statutory  manner  the  meaning  of  the  terms  used  in  it, 
and,  although  there  is  a  strong  presumption  against  any  serious  change 
in  the  generni  law  boing  intended,  it  is,  aflcr  all,  a  question  of  the 
interpretation  of  tlie  statute,  anrl  these  definitions  must  be  implicitly 
followed.  This  is  true,  but  the  application  of  this  principle  only 
strengthens  the  view  I  have  enunciated.  When  I  look  at  the  definition 
of  "bolder"  in  the  Bills  of  Exchange  Act,  1K82,  section  2,  I  find 
that,  so  far  from  its  indicating  any  intention  to  create  a  difference  of 
status  between  a  holder  who  is  a  payee  and  a  holder  who  is  an 
indorsee,  or  to  put  a  payee  in  any  worse  position  in  this  respect  than 
an  indorsee,  the  contrary  is  the  rase.  The  Act  takes  special  care  to 
place  them  on  an  equality,  for  it  defines  "holder"  as  meaning  the 
"payee  or  indorsee  of  a  bill  or  note  who  is  in  possession  of  it,  or  the 
bearer  thereof."  Therefore,  unless  the  context  compels  us  to  do  other- 
wise, we  must  construe  the  term  "  holder  "  as  including  a  payee.  T 
next  find  that  in  section  30.  pubsection  2,  of  the  Act  it  is  provided 
that  "every  holder  of  a  bill  is  prima  farir  deemed  to  be  a  holder  in 
dne  course,"  and  that,  if  it  is  wished  to  dislodcre  bin)  from  that  posi- 


UK")  INTERPUETATION.  [aUT.    II. 

tion,  it  must  be  shown  that  there  has  heeii  fraud  or  sonic  other  like 
eiri'Uinstaiae  iu  counection  witli  llie  hill  ln'IOrc  it  reached  his  handb, 
and  eveu  tliis  ouly  shifts  the  IhikIch  of  inool'  and  makes  it  incumbent 
on  him  to  prove  that  he  {i;ave  vahie  in  j^'uod  faith. 

Thosi'  provisions  specirually  give  to  the  pa\'ee  the  prima  facie  status 
of  a  "  hokler  in  due  course,"  and,  if  lii'  can  show  that  value  has  in 
good  faith  been  given  by  him  for  the  bill,  that  prima  facie  status  can- 
not be  displncc^T""" 

It  is  suggested,  however,  that  these  conclusions  are  negatived  liy 
the  language  of  section  V.\  subsection  1,  which  states  the  conditions 
under  which  a  person  is  a  "  holder  in  due  course."  1  can  find  noth- 
ing in  the  language  of  that  subsection  which  throws  any  doubt  on 
the  view  that  "  holder  in  due  course  "  would  include  a  payee  who  has 
given  value  in  good  faith,  unless  we  are  to  construe  the  word 
"  negotiated  "  as  being  merely  equivalent  to  "  indorsed."  But,  wlien 
the  definition  of  "negotiation"  given  by  section  31,  subsection  1,  is 
looked  at,  it  apjiears  clear  that  the  Legislature  intended  to  make  it 
apply  also  to  the  original  operation  of  transferring  the  bill  to  tlie 
payee.  It  lays  down  that  "  a  bill  is  negotjated  when  it  is  transferred 
from  one  pefsOU  to  an Othl^fTTTinrclT  manner  as  to  consfTtiite  the  trans- 
feree the  hdlderof  the  bill."  Tt  carefully  abstains  from  jtrcscribing 
that  the  tralTsTeror  must  be  a  "  holder."  All  that  is  necessary  to  con- 
stitute "negotiation"  of  the  bill  is  that  it  should  have  l)ecn  trans- 
ferred from  one  person  to  another  in  such  a  manner  as  to  constitute 
the  transferee  the  "  holder  of  the  bill,"  i.  c.  —  if  we  replace  "  holder" 
by  its  definition  in  thu  All  —  "  the  payee  or  indorsee  wlio  is  in  pos- 
session of  the  bill."  A  cheque,  therefore,  payable  to  a  particular  per- 
son, which  is  handed  by  the  drawer  to  that  person  for  value,  would  be 
"  negotiated  "  within  the  meaning  of  the  Act. 

These  considerations  lead  me  to  the  conclusion  tlial  the  Act  did 
not  intend  to  impair  the  position  of  a  payee  as  contrasted  with  that 
of  an  indorsee,  and  that  a  payee  who  has  given  value  in  good  faith  is 
intended  to  come  within  its  provisions  as  a  "holder  in  due  course" 
just  as  much  as  an  indorsee.  Finding,  thcrerorc  i-o  indication  in  the 
Act  of  any  intention  to  interfere  with  the  ])osition  of  a  payee  of  a 
negotiable  instrument  in  this  respect,  I  arrive  witli  sonic  confidcMice 
at  the  conclusion  that,  in  the  circumstances  of  a  case  ]il<e  the  [)r(isent, 
such  a  payee  since  the  Act  still  occupies  the  favorable  [)osition  vvhicli 
he  would  have  had  before  the  Act  by  virtue  of  the  law  of  estoppel  as 
applied  to  a  case  where  a  promissory  note  has  hecii  signed  in  blank 
by  the  maker  and  intrusted  to  another  person  to  fill  up. 

A pplication  alloired.^'^ 

'"This  case  is  reported  in  8  A.  &  E.  Ann.  Cas.  182,  with  note  entitled, 
"  Liability  of  maker  of  blank  netrotiable  instrument  to  bona  fide  holder  where 
blanks  arc  fraudnlentlv  filled  in."  —  C. 


BLANKS.  191 

MADDEN  V.  GASTON. 
137  Appellate  Division  (N.  Y.)  294.  —  1910. 

Action  by  Charlotte  F.  Madden  against  George  H.  Gaston,  as 
executor  of  the  last  will  and  testament  of  Eliza  Wilson,  deceased. 
Appeal  from  a  judgment  entered  on  a  dismissal  of  the  complaint  at 
the  close  of  the  plaintiff's  evidence,  in  a  suit  on  two  checks,  alleged  to 
have  been  signed  by  the  defendant's  testatrix  in  blank  and  delivered 
to  the  plaintiff  and  thereafter  by  her  filled  out  with  the  amounts  of 
$5,000  and  $10,000,  respectively.  The  answer  put  in  issue  the  making 
of  tiie  cllT^Ks,  iiielr  dehveryTthe  consideration,  and  due  filling  out  of 
the  blanks.  The  plaintiff  proved  the  signature  of  the  maker  of  the 
checks  and  offered  them  in  evidence;  but  they  were  excluded  by  the 
court  upon  the  ground  that  there  was  no  proof  of  the  authority  given 
to  fill  up  the  blanks.  The  plaintiff  then  called  the  defendant,  who 
testified  that,~oh~fhe  day  before  the  death  of  his  testatrix,  he  had  a 
conversation  with  the  plaintiff,  and  then  saw  the  checks  in  question 
or  similar  papers.  — ^- 

MiLLEit,  J.  The  production  of  the  checks  by  the  plaintiff  raised 
a  presumption  of  a  valid  and  intentional  delivery  of  them  to  her  by 
the  maker.  Section  .'55  of  the  Negotiable  Instruments  Law  (chapter 
38  of  the  Consolidated  Laws).  Such  delivery  operated  as  prima  facie 
authority  to  fill  up  the  blanks  for  any  amount.  Section  IVA  of  the 
Negotiable  Instruments  I^aw.  The  learned  trial  court  was,  therefore, 
wrong  in  holding  that  it  was  iiicmiibent  upon  the  plaintiff  to  prove 
her  authority  to  fill  up  the  blanks,  as  the  statute  iniposes  the  burden 
upon  the  defendant  to  show  the  agreement,  and  that  its  terms  have 
been  violated,  if  that  be  claimed  ;  and  that  was  the  rule  at  common 
law.    Davidson  v.  Lavirr,  I  Wall.   1  17.     Said  section  '.V.\  also  provides: 

"In  order,  however,  tliiit  ;my  sii<li  iiist  nirncnt,  when  completed, 
may  bo  enforced  against  any  person  who  Ix'came  a  party  thereto  prior 
to  its  completion,  it  must  l)e  filled  up  strictly  in  accordance  with  the 
authority  given  and  within  a  reasonable  time." 

It  seems  to  me  thai  there  can  be  no  presnmplion  one  \\;iy  or  the 
other  as  to  the  time  wilhin  which  the  hhiiiks  wcrr  (illi'd  up.  There- 
fore, the  bnnlen  was  upon  the  phiinfifr,  who  assfrfed  if,  lo  prove  that 
the  blanks  were,  filled  np  witliin  a  "  r<'asonnl)le  fi?iic."  It  is  alleged  in 
the  comjtiaint  that  the  blank  checks  were  dcliverec!  on  llie  83d  of 
Octol>er,  I!MI7.  The  maker  died  on  I  he  !Mh  .if  -liine,  IIHIS.  There  is 
evidence  which,  perhaps,  would  justify  fhe  inferenci^  thai  Ihe  defend- 
ant saw  the  checks  on  the  Htb  of  .Iniie  \u  flieir  present  eondilion. 
Other  tlian  that,  there  is  nothing  to  show  when  Ihe  checks  were  filled 
np,  and  certainly  from  October  28,  1007,  tf>  June  f).  HIOS,  is,  unex- 
plained, more  than  a  "  reasonal)le  time."  However,  the  plaintiff  could 
only  prove  one  thing  at  a  lime.  The  checkp  were  excluded  u|)on  a 
ground  which  the  [)lain(iff  could  not  obviate,  and  thai  ruling  virtually 


10'^  INTERPRETATION.  [ART.    II. 

ended  the  case.    Wherefore,  the  plaintifT  should  ho  permitted  another 
opportunity  to  prove  her  i-ase. 

The  judgment  should  be  reversed,  aiul  a  new  trial  granted,  with 
oosts  to  appoHant  to  abide  event.     All  concur. 


X.  Ambiguous  language.  ^y    / 

1.  Discrepancy  Between  Words  and  Figures. 

§  36        WITTY  V.  MICHIGAN  MUTUAL  LIFE  INS.  CO. 

123  Indiana,  411.  — 1889. 

Berkshire,  J.  —  This  was  an  action  brought  by  the  appellee 
against  the  appellant  on  the  following  writing: 

$147.70.  Indianapolis,  Ind.,  'Nov.  28,  1883. 

Four  months  after  date  I  promise  to  pay  to  the  order  of  the  Michigan  Mutual 

Life  Ins.  Co.  dollars  ,  and  fivi-  per  cent,  attorney's  fees  thereon  per 

annum  from  date  until  paid,  value  received,  without  relief  from  valuation  or 
appraisement  laws  of  the  State  of  Indiana.  The  indorsers  jointly  and  severally 
waive  presentment  for  payment,  protest,  and  notice  of  protest,  and  non-pay- 
ment of  this  note,  and  expressly  agree,  jointly  and  severally,  that  the  holder 
may  renew  or  extend  the  time  of  payment  hereof  from  time  to  time,  and 
receive  interest  in  advance  or  otherwise  from  eitlier  of  tlie  makers  or  indorsers 
for  any  extension  so  made,  without  releasing  them  hereon. 

Negotiable  and  payable  at  ^ . 

J.  B.  Witty. 

Mar.  28,  31,  '84,  Indiana. 

The  appellee,  in  its  complaint,  did  not  ask  for  a  reformation  of  the 
instrument,  but  relied  on  it  as  a  promissory  note  complete  in  itself. 

The  appellant  answered  by  the  gejieral  denial  only. 

The  cause  was  submitted  to  the  court  at  Special  Term,  and  a  find- 
ing made  for  the  appellee.  The  appellant  filed  a  motion  for  a  new 
trial,  which  the  court  overruled,  and  he  excepted. 

An  appeal  was  taken  to  (xeneral  Term,  and  upon  the  errors  assigned 
the  judgment  at  Special  Term  was  affirmed,  and  from  the  judgment 
in  General  Term  this  appeal  is  prosecuted. 

There  is  but  one  question  presented  for  our  consideration.  Is  the 
written  instrument,  as  it  appears  in  the  record,  an  enforceable  obliga- 
tion ?  We  are  of  the  opinion  that  it  is,  if  not  so  otherwise,  by  virtue 
of  §  5501,  R.  S.  1881,  and  is  negotiable  by  indorsement. 

It  is  signed  by  the  appellant,  and  when  taken  as  an  entirety  we 
think  it  contains  a  promise  to  pay  $147.70,  together  with  five  per 
cent,  attorney's  fees..  By  the  very  terms  of  the  instrument  the  appel- 
lant obligates  himself  to  pay  to  the  appellee  "  dollars,"  and  it  is 
expressly  recited  that  this  promise  rests  upon  a  valuable  consideration. 
No  one  can  read  the  writing  without  at  once  coming  to  the  conclusion 
that  the  appellant  intended  to  obligate  himself  to  the  appellee  for  the 
payment  of  .some  definite  amount  of  money,  and  that  the  appellee 
Tinderstood  that  it  was  receiving  such  an  obligatiorj, 


X.]  /""'^  AMBIGUOUS  LANGUAGE.    •  193 

Though  there  may  be  some  formal  imperfections  in  a  written  obli- 
gation or  contract  which  parties  have  entered  into,  if  it  contains 
matteL^sufficient  to  enable  the  court  to  ascertain  the  terms  and  con- 
ditions of  the  obligation  or  contract  to  which  the  parties  intended  to 
bind  themselves,  it  is  sufficient  In  the  language  of  Lord  '(-ampbell, 
in  Warringtov  v.  Early  (2  Ellis  &  Bl.,  763),  "  the  effect  of  a  written 
contract  is  to  be  collected  from  all  within  the  four  corners  of  the 
document,"  and  no  part  of  what  appears  there  is  to  be  excluded. 
We  can  imagine  no  good  reason  why  the  marginal  figures  upon  the 
writing  in  question  should  be  disregarded. 

We  know  as  a  part  of  the  commercial  history  of  the  country  that 
the  universal  practice  has  been  for  a  period  so  long  that  the  memory 
of  man  runneth  not  to  the  contrary,  to  represent  by  superscription 
in  figures  upon  all  obligations  for  the  payment  of  money  the  amount 
or  sum  which  is  written  in  the  body  of  the  instrument.  The  super- 
scription is  always  intended  to  represent  the  amount  found  in  the 
body  of  the  instrument,  and  not  a  different  amount;  if,  therefore,  an 
obligation  is  found  where  there  is  a  promise  to  pay  "  dollars,"  but 
the  number  of  dollars  in  the  body  of  the  instrument  is  blank,  and  the 
margin  of  the  instrument  is  found  to  contain  a  superscription  which 
states  the  number  of  dollars,  why,  in  view  of  the  usage  or  custom 
which  has  so  long  prevailed,  should  the  body  of  the  instrument  not 
be  aided  by  the  superscription  ?  We  think,  in  such  a  case,  the  figures 
found  in-ttTTmafgin'sTiould  be  taken  as  the  amount  which  the  obligor 
intended  to  obligate  himself  to  pay,  and  the  obligation  enforced 
accordingly.  We  do  not  think,  in  such  a  case,  that  the  courts  would 
be  justified  in  disregarding  the  evident  intention  of  the  parties  as 
indicated  by  the  superscription  upon  the  paper,  and  in  holding  the 
instrument  void  for  uncertainty,  or  on  tlic  ground  that  it  is  not  a 
perfect  writing.  And  especially  are  we  of  the  opinion  stated,  in  view 
of  the  lil)eral  statute  which  we  have  on  the  subject  of  promissory 
notes  and  other  written  obligations  and  their  negotiation.  (Section 
5501,  supra.) 

In  the  case  under  considcralidii  flu-  action  is  between  the  original 
parties  to  the  inst  rtinient,  and  upon  if  in  I  lie  form  and  conditioTi  in 
which  it  was  executed,  and,  tlicrd'on',  we  do  no|  think  if  wonid  be 
profitable  to  consider  questions  wliiili  i\\\'j]\\  arise  where  I  lie  ol.liiX!^- 
tion  is  made  payable  at  a  bank,  the  blank  nninlu«r  of  dollars  after- 
wards filled  in  by  the  payee  and  indorsed  by  him  to  an  innocent 
holder  for  value  before  maturity.     *     *     * 

We  find  no  error  in  tlir-  reef)rfl. 

.liidi:men(   is  niTirnied,  with  eosts.' 


'  A  note  for   thee  hundrpd  Hollars,  the  fipiTPH  beinpr  $300.  is  pood  for  three 
hundred  dollars,  if  tho  nuker  intended   it  to  be  for  three  hundred.      Hurnham 
NBOOT.  INHTKUMKNTB  —  13 


191  INTKKlMiKIATloN.  [aRT.    II. 

§36  Mkaus  v.  CIratiam,  S  Mhukf.  (Tnd.)  111.-1810.  Blaok- 
FOHP,  ,7.  -  Tlu'  (■inuiustaiuo  that  tlio  figures  in  the  margin  of  the 
note  an'  "  .$;i"n .  1 '>  "'  niid  the  words  in  the  body  are  "three  hundred 
and  thirty-thii'e  dollars  and  fifteen  eents,"  does  not  affect  the  validity 
of  the  noti".  'I'he  words  in  tlie  body  must  govern,  and  the  note  is 
therefore  for  $;{;5:{.ir). 


2.  Interest,  How  Computed. 

§  36  Campbell  Printing  Press,  etc.,  Co.  v.  Jones,  79  Alabama, 
475.  —  1885.  Clopton,  J.  —  The  principle  seems  to  be  settled,  that 
a  promissory  note  payal)le  at  a  future  day,  with  interest,  bears  interest 

V.  Allen,  1  Gray  (Mass.),  496.     A  bill  payable  in  the  United  States  for  "  3,000," 

"  three   thousanil    ,"    omitting    the    dollar-mark    and    the    word    "  dollars," 

is  a  valid  bill  for  three  thousand  dollars.  Williamso7i  v.  Smith,  1  Cold. 
(Tenn.)   1.  — H. 

[Accord:  Kimball  v.  Costa,  76  Vt.  289.  In  this  case  the  figures  "$385" 
were  in  the  margin,  and  the  body  of  the  note  read:  "For  value  received,  I 
hereby  promise  to  pay  F.  E.  Kimball  or  order  the  sum  of  F.  E.  Kimball 
dollars,  $50  payable  August  9,  1902,  and  $50  every  two  months  thereafter 
until  note  is  j)aid,"  etc.  Tyler,  .T.,  said:  "The  writing  of  the  name  '  F.  K. 
Kimball'  after  the  words  'the  sum  of'  was  clearly  a  clerical  error,  and  the 
name  in  that  place  should  be  read  out  of  the  note.  .  .  .  The  words,  three 
hundred  and  eighty-five  dollars,  should  be  rend  into  the  body  of  the  note.  The 
defendant  had  no  right  to  understand  that  $50  or  $100  was  all  there  was  to  be 
paid.  The  figures  in  the  margin  were  notice  to  him  of  the  amount  for  which 
the  note  was  given."  Reported  in  1  A.  &  E.  Ann.  Cas.  610,  with  note  entitled, 
"  Object  and  effect  of  marginal  figures  in  bills  and  notes." 

Contra:  Chrsliiut  v.  Chcfttnut,  104  Va.  539.  In  this  case  the  figures 
"$1,800"  were  in  the  margin,  and  the  body  of  the  note  contained  a  promise 

"  to   pay   to   the  order  of  J.   A.   Chestnut  dollars,"   etc.      It  was   held 

error  for  the  trial  court  to  permit  the  plaintiff  to  put  in  evidence  the  note  in 
its  incomplete  form.  Buchanan,  J.,  said:  "The  propriety  of  the  court's 
ruling  depends  upon  the  question,  whether  or  not  the  figures  and  words  in 
the  margin  of  a  note  fix  the  amount  for  which  the  note  was  intended  to  be 
given,  where  no  amount  has  been  inserted  in  the  blank  left  for  it  in  the  body 
of  the  note.  Upon  this  (juestion  the  decisions  of  the  courts  are  not  in  accord, 
though  the  weight  of  authority,  and  the  better  reason,  seems  to  be  in  favor  nf 
the  view  that  the  sum  named  in  the  margin  is  generally  the  limit  of  the 
amount  with  which  a  hona  fide  holder  may  fill  up  the  blank,  but  until  so 
filled  the  instrument  is  incomplete,  and  no  recovery  can  be  had  upon  it  [citing, 
among  other  authorities,  'Norroich  Bank  v.  Hyde,  13  Conn.  281,  a  leading  case 
on  the  subjectl.  .  .  .  The  reason  for  this  rule  of  construction  is  that  one 
of  the  essential  recjuisites  of  a  bill  or  note  is  that  the  amount  for  which  it  is 
made  must  be  clearly  expressed  in  the  instrument,  and  as  the  marginal  figures 
are  not  generally  regarded  as  a  part  of  it,  but  are  intended  as  a  convenient 
index,  and  as  an  aid  to  remove  ambiguity  or  doubt  in  the  instrument  itself, 
they  cannot  supply  the  omission  to  insert  the  amount  in  the  body  of  the 
instrument  where  a  blank  has  l)een  left  for  that  purpose."  P.  541.  Reported 
with  note  in  2  L.  N.  S.  879.  —  C] 


X.]  ^ ^       AMBIGUOUS  LANGUAGE.     ♦  195 

from  date,  it  being  considered  as  a  part  of  the  debt.  (Dorman  v. 
Dibdel,  R.  &  M.  280;  Richards  v.  Richards,  2  B.  &  Ad.  447;  Lerzei>- 
berg  \\Cleveland,  19  La.  An.  47;i.)  *  *  *  Otherwise,  the  words, 
hearing  legal  rate  of  interest,  would  be  withowt  meaning  and  opera- 
tion. Such  is  the  legal  effect  after  maturity,  without  express  stipu- 
lation. In  Kennedy  v.  Nash  (1  Starkie,  452),  Lord  EUenborough 
held,  "  that  under  tlie  words,  hearing  interest,  the  phiintiff  was  entitled 
to  recover  interest  from  the  date  of  the  hill,  since,  without  any  such 
words,  he  would  he  entitled  to  interest  from  the  time  when  the  bill 
became  due."  The  obligation  of  the  note  is  to  pay  the  principal,  with 
interest.  To  limit  the  time  when  the  interest  begins  to  run,  to 
maturity,  is  to  presume  that  the  parties  contemplated  the  notes  would 
not  be  paid  when  payable,  and  tiierefore  provided  they  should  bear 
interest  thereafter.  In  order  to  give  some  effect  to  all  the  terms  of  the 
notes,  our  conclusion  is,  that  the  interest  runs  from  date.* 


3.  Instrument  Not  Dated. 

§36  Richardson  v.  Ellett,  10  Texas,  190. —  1853.  Hemphill, 
Ch.  J. —  Nor  is  the  judgment  excessive,  as  charged  by  the  plaintiff 
in  error.  It  is  true  that  the  note,  as  copied  in  the  petition,  does  not 
bear  any  date ;  but  tlie  p(;tition  avers  it  to  have  been  executed  on  the 
8th  day  of  January,  1850,  a  fact  not  controverted  by  the  defendant. 
By  its  terms  the  instrument  boars  interest  from  its  date,  and  it 
appears  to  have  been  accurately  estimated.' 


4.  Conflict  Bktwi^kn  Wiuttkn  and  Printed  Provisions. 

8  36  American  Express  Co.  v.  Pinckney,  29  111.  392.— 1862. 
Action  for  negligence  in  collecting  a  draft.  The  question  arises  on 
the  construction  of  a  partly  printed  and  partly  written  receipt  by 
defendant.  P>RKESE,  J. —  The  principle  a])plical)le  in  all  such  cases 
is,  that  a  writing  must  be  construed  according  to  the  clear  intent  of 
the  parties,  if  that  can  be  collected  from  tlu'  face  of  the  instrument. 
*  *  *  P)ut  there  is  another  pririci|ilc  of  law  applicable.  In  a 
case  where  the  figrecnient  is  partly  written  and  in  j)art  printed,  the 
preference  is  always  given  to  the  written  ])art.  What  is  ])rinted  is 
intended  to  af»y)lv  to  large  classes  of  contracts,  and  not  to  any  one  exclu- 
sively ;  the  blanks  are  left  purposely,  that  the  special  statements  or 
provisions  should  be  inserted  which  belong  to  the  yiarticular  contract, 


2  Intorest  on  notes  payable  on  demand  runs  only  from  the  time  of  demand. 
Huntrr  v.  Wf>n<l,  ?,i  Ala.  71  :   Dndfjp  v.  Perkinn,  9  V\c\<.   (Mn^s.)   .IfiO.  —  II. 
s  See  IJyles  on  Billa  (  KJlli  ed.),  p.  79.     Set-,  as  to  date,  §§  25.  30,  ante.  —  H, 


LA. 


196  INTERPUETATION.  [akT.    II. 

and  not  to  others,  and  thus  to  discriminate  this  from  otliers.  So 
Ix)rd  Ellonboroiigh  hold,  in  the  oiisc  of  Robertson  and  Thomasson  v. 
French  (t  Kast,  lUiO),  when  he  said,  that  words  superadded  in  writing 
are  entitled,  if  there  should  be  any  reasonable  doubt  upon  the  sense 
and  meaning  of  the  whole,  to  have  a  greater  effect  attributed  to 
them,  than  to  the  printed  words,  inasmuch  as  the  written  words  are 
the  immediate  languai^e  and  terms  selected  by  the  parties  themselves 
for  the  expression  of  their  meaning,  and  the  printed  words  are  a 
general  formula  adapted  equally  to  their  case,  and  that  of  all  other 
contracting  parties,  upon  similar  occasions  and  subjects.     *     *     * 


6.  Doubt  Whether  Bill  or  Note. 
§  36  FUNK  V.  BABBITT. 

[Reported  herein  at  p.  150.]* 


§36  COMMONWEALTH  7-.  BUTTERICK. 

[Reported  herein  at  p.  113.] 


6.    TrREGULAR    Sir.NATURE. 

§36        GERMANIA  NATIONAL  BANK  v.  MARINER. 

[Reported  herein  at  p.  2/0.] 


7.  Joint  and  Several  Liability. 

§36  DART  V.  SHERWOOD. 

7  Wisconsin,  52.3. —  1858. 

This  is  an  action  of  assumpsit  brought  by  the  appellee  against  the 
appellants,    as   joint   makers   of   a    promissory    note,    which    read    as 
follows: 
(g400.  KiPON,  Wis.,  'Nov.  4th,  1850. 

Thirty  rlay.s  after  date,  for  value  received,  T  promise  to  pay  Putnam  C.  Dart, 
or  order,  four  hundred  dollars,  with  interest,  at  the  rate  of  twelve  per  cent,  per 

annum. 

J.  C.  Shf.rwood. 
Wm.  C.  Shkrwood, 
Surety. 


*  See  also  Peto  v.  Reynolds,  9  Exch.  410,  note,  ante,  p.   150;   and  compare 
Watrous  v.  Holbrook,  39  Tex.  573,  ante,  p.  148. —  H. 


XI.]  ^^^^        AMBIGUOUS  SIGNATURES.  197 


On  tp4  trial  the  plaintiff  offered  the  note  in  evidence,  and  the 
defendants  made  two  objections  to  the  reading  of  the  same ;  *  *  * 
2.  That  the  note  did  not  show  a  joint  liability.  The  court  allowed 
the  not^  to  be  read,  and  the  plaintiff  rested  his  case.  The  defendants 
moved  for  a  nonsuit  on  the  ground  tliat  there  was  a  mis-joinder  of 
parties  defendant.     This  motion  was  denied. 

Judgment  for  plaintiff.     Defendants  appeal. 

By  the  Coxirt  —  Whiton,  C.  J.  —  The  judgment  of  the  court  below 
is  correct  and  must  be  affirmed.  The  note  declared  upon  is  the  joint 
and  several  note  of  the  defendants ;  joint  because  it  is  signed  by 
both;  and  several,  because  each  defendant  promised  severally.  (Story 
on  Promissory  Notes,  §  57;  Hunt  v.  Adams,  5  Mass.  R.  358;  Same  v. 
Same,  6  do.  519.)      *     *     * 

The  judgment  of  the  circuit  court  must,  therefore,  be  affirmed.^ 


XI.  Ambiguous  signatures. 

§  37  ANDENTON  v.  SHOUP. 

17  Ohio  State,  125.  —  1866. 

Action  against  George  W.  Shoup  on  the  following  instrument: 

Dayton,  August  11,  1.S81. 
Dayton  Branch,  State  Bank  of  Ohio,  pay  to  J.  B..  or  bearer,  two  hundred 
thirty  dollars. 
$230.  /  Samuel  Shoup,  Agent. 

Allegation  that  Samuel  Shoup  was  defendant's  agent  and  acted  as 
such  in  drawing  the  check;  that  plaintiff  is  holder  in  due  course; 
that  the  check  was  duly  presented  and  was  dishonored,  etc. 

Demurrer  sustained  and  judgment  for  defendant.     Plaintiff  appeals. 

Day,  C.  J. — The  averments  in  the  petition  will  not  warrant  the 
claim  in  argument,  that  this  is  a  case  where  a  party  himself  uses  a 
name  other  than  his  own  in  the  transaction  of  his  business.  The 
most  that  can  be  claimed  is,  that  the  principal  allowed  the  agent  to 
sign  his  own  name  as  agent  in  ilif  iransaction  of  sonic  of  llio  business 
of  the  principal.     *     *     * 

It  is  undoubtedly  well  settled  that,  where  an  ordinary  simple  con- 
tract is  signed  by  an  agent  in  his  own  name,  with  the  addition  of  the 
word  "agent"  thereto,  the  principal  may  be  made  liable  (hereon, 
whether  bis  narne  ap))ears  on  the  paper  or  not.  (Stan/  on  Agency, 
*;;  IfiOa,  and  authorities  there  cited.)  But,  for  commercial  reasons,  a 
distinction  is  taken,  in  the  authorities,  between  contracts  of  this  class 
and  negotiable  paper.    As  to  bills  of  exchange,  it  is  said  that  the  agent 


sAeeord:   Monnon  v.  Dnihi'lry.  40  Conn.  552;   Ely  v.  Clutr.   H»  [Inn    (N.  Y.) 
35;  Wallace  v.  Jewell,  21  Oh.  St.  163.  —  11. 


198  INTKHl'lil'.TATlON.  [akT.    ll. 

''  imist  either  sign  the  name  of  the  principal  to  tlie  bill,  or  it  must 
appear  on  the  face  of  the  hill  itself,  in  some  way,  that  it  was  drawn 
for  him,  or  the  principal  will  not  he  hound."  (Edw.  on  Bills,  80; 
Chitty  on  Hills,  27.) 

The  question  as  to  the  liahility  of  the  princi})al,  on  paper  executed 
by  an  aii^ent  in  his  own  name,  was  well  considered  hy  the  Supreme 
Court  of  Massachusetts,  in  the  cases  of  the  Eastern  Railroad  (Company 
V.  Benedict  (T)  (Jrav,  5()1),  and  the  Haiik  of  America  v.  Hooper  (lb. 
567.) 

In  the  latter  case,  it  is  said  that  "  there  will  he  found  to  be  a  leading 
distinction  taken  between  cases  of  commercial  paper  in  the  form  of 
bills  of  exchange  and  negotiable  promissory  notes,  and  other  simple 
contracts,  holding  that  no  one  but  a  party  to  such  negotiable  paper 
can  be  sued  for  the  non-payment  thereof."  In  support  of  this  dis- 
tinction the  following  authoiities  are  there  cited:  (Bytes  on  Bills  [5th 
ed.],  26;  Emily  v.  Lye,  15  East,  7;  Becham  v.  Drake,  1)  M.  &  W.  92; 
Pent  V.  Stanton,  10  Wend.  276;  Siackpole  v.  Arnold,  11  Mass.  27; 
Bedford  Com.  Ins.  Co.  v.  Covell,  8  Met.  442;  Taher  v.  Cannon,  Id. 
456.) 

The  case  of  De  Witt  v.  Walton  (5  Seld.  571),  decided  by  the  New 
York  Court  of  Appeals,  is  a  strong  case  to  the  same  point.  It  was  a 
suit  brought  on  a  negotiable  promissory  note,  signed  "  David  Hubbell 
IToyt,  agent  for  '  The  Churchman.' "  IToyt  was  an  agent  for  a 
paper  called  "  The  Churchman,"  and  was  authorized  to  contract  for 
the  proprietor  in  that  name,  and  the  suit  was  against  the  proprietor, 
Iloyt's  principal.  It  is  said  in  the  opinion,  that  "  the  good  sense  of 
many  authorities  upon  this  subject  would  seem  to  be,  that,  where  a 
party  is  sought  to  be  charged  upon  an  express  contract,  it  must  at 
least  appear  upon  the  face  of  the  instrument  that  the  agent  undertook 
to  bind  him  as  principal.  Here  the  promise  is  not  by  the  defendant 
or  '  The  Churchman,'  nor  by  Iloyt  for  them  or  either  of  them,  or  in 
their  behalf,  but  for  himself.  The  formula  used  by  him  in  the  signa- 
ture to  the  note  in  controversy  has  been  determined,  in  this  and  other 
states,  to  create  an  obligation  on  the  part  of  the  agent  personally,  and 
not  in  behalf  of  the  y)rincipal.  There  is  no  great  hardshij)  in  requir- 
ing that  if  a  man  undertakes  to  oblige  another,  by  note,  bill  of 
exchange,  or  other  commercial  instrument,  he  should  manifest  his 
purpose  clearly  and  intelligibly,  or  that  his  princijjal  will  not  be 
bound,  whatever  may  he  the  result  in  reference  to  himself." 

It  was  further  held  in  this  case,  that  the  words  added  to  the  name 
of  the  person  signing  the  paper  was  merely  descriptio  personce. 

The  principle  maintained  in  these  cases,  it  is  said  by  the  author  of 
the  notes  in  Smith's  Ijeading  Cases  (vol.  2,  p.  433),  "would  seem 
to  be  well  settled  on  both  sides  of  the  Atlantic." 

These  principles  applied  to  the  case  before  us  are  decisive  of  it. 


XI.]  ^-"-"""^  AMBIGUOUS  SlGNATUEES.        ^  199 

The  name  of  the  defendant  is  in  no  way  indicated  upon  the  face  of 
the  instrument  upon  which  alone  the  action  is  based. 

It  follows,  therefore,  that  the  ruling  of  the  court  below  was  cor- 
rect, a^d  that  the  judgment  rendered  by  it  must  be  affirmed.* 


§  39    WESTERN  WHEELED  SCRAPER  CO.  v.  McMILLEN. 
71  Nebraska,  686.  —  1904. 

Action  on  a  note  reading  "  we  promise  to  pay "  and  signed : 
"Directors  of  Thedford  Irrigation  and  Power  Co.  (Limited).  J.  M. 
McMillen,  G.  W.  Miller,  G.  L.  Matthews."  Judgment  for  defendants 
and  plaintiff  brings  error. 

DUFFIE,  J.  —      *      *      * 

The  court,  in  its  seventh  instruction,  told  the  jury :  "  You  are 
further  instructed  that  if  you  should  believe  from  a  preponderance 
of  all  the  evidence  in  this  case  that  the  three  notes  set  out  in  plaintiff's 
petition  were  made  and  executed  by  the  Thedford  Irrigation  &  Power 
Company,  Limited,  and  if  said  notes  were  signed  by  said  defendants 
with  the  intention  and  understanding  to  bind  the  Thedford  Irrigation 
&  Power  Company,  Limited,  and  not  the  signers  of  said  notes  as  indi- 
viduals, and  if  you  should  find  from  a  preponderance  of  all  the  evi- 
dence that  it  was  so  understood  by  and  between  the  agent  of  plaintiff 
and  these  defendants  at  the  time  said  notes  were  executed  and  de- 
livered, then  your  verdict  should  be  for  the  defendant,  '  No  cause  of 
action.' "  The  jury  returned  a  verdict  for  the  defendants,  and  the 
plaintiff  has  brought  the  record  to  this  court  for  review. 

J^hepetition  in  error,  among  other  matters,  alleges  "that  the  court 
erreJTTn  permitting  the  defendants  to  introduce  oral  testimony  tend- 
ing to  prove  a  different  contract  than  that  set  out  in  the  written  con- 
tract, namely,  the  notes  sued  upon,"  and  in  giving  the  instruction 
above  quot«;d  and  other  instructions',  which  it  is  unnecessary  to  dis- 
cuss. The  general  rule  undoubtcMlly  is  that,  on  account  of  the  qualities 
which  the  law  annexes  to  negotiable  instruments,  none  are  bound 
except  those  who  appear  on  the  face  of  the  inslruiiicnt  as  bound,  and 
accordingly  that  extrinsic  evidence  cannot  be  admitted  to  charge 
parties  whose  names  do  not  aj)pcar  on  the  face  of  the  instrument. 
*  *  *  It  is  undoubtedly  true  that  the  modern  cases  are  more 
liberal  than  was  formerly  the  case  in  allowing  one  who  signs  a  nego- 
tiable instrument,  designating  himself  as  a^'ent  or  trustee,  to  show 
by  parol  evidence  that  he  was  acting  for  another,  who  received  all  the 


«  Rpo  N.  Y.  Life  Ins.  Co.  v.  Mnrttntlntr,  7.')  Kan.  142.  rpporteii  in  21  ]j.  N.  8. 
1046.  witli  nxlinnstivp  noto  pntitled,  "  Lialiility  of  principal  on  negotiable  paper 
executed  by  an  agent."  —  C. 


'JOO  iNTKKiMjirr.vTioN.  [aut.  ir. 

benotits  of  the  considoratioii  for  which  the  note  was  given.  Keidan  v. 
Wincgar,  95  Mich.  430,  20  L.  \\.  A.  705,  is  a  case  in  point,  and  other 
cases  referred  to  in  the  notes  of  the  editor  will  furnish  examples  of 
tiie  relaxation  of  the  rule  adopted  by  the  courts  at  an  earlier  date 
upon  tliis  qiiestion.  1  f  this  court  had  not  put  itself  on  record,  we 
should  be  disposed  to  follow  the  modern  decisions,  but  as  early  as 
1886,  in  Webster  v.  H'ray.  19  Neb.  558,  the  court,  after  a  full  review 
of  the  authorities,  held  that  "no  party  can  be  charged  as  principal 
upon  a  negotiable  note  or  bill  of  exehange  unites  his  name  is  thereon 
disclosed ; "  and  it  was  further  held  in  that  case  that  parol  evidence 
was  not  admissible  to  show  that  one  who  appeared  upon  the  face  of 
the  notes  to  be  the  maker  was  in  fact  acting  as  agent  for  another,  or 
as  the  othcer  of  some  corporation  who  had  received  the  benefit  of  the 
consideration.  This  case  was  followed  by  Andres  v.  Kridler,  47  Neb. 
585,  where  suit  was  brought  upon  a  note  made  and  signed  substan- 
tially in  the  manner  of  those  in  suit,  and  it  was  held  that,  "  where  the 
pleadings  disclose  a  c'ause  of  action  against  a  defendant  personally, 
superadded  Avords,  such  as  '  agent,'  '  executor,'  or  '  director,'  should 
be  rejected  as  descriptio  personw."  We  think  this  court  is  now  fully 
committed  to  the  doctrine  tjiatj^.in  order  to  exempt  an  agent  from 
liability  upon  an  instrument  executed  by  him  within  the  scope  of  his; 
agency,  he  must  not  only  name  his  principal,  but  he  must  express  by! 
some  form  of  words  that  the  writing  is  the  act  of  the  principal,} 
^hough  done  by  the  hand  of  the  agent.  If  he  expresses  this,  the  prin-' 
cipal  is  bound,  and  the  agent  is  not.  But  a  mere  description  of  the 
general  relation  or  office  which  the  person  signing  the  paper  holds  to 
another  person  or  to  a  corporation,  without  indicating  that  the  par- 
ticular signature  is  made  in  the  execution  of  the  office  and  agency,  is 
not  sufficient  to  charge  the  principal  or  to  exempt  the  agent  from  per- 
sonal liability.  There  was  evidence  which  would  fully  support  a  find- 
ing that  in  executing  these  notes  the  defendants  did  not  intend  to 
bind  themselves  personally,  and  that  the  plaintiff's  agent  was  not  only 
fully  aware  of  that  fact,  and  understood  that  he  was  taking  tlie  notes 
of  tlie  corporation,  but  assisted  and  advised  as  to  the  form  in  which 
the  notes  should  be  drawn  in  order  to  make  them  the  obligation  of  the 
corporation.  This  being  the  case,  the  defendants,  upon  a  proper  plea, 
would  be  entitled  to  have  the  notes  reformed  to  express  the  real  inten- 
tion of  the  parties.  Western  Wheeled  Scraper  Company  v.  Stickleman 
et  al.,  122  Towa.  306,  and  authorities  there  cited. 

We  recommend,  therefore,  that  the  case  be  reversed,  and  remanded 
to  the  Distrift  Cmirt,  with  directions  to  allow  the  defendants  to  amend 
their  answer,  if  they  so  elect:  otherwise  to  enter  judgment  for  the 
plaintiff  for  the  amount  due  upon  the  notes. 

KiRKPATRiCK  and  Letton,  CC,  concur. 

Per  Curiam.  For  the  reasons  stated  in  the  foregoing  opinion,  the 
judgment  is  reversed,  and  remanded  to  the  District  Court,  with  direc- 


XI.]  AMBIGUOUS  SIGNATURES.  *  201 

tions  to  allow  the  defendants  to  amend  their  answer,  if  they  so  elect ; 
otherwise  to  enter  i^idgment  for  the  plaintiff  for  the  amount  due  upon 
the  notesJ 


§39  KEIDAN  r.  \YTNEGAR 

95  MiCHiGAX,  430.  —  1893. 

McGrath.  J.  Plaintiff  had  jud<rment  upon  the  following  promis- 
sory note:  "$336.96-100.  Grand  Hapids,  Mich.,  Dec.  22,  1887. 
Ninety  days  after  date,  I  pj'omise  to  pay  to  the  order  of  Geo.  Keidan 
three  hundred  thirty-six  and  96-100  dollars  at  the  Old  National  Bank 
of  Grand  Kapids,  Mich.,  value  received,  with  interest  at  the  rate  of 
eight  per  cent,  per  annum  until  paid.  W.  S.  Wiuegar,  Agt."  Defend- 
ant, with  his  plea,  filed  an  affidavit  setting  forth  "  that  the  note,  a  copy 
of  which  is  attached  to  the  declaration  in  said  cause,  and  served  upon 
said  deponent,  with  a  copy  of  said  declaration,  is  not  trhe  note  of  this 
deponent,  defendant  as  aforesaid;  and  he  denies  the  same  and  the 
execution  thereof,  and  says  tliat  he,  said  defendant,  is  not  indebted  to 

Tin  Rendrlt  v.  narriwnn.  IT)  AIp.  A97.  the  note  read  "we  promise  to  pa}'" 
and  was  signed 

"  Otis  Rabrim-^n 


R.  M.  Trevett 

L.   MUDGETT 

W.  H.  OiNN 


President 

Directors  of 

Prospect  and  Stockton 

Cheese  Company." 


In  an  action  by  the  payee  against  Harriman  et  al.,  as  individuals,  the 
defendants  dfTpicd  evidence  to  show  that  tlic  note,  wlmn  delivered  to  the  payee, 
was  intended,  to  hi«  knowledge,  to  he  the  ohligjition  of  the  Cheese  Company 
alone.  Held  that  the  evidence  was  inadmissible  and  that  the  defendants  were 
liable  as  individuals.  Daniokth,  J.,  said:  "  It  is  true,  that  in  the  cases  cited, 
such  evidence  was  admitted  and  was  perhaps  admissible,  under  the  well  estab- 
lished rule  of  law.  that  when  fherr-  is  an  nndiiguity  in  the  contract,  when  the 
language  userl  in  equally  susceptible  of  two  different  constructions,  evidence 
of  the  circumstances  by  which  the  parties  were  surrounded  and  under  which 
the  contract  was  made  may  bf  given,  not  for  the  purpose  of  proving  the  inten- 
tion of  the  partir',  inde|Miid(.nl  of  Ihc  writing,  but  that  the  intention  may  be 
more  inffdligently  ascertained  from  its  terms.  Put  to  make  this  evidence 
admissible  some  ambiguity  must  first  appear;  there  must  be  language  used 
such  as  may  without  doing  vifdence  to  its  meaning,  be  explained  consistently 
with  the  liability  of  either  party,  some  language  which  as  in  Simps(m  v. 
Garlanrl.  72  Me.  40.  tends,  in  the  words  nf  the  statute,  to  show  that  the  con- 
tract wni  mafle  by  the  agent  '  in  the  name  jif  the  principal,  or  in  his  own  name 
for  hiH  princii)al.'  In  this  case  no  sueh  andiiguity  exists,  no  such  language  is 
used.  The  promise  is  that  of  the  flefendants  alone  without  anything  to  indi- 
cate that  it  was  for  or  in  behalf  of  another.  True,  the  defendants  affixed  to 
their  nnmes  their  nfTirial  fifle.  with  the  name  of  the  corporation  in  which  they 
held  office,  but  nothing  whatever  to  qualify  their  promise  or  in  the  slightest 
degree  to  show  it  other  than  their  own.  The  statute  as  well  as  tlic  decisions, 
with  few  exceptions,  as  we  have  seen,  requires  more  tharj  this  {o  make  thf! 
testimonv  admissible,"     P,  ^0^.  —  C, 


202  IN  i'i:i;n;i;iAri()N.  |af{T.  ii. 

8ai(l  plaintilT  upon  said  noli',  nor  for  any  part  thereof,  nor  is  he  in- 
deiiletl  to  said  plaintill'  in  any  sum  whatoNcr,  nor  in  any  maimer  what- 
ever." Upon  the  trial  defendant  oll'ered  to  sliow  that  in  1884,  before 
plaintilT  had  any  dealings  with  del'endant,  piaintin"  was  informed  that 
defendant  was  carrying  on  business  as  the  agent  of  Maggie  G.  Wine- 
gar,  and  was  not  doing  business  for  himself;  that  business  relations 
were  tlien  establisiied  between  plaintill"  and  said  Maggie  0.  Winegar; 
that  said  business  relations  continued  from  the  early  part  of  l8(St  to 
and  including  the  year  1887,  and  embraced  many  transactions  between 
plaintilT  and  Maggie  0.  Winegar;  tliat  many  instruments  were  made 
between  the  parties,  which  were  signed  exactly  as  the  note  sned  nyion 
is  signed,  and  that  this  form  of  execution  had  come  to  be  recognized 
and  adopted  between  the  ]>arties  as  binding  Maggie  0.  Winegar;  that 
duri?ig  that  time  no  business  was  transacted  by  the  defendant  in  his 
individual  capacity,  and  all  the  business  done  was  that  of  liis  princi|)al, 
and  known  and  understood  to  be  such  by  plaintiff;  that  the  said  note 
was  given  and  accepted  as  the  obligation  of  Maggie  G.  Winegar;  that 
the  note  was  given  for  duebills  and  goods  furnished  by  plaintilT  to 
^laggie  G.  Winegar  on  the  books  of  j)IaintifT:  that  the  taking  of  these 
notes  did  not  in  the  least  change  the  character  of  the  indebtedness; 
and  that  defendant  never  received  any  benefit  or  consideration  for  said 
note.  The  court  refused  to  admit  the  testimony,  and  directed  a  verdict 
for  the  plaintiff. 

The  clear  weight  of  authority  is  that  the  promise  in  tlie  present  case 
is  prima  facie  the  promise  of  William  S.  Winegar,  and,  as  between  one 
of  the  original  parties  and  a  third  party,  the  addition  of  the  word 
"  agent "  is  not  sufficient  to  put  such  third  party  upon  inquiry.  The 
question  her^,~tr»wever,  is  whether,  as  between  the  immediate  parties 
I  to  the  instrument,  parol  evidence  is  admissible  to  show  the  real 
!  character  of  the  transaction.  *  *  *  In  Kran  v.  Davis,  47  Amer. 
Dec.  182,  Chief  Justice  Green  says:  "The  question  is  not,  what  is 
the  true  construction  of  the  language  of  the  contracting  party, 
but,  who  is  the  contracting  party?  Whose  language  is  it?  And 
the  evidence  is  not  adduced  to  discharge  the  acrcnt  from  a  per- 
sonal liability  which  he  has  assumed,  but  to  prove  that  in  fact 
he  never  incurred  that  liabiliiy;  not  to  aid  in  the  construc- 
tion of  the  instrument,  hut  to  prove  whose  instrument  it  is.  Now,  it  is 
true  that  the  construction  of  a  written  contract  is  a  question  of  law, 
to  be  settled  by  the  court  upon  the  terms  of  the  instrument.  But 
whether  the  contract  was  in  point  of  fact  executed,  when  it  was  made, 
and  by  whom  it  was  made,  are  questions  of  fact,  to  be  settled  by  a 
jury,  and  are  provable  in  many  instances  by  parol,  even  though  the 
proof  conflicts  with  the  language  of  the  instrument  itself."  *  *  * 
To  the  rule  that  extrinsic  evidence  cannot  be  received  to  contradict 
or  vary  the  terms  of  a  valid  instrument,  there  are  many  exceptions. 
As  between  the  original  parties,  the  consideration  may  be  impeached; 

r 


XI.]  /AMBIGUOUS  61GNATUEES.  *  203 

fraud  or  illegalit/^in  its  inception  may  be  shown.     It  may  be  shown 

that  the  note  was  delivered  conditionally,  or  for  a  specified  purpose, 

onlyp-Ujat-it  was  made  for  accommodation,  merely;  if,  by  mistake, 

one  party   indorses  before  another,  such  mistake  may  be  shown   to 

relieve  him  from  his  apparent  lial)ility;  that  a  party  who  indorses 

Iiis  name  upon  the  back  of  a  note  may  l)e  maker  or  indorser,  dependent 

upon  parol  proof  as  to  when  he  placed  his  signature;  that,  although 

the  legal  effect  of  successive  indorsements  is  to  make  the  indorse rs 

liable  to  each  othci  in  the  order  of  time  in  which  they  signed  their 

names,  yet  such  legal  effect  may  be  rebutted  by  parol  proof  that  all 

were  accommodation  indorsers,  and,  by  agreement  among  themselves, 

cosureties;  that  the  fact  of  a  note  being  joint  and  several  did  not 

exclude  proof  that  one  of  the  signers  was  a  surety,  merely,  and,  where 

the  creditor  knew  the  fact  of  suretyship,  an  extension  of  time,  for  a 

consideration,  without  the  consent  of  such  surety,  released  the  surety. 
*     *     * 

As  is  so  often  said,  it  is  the  intent  of  the  parties  which  is  to  be 
carried  out  by  the  courts.  The  rule  that  rejects  words  added  to  the 
signature  is  an  arbitrary  one.  Its  reason  is  not  so  much  that  the 
words  are  not,  or  may  not  be,  suggestive,  but  that  they  are  but  sug- 
gestive, and  the  instrument,  as  a  whole,  is  not  sufficiently  complete  to 
point  to  other  parentage.  The  very  suggestiveness  of  these  added 
words  has  given  rise  to  an  irreconcilable  confusion  in  the  authorities 
as  to  the  legal  effect  of  such  an  instrument.  Extrinsic  evidence,  there- 
fore, is  admissible  in  such  case,  between  the  immediate  parties,  to 
explain  a  suggestion  contained  on  the  face  of  the  instrument,  and  to 
carry  out  the  contract  actually  entered  into  as  suggested,  but  not  fully 
ihown,  by  the  note  itself.  The  presumption  tliat  persons  dealing  with 
negotiable  instruments  take  them  on  the  credit  of  the  parties  whose 
names  appear  should  not  be  absolute  in  favor  of  the  immediate  payee, 
from  whom  the  consideration  passed,  who  must  ])c  deemed  to  have 
known  all  the  facts  aud  cinninstiiiiccs  surrounding  the  inception  of 
tiie  note,  and  with  such  knowledge  accepted  a  note  containinir  siicb  a 
suggestion.  *  *  *  We  thirds-  that  in  the  present  case  defendnnt 
was  entitled  to  make  the  sliowing  ofTercd.  I^nrler  the  general  issue, 
defendant  was  entitled  to  give  in  evidence  any  matter  of  rlefense 
going  to  the  existence  of  any  j)romise  having  legal  force,  as  against 
him.     I  Shinti.  PI.  k  Vr.,  i)  710. 

The  judgment  is  reversed,  nnd  a  new  trial  onlered.  The  other 
justices  concurred." 


•  This  cnw  in  reported  in  20  L.  R.  A.  705.  with  exhaustive  note  entitled, 
"  AdmisHihilify  of  pxfrinHir  pviflmrr  to  show  who  is  linhlo  ns  ihr  makor  of  n 
note." 

Accord:  Mrr;nwnn  v.  frtrrnfm.  173  N.  V.  1.  Tn  this  cnse  the  note  road.  "I 
promise  tc  pnj  "  and  was  sipncd  "  Charles  (i.  Peterson,  Truste*."     Haioht,  J., 


204  INTERPRETATION.  [ART.    II. 

§39  CHIPMAN  V.  VO^'VV.H  f.t  at,. 

11!»  MA.ssAriirsi.TTS,  IK!).  —  1875. 

Contract  against  the  dereiuljiiits  as  drawers  of  three  drafts  in- 
dorsed in  l)lank  hy  the  payees,  of  which  the  following  is  a  copy:  — 

No.  176.  $5,000. 

New  E.ngl^vnd  Agkncy  of  the  Pennsylvania  Fire  Insuk- 

FOSTER    (S:     ColE,  ANCE    COMPANY,    PlI  H.ADEMMMA. 

Genernl  .\ponla  Boston,  Aupust  18,  187.3. 

for  thf  Pay  to  tlie  ordpr  of  Haley,  Morse  &  Company,  five  thou- 

New   Enjilaiul  sand    dollars,    being    in    full    of    all    claims    and    demands 

States,  against    said   company   for   loss  and   daniagi'  by   fire  on   tlie 

15  Devonsliire  tliirtieth  day  of  i\Iay,  1873,  to  property  insured  under  ])oIipy 

Street,  I    No.  824,  of  Boston,  Mass.,  agency. 

Boston.  i                                                                                  Foster  &  Cole. 

I    To  the  Pennsylvania  Fire  Insurance  Company,  Philadelphia. 

Defendants  were  general  agents  of  the  Pennsylvania  Fire  Insurance 
Company  of  Philadelphia,  and  drew  the  drafts  in  question  in  pay- 
after  quoting  section  S'J  of  the  Negotiable  Instruments  Law,  said:  "lie  did 
not.  in  the  instrument  itself,  disclose  the  fact  that  he  was  trustee  for  the 
creditors  of  .Johnson  &  Peterson,  so  that,  under  the  provisions  of  this  statute, 
he  would  become  personally  liable  upon  the  note,  unless  he  could  show  that  at 
the  time  of  the  delivery  of  the  note  to  the  plaintiffs  he  disclosed  the  fact  that 
the  consideration  for  which  the  note  was  given  was  for  the  benefit  of  the 
creditors  of  .Johnson  &  Peterson,  and  that  he  gave  the  note  as  the  trustee  for 
such  creditors.  It  is  contended  on  behalf  of  the  j>laintiffs  that  his  representa- 
tive character  must  be  disclosed  upon  the  face  of  the  note.  This  may  be  so 
in  so  far  as  innocent  purchasers  for  value  are  concerned,  but  as  to  the  paj'ees 
named  in  the  note  we  think  a  difi'erent  rule  prevails.  In  the  case  of  Bnuk  v. 
Wallifi.  150  N.  Y.  455.  the  action  was  upon  a  promissory  note  signed  by  Wallis, 
who  added  to  his  signature  '  President,'  and  by  Smith,  who  added  to  his  sig- 
nature '  'Jreasurer.'  They  were  in  fact  president  and  treasurer  of  the  Wallis 
Iron  Works,  a  corporation,  and  the  note  was  issued  as  an  obligation  for  the 
corporation,  and  was  discounted  by  tlie  plaintiff  bank.  It  was  held  that  the 
plaintiff  was  entitled  to  recover  upon  the  ground  that  the  representative  char- 
acters of  the  defendants  were  not  disclosed  to  the  bank  at  the  time  that  it 
discounted  the  paper.  Andrews,  C.  .].,  in  ihlivering  the  ojjinion  of  the  court, 
said  with  reference  thereto:  '  It  may  Ix'  ailiiiitted  that  if  the  bank,  when  it 
discounted  the  paper,  was  informed  or  knew  that  the  note  was  issued  by  the 
corporntion.  and  was  intended  to  create  only  a  corporate  liability,  it  could 
not  be  enforced  against  the  defendants  as  individuals,  who,  by  mistake,  had 
executed  it  in  such  form  as  to  make  it  on  its  face  their  own  note,  and  not 
that  of  the  corporation.  But,  according  to  the  rules  governing  commercial 
paper,  nothing  short  of  notice,  express  or  implied,  brought  home  to  the  bank 
at  the  time  of  the  discount,  that  the  note  was  issued  as  the  note  of  the  cor- 
poration, and  was  not  intended  to  bind  the  defendant.-,  could  defeat  its  remedy 
against  the  parties  actually  liable  thereon  as  promisors.'  We  do  not  under- 
stand that  the  statute  to  which  we  have  alluded  was  designed  to  change  the 
common-law  rule  in  this  regard,  which  is  to  the  effect  that,  as  between  the 
original  parties  and  those  having  notice  of  the  facts  relied  upon  as  constituting 
a  defense,  thf  consideration  and  the  conditions  under  which  the  note  wag 
^eljverfd  mfiy  t)e  shown."     Pages  4,  g,  —  C, 


XI.]  AMBIGUOUS  SIGNATURES.  •  205 

ment  of  three  poUcies  issued  by  that  company,  The  company  refused 
to  honor  the  drafts,  and  they  were  duly  protested. 

Gray,  C.  J.  —  Each  of  these  drafts,  upon  its  face,  purports  to  be 
is8ued~-hy  the  New  England  agency  of  the  Pennsylvania  Fire  Insur- 
ance Company,  and  shows  that  Foster  &  Cole  are  the  general  agents 
of  that  corporation  for  the  New  England  States,  as  well  as  that  the 
draft  is  drawn  in  payment  of  a  claim  against  the  corporation.  It 
thus  appears  that  Foster  &  Cole,  in  drawing  it,  acted  only  as  agents 
of  the  corporation,  as  clearly  as  if  they  had  repeated  words  express- 
ing their  agency  after  their  signature ;  and  they  cannot  be  held  per- 
sonally liable  as  drawers  thereof.  Carpenter  v.  Farnsworth,  106 
Mass.  561,  and  cases  cited. 

Judgment  for  the  defendants. 


§  39  CASCO  NATIONAL  BANK  v.  CLARK. 

139  New  York,  307.  —  1893. 

Action  against  defendants  as  makers  of  a  promissory  note.  Judg- 
ment for  plaintiff.    The  opinion  states  the  facts. 

Gray,  J.  —  The  action  is  upon  a  promissory  note,  in  the  following 
form,  viz. : 


Brooklyn,  N.  Y.,  August  2,  1890. 
$7,500.     Three  months  after  date,  we   promise  to  pay   to  the  order  of 
Clark  &  Chaplin  Ice  Company,  seventy-five  hundred  dollars  at  Mechanics' 
Bank :  value  received. 

John  Clark,  Prest. 
E.  H.  Close,  Trees. 


It  was  delivered  in  payment  for  ice  sold  by  the  payee  company  to 
the  Ridgewood  Ice  Company,  under  a  contract  between  those  com- 
panies, and  was  discounted  by  the  plaintiff  for  the  payee,  before  its 
maturity.  The  appellants,  T'lark  and  Close,  appearing  as  makers 
upon  the  note,  the  one  describing  himself  as  "  Prest."  and  the  other 
as  "  Treas.,"  were  made  individually  defendants.  They  defended  on 
the  ground  that  they  had  made  the  note  as  officers  of  the  Ridgewood 
Ice  Company,  and  did  not  become  personally  liable  thereby  for  the 
debt  represented. 

Where  a  negotiable  promissory  note  has  been  given  for  the  pay- 
ment of  a  debt  contracted  by  a  corporation,  and  the  language  of  the 
promise  does  not  disclose  the  corporate  obligation,  and  the  signatures 
to  the  paper  are  in  the  names  of  individuals,  a  holder,  taking  hnna  fide, 
and  without  notice  of  the  eireurnstanees  of  its  making,  is  entitled 
to  hold  the  note  as  the  personal  undertaking  of  its  signers,  notwith- 
standing they  affix  to  their  names  the  title  of  an  office.    Such  an  affix 


1*00  INTEKI'KETATION.  [aUT.    11. 

will  Ix^  regarded  as  descriptive  of  tlie  persons  and  not  of  the  character 
of  tlie  lial>ility.  Unless  IIh>  promise  j>iiip()rts  to  lie  by  the  corporation, 
it  is  that  of  the  persons  who  suhserihe  to  it;  and  the  fact  of  adding 
to  their  names  an  abhreviation  of  some  othcial  title  has  no  legal  sig- 
nification as  qualifying  their  obligation,  and  imposes  no  obligation 
upon  the  corporation  whose  officers  they  may  be.  This  must  be 
regarded  as  the  long  and  well-settled  rule.  (Byles  on  Bills,  §§  H6, 
37,  71;  I'entz  v.  Stanton,  10  Wend.  271;  Taft  v.  Brewster,  Ji'john. 
334;  Hills  v.  Bannister,  8  Cow.  31;  Moss  v.  Livingston,  4  N.  Y.  208; 
DeWitt  V.  Walton,  9  Id.  571;  Bottomley  v.  Fisher,  1  Hurlst.  &  Colt. 
211.)  It  is  founded  in  the  general  principle  that  in  a  contract  every 
material  thing  must  be  definitely  expressed,  and  not  left  to  conjecture. 
Unless  the  language  creates,  or  fairly  implies,  the  undertaking  of  the 
corporation,  if  the  purpose  is  equivocal,  the  obligation  is  that  of  its 
apparent  makers. 

It  was  said  in  Briggs  v.  Partridge  (64  N".  Y.  357,  363),  that  persons 
taking  negotiable  instruments  are  presumed  to  take  them  on  the 
credit  of  the  parties  whose  names  appear  upon  them,  and  a  person 
not  a  party  cannot  be  charged,  upon  proof  that  the  ostensible  party 
signed,  or  indorsed,  as  his  agent.  It  may  be  perfectly  true,  if  there 
is  proof  that  the  holder  of  negotiable  paper  was  aware,  when  he 
received  it,  of  the  facts  and  circumstances  connected  with  its  making, 
and  knew  that  It  was  intended  and  delivered  as  a  corporate  obligation 
only,  that  the  persons  signing  it  in  this  manner  could  not  be  held 
individually  liabJe^  Such  knowledge  might  be  imputable  from  the 
language  of  the  paper,  in  connection  with  other  circumstances,  as  in 
the  case  of  Mott  v.  Hicks  (1  Cow,  513),  where  the  note  read,  "the 
president  and  directors  promise  to  pay,"  and  was  subscribed  by  the 
defendant  as  "  president."  The  court  held  that  that  was  sufficient  to 
distinguish  the  case  from  Taft  v.  Brewster,  supra,  and  made  it  evident 
that  no  personal  engagement  was  entered  into  or  intended.  Much 
stress  was  placed  in  that  case  upon  the  proof  that  the  plaintiff  was 
intimately  acquainted  with  the  transaction  out  of  which  arose  the 
giving  of  the  corporate  obligation. 

In  the  case  of  Bank  of  Genesee  v.  Patchin  Bank  (19  N.  Y.  312), 
referred  to  by  the  appellant's  counsel,  the  action  was  against  the 
defendant  to  hold  it  as  the  indorser  of  a  bill  of  exchange,  drawn  to 
the  order  of  "  S.  B.  Stokes,  Cas.,"  and  indorsed  in  the  same  words. 
The  plaintiff  bank  w»s  advised,  at  the  time  of  discounting  the  bill,  by 
the  president  of  the  Patchin  Bank,  that  Stokes  was  its  cashier,  and 
that  he  had  been  directed  to  send  it  in  for  discount,  and  Stokes  for- 
warded it  in  an  official  way  to  the  plaintiff.  It  was  held  that  the 
Patchin  Bank  was  liable,  because  the  agency  of  the  cashier  in  the 
matter  was  communicated  to  the  knowledge  of  the  plaintiff  as  well  as 
apparent. 


XI.J  AMBIGDOUS  SIGNATURES.  •  207 

Iliciden tally,  it  was  said  that  the  same  strictness  is  not  required 
in  the  execution  of  commercial  paper  as  between  banks,  that  is,  in 
other  ^-espects,  between  individuals. 

In  the  absence  of  competent  evidence  showing  or  charging  knowl- 
edge in  the  holder  of  negotiable  paper  as  to  the  character  of  the 
obligation,  the  established  and  safe  rule  must  be  regarded  to  be  that 
it  is  the  agreement  of  its  ostensible  maker  and  not  of  some  other 
party,  neither  disclosed  by  the  language,  nor  in  the  manner  of  execu- 
tion. In  this  case  the  language  is,  "  we  promise  to  pay,"  and  the 
■  signature  by  the  defendants,  Clark  and  Close,  are  perfectly  consistent 
with  an^  assumption  by  them  of  the  company's  debt. 

"The  appearance  upon  the  margin  of  the  paper  of  the  printed  name 
"  Ridgevvoo3_Ice  Company  "  was  not  a  fact  carrying  any  presumption 
that  the  note  was,  or  was  intended  to  bo,  one  by  the  company. 

"ft  was  competent  for  its  officers  to  obligate  themselves  personally, 
for  any  reason  satisfactory  to  themselves,  and,  apparently  to  the 
world,  they  did  so  by  the  language  of  the  note ;  which  the  mere  use 
of  a  blank  form  of  note,  having  upon  its  margin  the  name  of  their 
company,  was  insufficient  to  negative. 

[The  court  then  decides  that  the  fact  that  one  Winslow  was  a 
director  in  the  payee  company,  and  also  in  the  plaintiff  bank,  did 
not  charge  the  latter  with  notice  as  to  the  origin  of  the  paper.] 

Judgment  affirmed.* 


ENGLISH  A\D  SCO'niSlT  AATEKICAX  MORTGACE  AND 
INVESTMENT  COMPANY  v.  GLOBE  LOAN  AND  TRUST 
COMPANY. 

70  Nrrraska,  435.  —  1903. 

Albert,  C.  This  action  was  bmnglit  by  the  English  iV  Scottish 
American  Mortgage  S:  Investment  Company  against  tlic  fJjobc  Ijoan  Sc 
Trust  Company,  Emma  O.  Devries,  as  administratrix  of  the  estate  of 
II.  0.  Devries,  deccaserl,  and  W.  T^eacli  Taylor,  on  a  promissory  note, 
of  whic'h  the  following  is  a  copy : 

$082.13.  Omaha,  Nkm..   \tnrrh   ]st.   ]H9R. 

(ILOHK  1/).\N  A  TIU'ST  CO..  OM.MIA,  NKMRASK.V. 
On  or  lipforp  two  y»'ar.s  nfU-r  rintr,  wo  j>r<)n)isp  to  pay  to  tlio  En^^li.xh  A 
Scottish  .\moriran  Mort^japf  &  T.  f'o..  or  orflor.  nine  hundrod  anrl  {>ij»))ty  two 
and  13/100  Dollars,  for  valiH'  roroivc-d;  nopotiat)lo  and  j)aynl)lc  at  tlio  ofTirf  of 
the  Olohc  F.oan  A  Trust  Company,  Omahn,  NobraHkn.  with  intcrrst  at  the  rate 
of  «ix  por  ront.  per  annum  from  dato  until  maturity. 

Oi.nnK   l,f)AN    <^-    Tru;sT  Co., 
II.   O.    nFVRiK.s.    Prrnftt. 
W.    H.   Tati/)R,   Krcy. 

•See  extract  from  Mepoiran  v.  Prterson,  170  N,  Y.  1,  in  note  on  p.  203.  —  C, 


20y  INTKHPUKTATION.  |  ART.    II. 

Only  the  last-named  defendant  is  concerned  in  the  litigation  at  this 
time.  As  a  defense^  to  flie  note,  he  |ilcii(led  tiial  it  was  the  note  of  the 
trust  company  alone,  and  that  lie  signed  as  secretary  in  order  to  give 
it  effect  ar  the  obligation  of  such  company,  and  for  no  other  purpose. 
On  the  trial  of  the  issues  joined  hetween  the  plaintiff  and  Taylor,  the 
former  offered  tlie  note  in  evidence;  and  it  was  excluded  on  the 
ground  that  it  appeared  on  the  face  of  the  note  that  it  was  the  obli- 
gation of  the  trust  company,  and  not  the  personal  obligation  of  such 
defendant.  Judgment  was  given  for  Taylor,  and  the  plaintiff  brings 
error. 

The  sole  question  in  this  case  is  whether  the  note,  on  its  face,  shows 
a  personal  liability  on  the  part  of  Taylor,  If  it  does,  the  judgment 
of  the  District  Court  is  wrong,  and  should  be  reversed. 

The  plaintiff  contends  that  the  mere  addition  of  the  official  title  of 
an  officer  of  a  corporation  to  his  signature  on  a  note  does  not  make  it 
the  note  of  the  corporation,  and  that  a  note  thus  signed  is  the  personal 
obligation  of  the  officer  thus  signing  it.  Among  the  authorities  cited  in 
support  of  this  contention  are  the  following:  Andres  v.  Kridler,  47 
Xeb.  5.S5;  Hays  v.  Crutcher,  54  Ind.  2fil  ;  ^coit  v.  Baker,  3  W.  Ya. 
285 ;  Ecndell  v.  Harriman,  75  Me.  497 ;  Banl'  v.  Clark,  139  N.  Y.  307; 
Tuclcr  Mfg.  Co.  v.  Fairbanks,  98  Mass.  101.  Tn  none  of  the  foregoing 
cases,  however,  is  the  name  of  the  corporation  itself  attached  to  the 
note  as  maker;  and  those  cases  appear  to  rest  on  the  familiar  rule  that, 
where  an  agent  signs  a  negotiable  instrument  in  his  own  name,  with- 
out disclosing  on  the  face  of  the  instrument  the  name  of  his  priiicipal, 
he  is  personally  liable  thereon.  But  in  the  present  case  the  name  of 
the  corporation  is  attached  to  the  note,  and  is  followed  by  that  of 
Devries  and  Tavlor,  with  the  designation  of  their  respective  titles.  In 
Atneriran  Nniumnl  Bank  v.  Omaha  Cnjfiv  Mfg.  Co.,  95  N.  W.  672, 
this  court  held  that  a  note  signed:  "  Omaha  Coffin  Mfg.  C^o.  C.  A. 
Clafiin,  Presdt.  S.  L.  Andrews,  Sec."  —  was  the  note  of  the  cor- 
poration, and  that  the  officers  whose  names  were  attached  thereto  were 
not  liable  thereon.  The  doctrine  armounced  in  that  case  is  supported 
by  the  following:  Liebscher  v.  Kraus,  74  Wis.  387;  Reeve  v.  First 
Nat.  Bank,  54  N.  J.  Law,  208;  Draper  v.  Steam  Heating  Co.,  5  Allen, 
338;  Castle  v.  Foundry  Co.,  72  Me.  167;  Falk  v.  Moebs,  127  U.  S. 
597. 

In  the  cases  just  cited  but  one  signature  followed  that  of  the  cor- 
poration, and  in  American  National  Bank  v.  Omaha  Coffin  Mfg.  Co., 
supra,  the  liability  of  the  second  officer  signing  the  instrument  was 
not  necessarily  involved  ;  and  on  that  ground  flic  y)ln!ntifr  undertakes 
to  distinguish  between  those  cases  and  the  case  at  bar,  and  insists  that 
while  it  may  be  presumed  that  Devries,  in  signing  the  note,  intended 
merelv  to  indicate  by  w^liom  the  corporate  signature  was  affi,Ted  to 
the  instrument,  no  such  presumption  is  to  be  indulged  as  to  Taylor, 
because  the  signature  of   Devries,  to  which   is  attached   his  official 


^A.]  AAlblGUOUS  SIGNATURES.  *  209 

desigiiiation,  following  the  name  of  the  corporation,  is  sufficient  of 
itselfyto  indicate  by^hom  the  corporate  signature  was  affixed.  The 
plaintW'b  argumei>i  on  this  point  is  agreeably  plausible,  but  not  cou- 
xiiKing^^iVliile  t..v  law  would  have  j)rej^umed  a  cor])orate  obligation, 
I  ad  tl:e  r.aiv.e  of  t'lo  (oipoiatioii  been  followed  by  the  official  signa- 
lui-e  of  tlic  pic^ido-.t  aloi.e,  Ihcic  is  no  presumption  that  such  is  the 
tole  metliod  of  altc.ti::g  llic  (oijiorato  signature.  It  is  not  unusual 
f.jr  cor])oration3  to  requiie  th.at  instruments  intended  to  bind  them 
eliall  lie  executed  1  y  n^ore  th.nn  one  of  their  officers.  And  where,  as 
in  this  instance,  W.o  (oiporate  name  is  followed  by  the  signatures  of 
"two  of  its  officns,  lo  which  are  attached  the  respective  titles  of  such 
officers,  the  presumption  which  attends  the  signature  of  the  first  officer 
should  he  held  to  attend  that  of  the  second  as  well.  This  view  is  in 
harmony  with  modern  methods  and  common  usage.  Instruments  thus 
signed  pass  current  as  corporate  obligations  only,  and  outside  of  a 
courtroom  no  one  ever  acts  upon  them  in  the  belief  that  they  bind,  or 
were  ever  intended  to  bind,  the  officers  thus  signing  them,  or  any 
yieison  other  than  the  corj^jratioji  itself. 

We  have  not  overlooked  Ileffver  v.  Brownell,  70  Iowa,  591,  wherein 
the  officers  were  held  liable  on  a  note  signed  precisely  as  the  one  in 
suit.  But  that  case  is  contrary  to  the  doctrine  announced  by  this 
court  in  American  National  Bank  v.  Omaha  Coffin  Mfg.  Co.,  supra, 
and,  as  we  think,  to  the  weight  of  modern  authority. 

It  is  recommended  Ihat  the  judgment  of  the  District  Court  in 
favor  of  Taylor  against  the  plaintiff  be  affirmed. 

Barnes  and  rilnnville,  CC,  concur. 

Vv.n  Cvui\y\.  For  the  reasons  stated  in  the  foregoing  opinion,  the 
j'!''"-!:;eiit  of  the  District  Court  in  favor  of  Taylor  against  tlic  jilaiiilifT 
is  affirmed.'"  V  T 

-fV — ^ — •  •  "•  f' — 

'"See  report  of  tliiH  i-ixUf  j^  fi  A.  &  E.  .\nn.  Can.  909,  with  ex^hnustivo  nnto 
entitled,  "  Linliility  of  |)ci>-r)n  ".jj/ninj;  n<'},'otiahle  paper  as  odicer  of  corporation." 

Accord:  Auiif/sl  v.  Ckiiik'.  72  Oli.  St.  5r>l,  where  the  note  read  "  we  promise 
to  pay"  and  was  fii^n.  d  "The  Alcron  White  Sand  and  Stone  Co.  L.  K. 
MihilU,  Sec'y  and  Treas.     1).  B.  Anngst,  Pres." 

Held  that  on  its  face  it  was  the  note  of  tlir  company  alone,  and  not  the 
note  of  .Mihills  and  .Aiinust.  and  that  the  latter  were  not  personally  hound 
fliticnn.  (  itiw,  .1..  .'^^aid:  "  f?ut  it  is  contended  hy  counsel  fur  defendant  in 
error  in  the  pn  sent  case  that  tlic  note  here  in  (piestion.  liet-aii^^e  of  tin-  lanfjJiage 
emplfiyed  in  the  hody  of  the  iti'^trnnient  itself,  ini|K)rts  on  its  face  an  under- 
taking  on  the  part  of  all  whose  names  are  signed  thereto  that  they  will  he 
hound  thereon,  and  that  in  terms  it  imposes  upon  each  a  personal  liahility 
as  a  maker  of  said  note.  ('ouns(d  assume  that  the  use  of  the  words  'we 
promise  to  pay.'  in  the  hody  of  the  instrument,  is  conclusive  of  the  fact  that 
this  note  is  and  was  intended  to  he  the  joint  note  of  the  Akron  White  Sand  & 
Stone  Company.  I-.  K.  Mihills,  and  I).  H.  Atingst.  We  do  not  think  so,  and, 
in  our  judynient,  no  siudi  contr(dlini»  efTect  can  properly  he  given  tlwse  words. 
The  wf)rd  '  we.'  whr-n  uj-d  in  a  [irtmii^sory  note,  doi-s  not  always  or  necessarily 
imply  a  plurality  of  makers,  and  it  is  often  used,  as  will  appear  from  many 
NKOOT.  IN8TIIU.MENT8—  J  4 


210  ixi'i:iii'iti:i  ATioN.  [akt.  ii. 

§39      GERMANIA  NATIONAL  HANK  OF  MILWAUKEE 

V.  MA  in  NEK. 

129  Wisconsin,  544.  —  1906. 

WiNsi.ow.  J.  The  })l;iiMtiir  sued  tlie  appellant  and  the  North- 
westL'iii  Straw  Works  as  makers  of  (he  followinf]^  promissory  note: 

MiLWAiKKK,    fnnwiry  <>,   1905. 
Four  months  aftiT  liati'  tin-  Noithweslorn  Straw  Works  promise  to  pay  to 
thf  order  of  F.  C.  Ri-,'clo\v    (.$20,000)    Twenty  Tliousand   Dollars  at  the   First 
National  Bank,  Milwaukee.     Value  reeeived. 

Thb:  Nobthwestekn  Straw  Works, 

E.  R.  Stillman,  Treas. 
John  W.   Marinkb. 

The  defendants  answered  jointly,  alleging  that  the  note  was  the 
note  of  the  Northwestern  Straw  Works  (a  corporation)  alone,  and 
was  signed  hy  Mariner  as  secretary  of  the  corporation  and  not  in  his 
individual  capacity.  The  case  was  tried  without  a  jury,  and  the  evi- 
dence showed  without  dispute  that  the  plaintiff  purchased  the  note 
from  the  payee  in  due  course  and  for  value  hefore  due;  that  it  repre- 
sented a  loan  made  to  the  corporation  defendant  alone;  that  the  hy- 


of  the  cases  cited  in  this  opinion,  to  designate  or  describe  a  corporation  aggre- 
gate. It  is  said  in  Randolph  on  Commercial  Paper,  §  143,  that  '  "  W^e  promise" 
seems  the  natural  form  of  words  for  a  corporation's  promise,  if  the  name  itselt 
is  not  used  in  the  body  of  the  note.'  ...  In  Draper  v.  Massachii.ietts  Steam 
UeatiiKj  Co.  and  anotlirr,  5  Allen,  338.  the  note  in  suit  read,  '  We  promise  to 
pay.'  and  the  signing  was  similar  to  that  in  the  case  at  bar,  viz.:  '  Mass.  Steam 
Heating  Co.  —  L.  L.  Fuller,  Treasurer.'  Hoar,  J.,  in  the  opinion  in  that  cas( , 
says:  'The  name  of  the  company  is  signed  to  the  note.  This  signature  could 
not  be  made  by  the  corporation  itself,  and  must  have  been  written  by  some 
olTicer  or  agent.  It  was  manifestly  proper  that  some  indication  should  be 
given  by  whom  the  signature  was  made,  as  evidence  of  its  genuineness;  and 
Fuller  added  his  own  name,  with  the  designation  of  his  ofTicial  character.  It 
would  have  been  better  if  the  name  of  the  principal  had  been  inserted  in  the 
body  of  the  contract  as  the  contracting  party,  or  if  the  word  "  by  "  had  pre- 
ceded Fuller's  name  in  the  signature.  But  we  think  the  omission  to  do  tiiis 
does  not  cliange  the  appai-ent  character  of  the  instrument,  and  that  the  whole, 
taken  together,  shows  it  to  Ik-  the  signature  of  the  Massachusetts  Steam  Heat- 
ing Company,  and  not  of  Fuller.*"     Page  555. 

.After  citing  a  large  numlM!r  of  cases  the  court  says:  "In  all  of  the  above 
cases  the  notes  were  held  to  be  unambiguous,  and  to  be  the  notes  of  the  cor- 
porations alone."     P.  558. 

But  to  the  other  extreme,  see  Mathews  d  Co.  v.  Mnttres.i  Co..  87  Iowa,  246, 
where  the  note  read  "  we  promise  to  pay  "  and  was  signed,  "  Dubuque  Mattress 
Co.,  .lohn  Kapp.  Pt."  Held,  that,  upon  the  face  of  the  note,  Kapp  was  per- 
sonally liable,  and  that  even  in  an  action  between  the  immediate  parties  to  the 
instrument  oral  testimony  was  inadmissible  to  show  that  he  was  at  the  time 
president  of  the  company,  and  authorized  to  sign  notes  for  it,  that  the  note 
was  given  for  goods  sold  to  the  company,  and  was  intended  to  bind  it  alone, 
and  that  the  payee  knew  tlint  fr'ct  wlien  lie  took  it. 

See,  also,  Rendetl  r.  Harriman,  75  Mo.  497,  in  note  on  p.  .  —  C. 


JU]  /  AMBIGUOUS  SIGNATUBES.  *  211 


laws  of  the  corporation  required  its  notes  to  be  signed  by  two  oflBcers, 
either  the  president  or  treasurer  and  tlie  secretary;  that  Mr.  Stilhnan 
was  the  treasurer  of  the  corporation  and  Mr.  Mariner  the  secretary; 
thaf^r.  Mariner  signed  his  name  thereto  simply  for  tlie  purpose  of 
making  it  the  note  of  the  corporation,  and  not  intending  to  bind 
himself,  but  neglected  to  add  the  word  "  Secretary  "  to  his  name ; 
that  the  plaintiff  had  no  information  as  to  the  capacity  in  which 
Mariner  signed  the  note,  further  than  that  afforded  by  the  note  itself; 
and  that  the  defendant  corporation  went  into  bankruptcy  after  the 
maturity  of  the  note  and  made  a  composition  with  its  creditors  under 
which  there  was  paid  to  the  plaintiff  on  the  note  $4,020.  There  was 
no  proof  that  the  corporation  had  ever  held  out  to  the  plaintiff  or  the 
public  that  Mr.  Stillman  or  any  single  officer  had  authority  to  execute 
notes  for  it.  Upon  these  facts  the  court,  upon  motion,  ordered  the 
complaint  amended  so  as  to  charge  Mr.  Mariner  as  indorser,  found 
him  liable  as  such,  and  entered  judgment  against  him  for  the  balance 
due  upon  the  note,  from  which  judgment  Mariner  appeals. 

The  question  as  to  tlie  liability  of  Mariner  under  the  facts  stated  is 
certainly  not  free  from  difficulty.  The  general  rule  is  well  supported 
that  when  it  clearly  appears,  either  in  the  body  of  the  note  or  by 
appropriate  words  added  to  the  signatures  themselves,  that  a  cor- 
poration is  the  party  making  the  promise,  there  is  no  individual  lia- 
bility on  the  part  of  the  signers.  1  Randolph  on  Com.  Paper  (2d  ed.) 
§  135.  In  an  early  case  in  this  state,  however  (Dennison  v.  Austin, 
]')  Wis.  334),  this  principle  was,  in  effect,  modified,  as  it  is  modified 
in  some  other  jurisdictions,  by  a  proviso  to  the  effect  that,  if  the 
signers  in  fact  had  no  authority  to  bind  tlie  corporation,  tlicy  bind 
themselves  individualj^  The  Negotiable  Instrument  Law  (chapter 
356,  p.  fiTRS,  Laws  of  1899)  recognizes  both  the  general  principle  and 
the  proviso,  in  section  1075-20  »  (page  09  1 ),  in  these  words :  "  Where 
the  instrument  contains  or  a  person  adds  to  his  signature  words  indi- 
cating that  he  signs  for  or  on  behalf  of  a  principal,  or  in  a  repre- 
sentative capacity,  he  is  not  liable  on  the  instrument,  if  he  was  duly 
authorized."  *  As  it  appears  without  dispute  in  the  present  case  that 
the  signers  of  the  note  were  autlutrizcd  to  execute  it  on  behalf  of  the 
corporation,  the  proviso  need  not  be  considered.  In  the  present  case 
the  body  of  the  note  declares  that  the  "  Northwestern  Straw  Works" 
(presumably  a  corporation)  is  the  promisor.  It  does  not  say  "  I  "  or 
"we"  promiBe  to  pay,  but  specifically  names  a  corporation  as  the 
promisor.  Hence,  so  far  as  Mr.  Stillman  is  concerned,  the  note  its<'lf 
makes  it  clear  that  he  signed  only  on  behalf  of  tin;  corporation.  IVrol 
evidence  would   not   be  !)driiis>-ihlr  to  show   tli;it    he  signed   as  a   joint 


1  N.  Y..  S  31).  —  C. 

«  Sfp  thp  pxtrart  from  Mr.  McKeehan's  nrtirip  on  the  Negotiablo  InstnimenU 
Law,  post,  pages  .  —  C. 


812  l\  ii:ki'i;i:i  A  I  iu.\.  [aet.   11. 

liiakiT.  Lifhsclwr  v.  Kraiis,  Tl  Wis.  ;{S7.  Tlu-  siimr  claim  is  rorcil)ly 
made  as  to  tiie  signature  of  the  del'endaiit  Mariner,  and  it  is  lutL  with- 
out authority  to  support  it.  SJmver  v.  Ocean  Minim/  ('(iiiijkiiii/.  21 
Cal.  45. 

Wo  are  not  iinliiuHl,  however,  to  rest  the  ease  u})on  any  (h)uhtful 
proposition,  (irantiuii^  that  the  section  does  not  apply  as  to  the  signa- 
ture of  Mr.  Mariner,  we  think  it  would  be  conceded  that  upon  its  face 
it  is  ambiguous  so  far  as  Mr.  Mariner  is  concerned.  The  instrument 
says  that  tlie  "Northwestern  Straw  Works"  promises  to  pay.  The 
signature  of  Mariner  is  the  bare  signature  of  an  individual.  This  is 
certainly  not  usual,  and  should  arrest  the  attention  of  any  one  deal- 
ing with  it  at  once.  People  do  not  ordinarily  sign  contracts  purport- 
ing on  their  face  to  be  contracts  of  others.  If  they  do,  the  fact  itself 
suggests  at  once  a  doubt  as  to  what  they  mean  by  it.  In  other  words, 
the  instrument  becomes,  as  to  such  signatures,  ambiguous.  The  Nego- 
tiable Instrument  Law,  before  referred  to,  contains  several  provisions 
with  reference  to  the  construction  of  negotiable  instruments  bearing 
the  signatures  of  persons  who  have  not  made  their  intentions  c;lear, 
and  these  must  be  considered.  Subdivision  (i,  §  1()75-17,  ^  p.  603, 
provides  that,  "  where  a  signature  is  so  placed  on  an  instrument  that 
it  is  not  clear  in  what  capacity  the  person  making  the  same  intended 
to  sign,  he  is  to  be  deemed  an  indor.ser."  This  provision,  by  its  very 
terms,  applies  only  to  a  case  of  doubt  arising  out  of  the  location  of 
the  signature  upon  the  instrument.  Names  are  sometimes  placed  at 
the  side,  on  the  end,  or  across  the  face  of  the  instrument,  and  thus  a 
doubt  arises  as  to  whether  the  signer  intended  to  be  bound  as  a  maker 
or  an  indorser,  or  perhaps  as  a  guarantor,  and  to  solve  these  doubts 
the  section  in  question  was  evidently  framed.  Tt  was  to  settle  a  doubt 
fairly  arising  from  the  ambiguous  location  of  the  name,  and  applies 
to  no  other.  In  the  present  case  there  is  no  doubt  of  tliis  nature.  The-- 
signature  of  Mr.  Mariner  fs  placed  in  the  usual  and  proper,  in  fact 
the  only  proper,  place  for  a  maker.  The  doubt  arising  is  not  a  doubt 
whether  he  intended  to  sign  as  maker,  indorser,  or  guarantor,  for  it 
is  clear  from  the  location  of  the  name  that  he  did  not  intend  to  sign 
as  indorser  or  guarantor,  but  simply  a  doubt  wliether  he  intended  to 
sign  in  an  individual  or  in  a  representative  capacity  as  maker.  To  say 
that,  where  it  conclusively  appears  from  the  instrument  that  the 
signer  intended  to  sign  as  a  maker,  the  statute  is  intended  to  make 
him  an  indorser,  would  be  little  short  of  ridiculous.  The  statute  was 
passed  to  meet  a  case  where  it  is  doubtful  from  the  instrument  whether 
a  man  intended  to  become  an  indorser,  not  to  make  an  indorser  out 
of  a  person  who,  without  doubt,  intended  to  sign  as  maker,  either 
individually  or  as  representative  of  another.  We  have  no  doubt,  there- 
fore, that  this  section  has  no  application  to  the  present  case. 

8  N.  Y.,  §  36,  subd.  6.  —  C. 


XI.]  /  AMBIGUOUS  SIGNATURES.  •  213 

Sections  1^7-3  and  1G77-4,  p.  712,  are  also  referred  to  as  having 

soinH^bearing  on  the  question.  Section  1677-3  *  provides  that  '^  a 
i«?rson"ptii(iiig  his  signature  upon  an  instrument  otherwise  than  as 
"aker,  drawer  or  aneptor,  is  deemed  to  be  an  indorser,  unless  he 
1  Karly  indicates  by  appropriate  words  his  intention  to  be  bound  in 
-oiiie  other  capacity."  Section  U)T7-1  ■'  ])roviflcs  that,  "where  a  per- 
-o:i  not  otherwise  a  party  to  nn  iiisf  riinieiit  jdnces  tliereon  his  signa- 
ture in  bhnd<  before  (It'livciy,  1k>  is  liable  as  an  indorser  in  accordance 
with  the  following  rides,"  etc.  As  1o  the  last-named  section,  it  is 
manifest  that  it  has  no  ap]di(ation,  bcnanse  Mr.  Mariner  did  not  place 
his  signature  upon  the  iiolc^  in  lilank.  The  first-named  section  is 
ecpially  inapplicable,  because  it  is  certain,  from  the  instrument  itself, 
that  he  placer]  his  signature  thereon  as  maker,  either  individually  or 
in  a  representative  capacity;  lience  the  contingency  named  in  the 
section  has  not  arisen.  It  seems  entirely  clear  from  the  language  of 
these  two  sections,  and  from  the  notes  thereto,  that  they  were  intended 
to  lay  down  in  statutory  form  the  propositions  already  decided  by  this 
court  in  Cadi/  v.  Shepard,  12  Wis.  *63}),  and  King  v.  Ritchie,  18  Wis. 
*554,  and  other  cases  following  them.  There  are  no  other  sections  of 
the  Negotiable  Instrument  Law  which  can  be  reasonably  claimed  to 
have  any  material  bearing  on  the  question  now  under  consideration, 
and  it  must  therefore  be  determined  upon  general  principles  of  the 
common   law.  *" 

It  is  elementgry-tliat,  in  case  a  written  coutract-i&  amkigufljia_m_it8, 
?rips,  parol  prorif  nf  the  fnrf^  nnd  circumstances  under  which  it  was^ 
e  int  lO'liK  (■(!  to  nid  in  its  construction.  This  rule 
'applies  to  coinmcrcial  ]iapcr,  even  iti  flic  hands  of  third  persons, 
because,  where  the  andtiguity  is  apjiaicut  to  a  reasonably  prudent  man 
on  the  face  of  the  paper,  he  is  necessarily  put  upon  inquiry.  Meachem 
on  Agency,  5$  443;  Tlnnd  v.  IlaUenhpck.  7  Hun,  362;  10  Cyc.  p.  1051  ; 
4  Thorn j)son  on  Corporations,  ^  5141.  The  parol  evidence  in  the 
present  case  sIiowcmI  without  dis])ute  that  Mr.  Mariner's  signature  was 
attacbed  simply  in  his  repn'sentativf  capacity  and  as  agent  of  the 
corporation.  There  being  a  plain  iimliiguity  in  this  respect  appear- 
ing on  the  face  of  the  note,  the  evidence  was  properly  received,  and 
the  judgnierd  against  Mariner  individually  was  erroneouslv  rendered. 


Judgment   reverse(l,  and   act  ion  j;einand(^  with  directions  to  dis- 
'isa-thc-coni^daMit        ■"r"^^'^"  ^^    ^-^^ii^ ^.Uw^u:^*—- 


<N.  Y.,  S  11.1. —  C. 
»N.  Y.,  §114.  — C. 


214  INTKUl'ltKTATION.  [aUT.    II. 

!J39       SOUITEGAN  NATIONAL  BANK  v.  BOARDMAN. 

40  Minm:.suia,  2!)3.  —  1891. 

Action  against  defendant  as  indorser  upon  the  followin*;  proims 
so IV  note : 
$1000.  Minneapolis,  May  12,  1884. 

Six  nioiitlis  after  date  we  promise  to  pay  to  tlie  order  of  A.  ,1.  iJoariiman, 
treasurer,  one  tliousand  dollars,  value  received,  with  interest  at  eij^ht  per  cent, 
after  maturity. 

Minneapolis  Enhine  and  Machine  Works. 
By  A.  L.  Cbocker,  Sec'y. 
(Indorsed)  A.  J.  Boardman,  Treasurer. 

Defendant  was  treasurer  of  the  Minneapolis  Engine  \'  Machine 
Works,  and  claims  to  have  made  the  indorsement  in  thai  (  a|)a(.ity. 
Judgment  for  plaintiff. 

Mitchell,  J.  (after  stating  the  facts,  and  deciding  that  the  trial 
court  erred  in  not  submitting  to  the  jury  a  question  as  to  the  extension 
of  the  time  of  payment  without  the  consent  of  the  defendant).  With 
a  view  to  another  trial  it  is  necessary  tor«?onsider4he  questions  involved 
in  the  first  defense.  Tliese  are  (1)  whether,  on  the  face  of  the  paper, 
this  is  the  indorsement  of  the  corporation  or  of  defendant  individually; 
and  (2)  whether  its  character  is  conclusively  determined  by  the  terms 
of  the  instrument  itself,  or  whether  extrinsic  evidence  is  admissible 
to  show  in  what  character  —  officially  or  individually  —  the  defend- 
ant made  the  indorsement. 

Where  both  the  names  of  a  corporation  and  of  an  officer  or  agent 
of  it  appear  upon  a  bill  or  note,  it  is  often  a  perplexing  question  to 
determine  whether  it  is  in  legal  effect  the  contract  of  the  corporation, 
or  the  individual  contract  of  the  officer  or  agent.  It  is  very  desirable 
that  the  rules  of  interpretation  of  commercial  paper  should  be  definite 
and  certain;  and  if  the  courts  of  the  highest  authority  on  the  subject 
had  laid  down  any  exact  and  definite  rules  of  construction  for  such 
cases,  we  would,  for  the  sake  of  uniformity,  be  glad  to  adopt  them. 
But,  unfortunately,  not  only  do  different  courts  differ  with  each  other, 
but  we  are  not  aware  of  any  court  whose  decisions  furnish  any  definite 
rule  or  system  of  rules  applicable  to  such  cases.  Each  case  seems  to 
have  been  decided  with  reference  to  its  own  facts.  If  what  the  courts 
sometimes  call  "  corporate  marks  "  greatly  predominate  on  the  face 
of  the  paper,  they  hold  it  to  be  the  contract  of  the  corporation,  and 
that  extrinsic  evidence  is  inadmissable  to  show  that  it  was  the  indi- 
vidual contract  of  the  officer  or  agent.  If  these  marks  are  less  strong, 
they  hold  it  prima  farie  the  individual  contract  of  the  officer  or  agent, 
but  that  extrinsic  ovidenr-e  is  admissible  to  show  that  he  executed  it 
in  his  official  capacity  in  behalf  of  the  corporation ;  while  in  still 
other  cases  they  hold  that  it  is  the  personal  contract  of  the  party  who 
signed  it,  that  the  terms  "  agent,"  "  secretary,"  and  the  like,  are 


AMBIGUOUS  SIGNATURES.  '  215 

merely  descriptive  of  the  person,  and  that  extrinsic  evidence  is  not 
admissible  to  show  the  contrary.  See  Daniel,  Neg.  Inst.  §  398,  et  seq. 
When  others  have  thus  failed  we  can  hardly  hope  to  succeed.  Per- 
haps the  difficulty  is  inherent  in  the  nature  of  the  subject. 

This  coui-t  has  in  ;i  UhT^'of ■^k'^.iisioiis  held  that  where  a  party  signs  / 
a  coiitMHl,  all'xiiiLr  til  !;i.-  .~i_;'li;iHnv  llic  trnii  "  aLTrUt,"  "  t riislfc,"  or 
[the  like,  it  is  prima  facie  Ills  individual  contract,  the  term  attixed-^ 
being  presumptively  merely  descriptive  of  his  person,  but  that  extrinsic  / 
evidence  is  admissible  to  show  tlial  tlic  words  were  understood  as/^~* 
<teter'nirning  the  characti'r  in  which  ho  contrju'ted.  See  Pratt  vt 
Tea V pre.  ^'^  Minn.  17T:  BiurjlKtin  v.  Sfpirart.  1^  Minn.  96,  and  l4 
Minn.  153;  Veering  v.  Thorn.  29  Minn.  120;  Rowell  v.  Oleson,  3^ 
Minn.  288;  Peterson  v.  Homan,  44  Minn.  166;  Brunswiclc-Baike  Co. 
V.  Bouiell,  45  Minn.  21.  Only  one  of  these,  however,  (Bingham  v. 
Stewart),  was  a  case  of  commercial  paper  where  the  name  of  a  cor- 
poration appeared  on  its  face,  and  in  that  case  possibly  the  court  did 
not  give  due  weight  to  all  the  "  corporate  marks  "  upon  it.  Where 
there  is  nothing  on  the  face  of  the  instrument  to  indicate  in  what  ca- 
pacity a  party  executed  it  except  his  signature  with  the  word  "  agent," 
**  treasurer,"  or  the  like  suffixed,  there  can  be  no  doubt  of  the  cor- 
rectness of  the  proposition  that  it  is  at  least  prima  facie  his  individual 
contract,  and  the  sufTix  merely  a  description  of  his  person.  But  bills, 
notes,  acceptances,  and  indorsements  are  to  some  extent  peculiar  —  at 
least,  the  different  relations  of  the  parties,  respectively,  to  the  paper 
are  circumstances  which  in  themselves  throw  light  upon,  and  in  some 
cases  control,  its  interpretation,  regardless  of  the  particular  form  of 
the  signature.  For  example,  if  a  draft  were  drawn  on  a  corporation 
by  name,  and  accepted  by  its  duly  authorized  agent  or  officer  in  his 
individual  name,  adding  his  official  designation,  the  acceptance  would 
be  deemed  that  of  the  corporation,  for  only  the  drawee  can  accept  a 
bill ;  while,  on  the  other  hand,  if  drawn  on  the  drawee  as  an  indi- 
vidual, he  could  not  by  words  of  official  description  in  his  acceptance 
make  it  the  accey)tance  of  some  one  else.  So  if  a  note  was  made  pay- 
able to  a  corporation  by  its  corporate  name,  and  is  indorsed  by  its 
authorized  official,  it  would  be  deemed  the  indorsement  of  the  cor- 
poration ;  for  it  is  only  tlu;  jiayee  wiio  can  he  first  iiidorser,  and  trans- 
fer the  title  to  the  [)aper.  But  this  is  not  such  a  case.  It  does  not 
appearonthe  fa(e  of  this  note  what  the  defendant  was  treasurer  of. 
Extrinsic  evuleiilcir"lTinrta  be  reflorted  to  fltlTTe  very  Ihrcshold  of  the 
caw3  to  |)rove  thai   fact. 

Counsel  for  tho  d^'fendant  relies  very  largely  upon  the  case  of  Folk 
v.  Moehs.  127  IT.  S.  597,  which  comes  nearer  sustaining  his  contention 
than  any  other  case  to  which  we  have  been  referred.  Rut  that  case 
differs  from  this  in  the  very  iri\i)orfant  particular  that_it  appeared 

ny>nn  the  Tare  of  fTre~papf T~TTs7'lf  fliiif  the  pnyee  nnd  indorser  was  the - 

BecretaTy  arrnreasu rer~of"~ttrc  cnrpgration,  and  that  as  such  lie  him- 


216  INTKRPKin'ATION.  [aKT.    II. 

self  executed  the  note  in  its  behalf.  The  luse  was  also  decided  largely 
upou  the  authority  of  TIi[<;Jiiocl-  v.  Buchanan,  105  U.  S,  416,  which 
is  also  clearly  distinguishable  from  the  present  case,  for  there  the  bill 
sued  on  purported  on  its  face  to  be  drawn  at  the  otlice  of  the  company, 
aiui  directed  the  drawee  to  charge  the  amount  to  the  account  of  the 
conjj)any,  of  which  the  signers  described  themselves  as  president  and 
secretary. 

Our  com-lusion  is  that  there  is  notliing  upon  the  face  of  the  note 
sued  on  to  take  it  out  from  under  the  rule  laid  down  in  the  decisions 
of  this  court  already  referred  to,  that  upon  its  face  this  is  prima  facie 
the  indorsement  of  defendant  individually,  but  that  extrinsic  evidence 
is  admissible  to  show  that  he  made  the  indorsement  only  in  his  official 
capacity  as  the  indorsement  of  the  corporation. 


'y--^ 


Order  reversed.* 


§  39       McKEEHAN,  The  Negotiable  Instruments  Law. 
[41  Am.  Law  Reg.,  N.  S.,  pp.  462-465.1 

Professor  Ames  criticises  this  section  [N.  Y.,  §  39]  as  follows: 
"  Section  20  provides  that  a  person  who  purports  to  sign  an  instru- 
ment in  behalf  of  a  named  principal  is  not  liable  on  the  instrument, 
if  he  was  duly  authorized  by  tlie  principal.  By  necessary  implication 
he  is  liable  on  the  instrument  if  not  duly  authorized.''  This  is  a 
departure  from  the  English  act  and  from  the  almost  uniform  current 
of  judicial  decisions.  This  new  rule  involves  a  flat  contradiction  of 
the  instrument,  and  the  fiction  works  not  justice,  hut  injustice." 

The  section  is  copied  from  Article  95  of  the  German  Exchange  Law, 
and  undoubtedly  is  a  departure  from  the  English  act,  under  which  the 
pretended  agent  is  liable,  not  on  the  instrument,  but  for  the  damage 
resulting  from  the  breach  of  his  implied  warranty  of  authority  to 
sign  for  the  principal.     Mr.  Crawford's  original  draft  embodied  the 

•  There  is  a  clear  distinction  between  makers,  drawers,  and  ncp(>ptnrs.  nn  the 
one  hand,  and  indor.sers  on  the  other.  An  indorsement  beinp  necessary  to 
transfer  title  a  payee  designated  as  "A.  B.  agent  "  may  indorse  in  that  form 
without  becoming  liable  as  indor'-er.  HufTcut  on  Agency,  §  KM;  liahrock-  v. 
Beman,  1  E.  D.  Smith  (N.  Y. )  59.3;  Voter  v.  Leiris.  36  Ind.  288;  First  Nat. 
Bk.  V.  nail,  44  N.  Y.  395;  Falk  v.  Moebs,  127  U.  S.  597.  See  especially  the 
statement  in  Collins  v.  Buckrye,  etc.,  Co.,  17  Oh.  St.  215.  The  rule  is  especially 
liberal  in  favor  of  cashiers  who  indorse  instruments  drawn  to  their  order,  as, 
"  pay  to  the  order  of  A.  B.  cashier."  Bank  of  C.enesee  v.  I'atchin  Bank,  19 
N.  Y.  312;  Folger  v.  Chase,  18  Pick.  (Mass.)  63.  Neg.  Inst.  L.,  §  72,  jwst, 
which  extends  the  liberal  rule  to  a  "  cashier,  or  other  fiscal  officer  of  a  bank 
or  corporation."  —  H.  [See  -Johnson  v.  Buffalo  Center  St.  Bk.,  134  Io\v;i,  731, 
post.  —  C.l 

T  "  Mr.  Crawford  so  interprets  the  section.     Crawford's  An.  N.  I.   L.  26." 


AMBIGUOUS  SIGNATURES.  •  217 


English  rule,'  but  the  commissioners  changed  it  and  adopted  the 
fici]man  rule  deliberately  and  after  mature  consideration.  It  is 
scaiy-ely  true  that  in  doing  so  they  departed  from  "  the  almost  uniform 
current  of  judicial  decisions."  There  is  a  strong  conflict  of  authority 
on  the  point,  some  states  holding  the  pretended  agent  liable  on  the 
instrument  itself,  while  a  soniowhat  larger  number  hold  him  liable 
onjj^jfor  the  damage  resultinii  from  the  breacfi  of  his  implied  warranty 
ofauthority.®  The  latter  decisions  scorn  correct  on  theory.  As  was 
said  in  Hall  v.  CravdaU.  if  the  instrument  contains  language  which 
does  not  in  legal  effect  charge  the  pretended  agent,  "or,  in  other 
words,  contains  language  which,  in  legal  effect,  binds  the  principal 
only,  the  agent  cannot  be  sued  on  the  instrument  itself,  for  the 
obvious  reason  that  the  contract  is  not  his."  He  has  falsely  repre- 
sented that  he  had  authority  to  bind  another,  but  he  has  not  in- 
tended or  attempted  to  bind  himself,  and  courts  which  hold  him 
liable  on  the  contract  itself  "treat  all  matter  which  the  contract  con- 
tains in  relation  to  the  principal  as  surplusage,  which  is,  in  effect,  to 
make  a  new  contract  for  the  parties  concerned  instead  of  construing  the 
one  which  they  made  for  themselves."' 

Judge  Brewster's  answer  is :  "  One  signing  a  note  as  agent  for 
another  should  know  and  he  able  to  show  his  authority.  Tf  he  signs 
without  authority,  he  alone  in  fact,  and  so  in  law,  is  the  maker  of  the 
note,  and  ho  should  he  hold  liable  accordinglv."  This  view,  thouirh 
perhaps  difficriH  to  justify  on  the  principles  of  contract,  is  supported 
by  weighty  authority.^  and  important  practical  advantages.     The  rule 


"Crawford.  An.  N.  I.  L.  26. 

•In  tho  following  .statns  the  pretended  agent  appears  to  be  liold  liable  on 
the  contract  itself:  Ormshy  v.  Knidnll,  2  Ark.  .338  (but  see  Dnlr  v.  DotwJdson, 
4«  Ark.  190);  ffirhip  v.  Rn.<<<>.  15  T,a.  Ann.  fifiS;  TrruUHfjrr  v.  Murphxi,  104 
Ind.  32;  Keener  v.  Harrod,  2  Md.  63;  Byaa  v.  Doorea,  20  Mo.  284:  Wrare  v. 
fiove,  44  N.  H.  190;   Clarke  v.  l-'oalrr,  8  Vt.  98. 

In  the  following  states,  the  pretended  agent  is  held  liable  not  on  the  con- 
tract itself,  but  for  the  damage  resulting  from  the  breach  of  his  implied  war- 
ranty of  authority:  Hall  v.  Crntutnll,  29  Cal.  .567:  -fohv/ion  v.  Smith.  21  Conn. 
627;  Duncan  v.  Mlrft,  32  111.  532  (but  see  Frankland  v.  .lohnson,  147  111.  520)  ; 
fiartlett  v.  Tucker,  104  Mass.  330;  \oyrs  v.  Lorimj,  55  Me.  408;  Hfuffirld  v. 
Lnrlue,  16  Minn.  388;  White  v.  Mnilisnn.  20  N.  Y.  117;  Ttrysnn  v.  I. urns,  84 
N.  C.  680;   Hopkins  v.  Mehnffy.  11   S.  *,  R.    (Pa.)    126. 

1  Hall  V.  (Jrandall,  supra.  Referring  to  the  cases  whieli  hold  the  pretended 
agent  liable  on  the  instrument,  Walton,  J.,  said  in  Anycs  v.  Lorintj,  55  Me. 
408:  "The  inconsistency  r)f  such  a  doctrine,  to  jise  no  strong<T  term,  will  bo 
apparent  by  supposing  that  instead  of  a  promise  to  pay  money  the  protended 
agent  had  signerl  a  i>romise  that  his  principal  should  marry  the  plaintifT 
within  a  given  time,  or  do  some  other  act  which  it  was  perfectly  c(unpct,cnt  for 
the  principal  to  [lerforni,  but  which  the  agent  could  not.  What  wouM  be 
thought  of  a  declaration  eharging  the  pretended  agent  as  a  principal  in  such 
a  case?  " 

"To  the  decisions  referred  to  above,  and  the  very  high  authority  of  the 
German  Code,  there   may   be  added   the  opinion   of   Mr,   Arthur   Cohen,  Q.  C. 


218  INTERPRETATION.  [arT.    II. 

Will  tend  io  iiicri'Mso  lu^t^olialiilit v,  l>v  assuring  tlic  holder  that  if  the 
pretended  principal  taiuii't  lu'  iraclicd  Imm  auso  of  a  lack  of  authority 
in  the  agent,  a  rordvery  may  In-  liail  (»!i  I'lc  insli-iunent  itvSelf  against 
the  agent.  Then  there  is  (he  additional  advantage  —  whieh  on  reflec- 
tion will  ap))ear  to  he  of  great  importance  —  that  the  liahility  of  the 
agent  can  he  easily  jiroved  and  the  amount  to  he  recovered  ascertained 
hy  a  mere  inspection  of  the  instrument,  whereas  if  the  only  recovery 
were  for  damages  resulting  from  a  breach  of  warranty,  a  complicated 
set  of  disputed  facts  would  often  go  to  the  jury,  from  which  it  would 
be  dirticult  even  to  approximate  the  damage,  "^rhe  case  which  Professor 
Ames  supposes,  as  proving  the  injustice  of  section  20  may  serve  as  an 
illustration  of  this.  He  says,  "  For  example,  A.,  mistakenly  believing 
that  he  is  duly  authorized,  signs  a  note,  'A.,  agent  for  B.,'  and  de- 
livers it  to  v.,  the  payee.  At  maturity  B.  repudiates  the  note.  He  is, 
however,  at  that  time  a  bankrupt.  A.  is  rightfully  chargeable  to  C.  on 
his  implied  warranty  of  autliority,  but  only  to  the  amount  that  C. 
might  have  recovered  from  B.,  if  he  had  authorized  the  note.  But 
under  section  20  A.  is  liable  to  C.  for  the  face  of  the  note."  But,  as 
Mr.  Cohen  points  out,  "  It  would  be  doubtful  what  could  he  recovered 
until  the  dividend  was  declared  and  the  bankruptcy  concluded ;  and  in 
the  case  of  the  principal  not  heing  hankrupt,  hut  being  a  man  in  bad 
credit,  the  question  would  have  to  be  left  to  a  jury  what  amount  could 
probably  be  recovered  from  the  principal.  It  may  wtH  he  held  that 
in  actions  on  negotiable  instruments  against  a  person  who  professedly 
acts  on  behalf  of  another  person.  A.,  it  would  be  inconvenient  to  allow 
the  former  to  attempt  to  prove  that  probably  the  whole  amount  could 
not  be  recovered  from  A." 

So  the  case  stands  about  as  follows:  The  rule  discarded  by  the 
Commissioners  works  out  the  rights  of  the  parties  strictly  on  the  rules 
of  contract,  and  the  balance  of  authority  is  in  its  favor.  Under  it, 
however,  a  plaintiff  may  encounter  considerable  difficulty  and  uncer- 
tainty in  proving  his  case.  The  rule  they  have  embodied  in  the  act  — 
while  perhaps  less  clear  on  theory  —  is  supported  by  the  authority  of 
several  states,  by  the  German  Code,  by  some  of  the  best  expert  opinion 
of  England,  and   (besides  tending  to  increase  negotiability)   enables 


(one  of  thp  framers  of  the  English  art,  and  admittedly  one  of  the  leading 
experts  in  England  on  this  subject),  who  regards  section  20  as  an  improvement 
on  the  English  act.  He  says:  "This  section  certainly  alters  the  law  as  it 
exists  in  England,  but  T  think  it  very  likely  that  the  alteration  is  an  improve- 
ment. The  wisdom  of  the  rule  laid  down  in  Cohen  v.  Wright  has  often  been 
doubted.  ...  I  think  the  20th  section  should  be  retained,  and  may  be 
considered  as  a  practical  improvement  of  the  law,  unless  there  be  reason  to 
suppose  that  merchants  and  bankers  think  it  unjust.  I  agree  with  Mr. 
Brewster  that  much  indulgence  should  not  be  shown  in  business  to  a  person 
who  professes  to  have  authority  when  he  is  really  acting  without  authority." 
Letter  from  Mr.  Cohen  to  Judge  Brewster,  written  March  31,  1901. 


AMBIGUOUS  filGNATUKES.  *  21§ 

a  plaintiff  to  know  and  prove,  with  ease  and  certainty,  the  amount  to 

be  recovered.    Of  course,  under  such  circumstances,  individual  opinion 
will  differ  somewhat  as  to  which  rule  should  have  been  chosen.^ 


§40  Stagg  v.  Elliott,  12  Common  Bench,  N.  S.  373.  —  1862. 
Bill  accepted  "  per  pro.  William  Elliott,  George  Elliott."  George 
was  the  son  of  the  defendant,  William,  and  manager  of  his  business. 
Bylp:s,  J.  — The  words  "  per  procuration  "  are  an  express  statement 
that  the  party  accepting  the  bill  has  only  a  special  and  limited  au- 
tliority,  and  therefore  a  person  who  takes  a  bill  so  accepted  is  bound 
at  his  peril  to  enquire  into  the  extent  and  nature  of  the  agent's 
authority.  It  is  not  enough  to  show  that  other  bills  similarly  accepted 
or  endorsed  have  been  paid,  although  such  evidence,  if  the  accept- 
ance were  general  by  an  agent  in  the  name  of  a  principal,  would  be 
evidence  of  a  general  authority  to  accept  in  the  name  of  the  principal. 
*  *  *  The  result  of  the  decisions  seems  to  be  this,  that  the  way 
in  which  this  bill  was  accepted  is  the  legitimate  way  of  showing  the 
fact  that  the  acceptor  has  only  a  special  and  limited  authority.  Fur- 
ther, it  is  to  be  observed,  that  this  rule  depends  upon  the  law  merchant, 
which  extends  over  Europe  and  America;  and  this  is  the  way  in  which 
it  is  understood  all  over  the  world. 


§  40  The  Floyd  Acceptances,  7  Wallace  (U.  S.),  fi66.  —  1868. 
Mr.  Justice  Millkk.  —  An  individual  may,  instead  of  signing,  with 
his  own  hand,  the  notes  and  bills  which  he  issues  or  accepts,  appoint 
an  agent  to  do  these  things  for  him.  And  this  appointment  may  be  a 
general  power  to  draw  or  accept  in  all  cases  as  fully  as  the  principal 
could;  or  it  may  be  a  limited  authority  to  draw  or  accept  under  given 
circumstances,  dcfijicd  in  the  instriiriicnt  which  confers  the  power. 
Hut,  in  ('acli  case,  the  person  dealing  with  the  agent,  knowing  that  he 
acts  only  by  virtue  of  a  delegated  power,  must,  at  his  peril,  see  that 
the  papor  on  which  he  relies  comes  within  the  power  under  which  the 
npcui  acts.  And  this  applies  to  every  person  who  takes  the  paper 
aftfTwards;  for  it  is  to  be  kept  in  mind  that  the  protcftion  which 
conuiifnial  usage  throws  around  negotiable  paper,  cannot  he  used 
to  establish  the  authority  by  which  it  was  originally  issued.  These 
principles  are  well  estal)IiR}ied  in  regard  to  the  transaction  of  indi- 
viduals. Thoy  are  efpially  ay)pli<';il>lc  to  those  of  the  government. 
Whenever  nr'gotiahle  paper  is  found  in  the  rnnrket  piirporfinL'  to  hind 

•  f^e  alflo  articlp  in  10  I>aw  Noten,  104.  entitlpd  "  Liability  of  an  a^^ent  under 
the  NcpotiaMo  TnstriimentH  T>aw,"  and  rritirism  of  this  article  in  20  TIarv. 
Law  Rov.   160. —  C. 


220  INTERPRETA'I  ION.  [aRT.    II. 

the  government,  it  must  necessarily  be  by  the  signature  of  an  officer 
of  the  government,  nnd  the  puiclinsiM-  of  sucli  paper,  whether  tlie  first 
liohior  or  another,  must,  at  his  peril,  see  that  the  oflfieer  had  authority 
to  hind  the  government. 


§  40  Nixon  v.  Fai-mku,  S  New  York,  398.  —  1853.  Bill  accepted 
"Jeremiah  G.  PalnuM-,  l»y  James  L.  Palmer."  Defense,  want  of 
autiiority.  Mason,  J.  —  "  The  bill  being  on  its  face  accepted  by  James 
L.  Palmer  for  the  defendant,  was  notice  that  he  professed  to  act  under 
an  authority,  and  imposed  upon  the  plaintiffs  the  duty  of  ascertaining 
that  he  acted  within  it." 

Xn.  Indorsement  by  infant  or  corporation. 


§41  FEAZIER  .1'.  MASSEY.   r 

-"■"  14  INDIAN^^,  382. —  I860. 

WoRDEN,  J.  —  Action  by  Massey  against  the  appellants  upon  a 
promissory  note  made  by  the  latter  to  William  T.  Hess,  and  by  Hess 
indorsed  to  the  plaintiff. 

AnsAver  that  said  William  T.  Hess,  the  payee  of  the  note,  was,  at 
the  time  he  indorsed  it  to  the  plaintiff,  a  minor  under  the  age  of 
twenty-one  years ;  wherefore,  etc. 

To  this  answer  a  demurrer  was  sustained,  and  the  plaintiff  had 
judgment. 

The  ruling  on  the  demurrer  raises  the  only  question  involved  in 
the  case. 

W^e  think  it  clear  that  the  demurrer  was  correctly  sustained  to  the 
answer.  The  disability  of  an  infant  to  make  a  valid,  binding  con- 
tract, is  a  personal  privilege  intended  for  the  benefit  of  the  iiifai)l 
himself,  and  none  but  he,  or  his  representatives,  can  take  advantauv 
of  such  disability.  (I  Pars.  Cont.  275.)  Besides  this,  the  defeiidant  , 
by  making  the  note  to  Hess,  asserted  to  the  Avorld  his  competency  to 
negotiate  and  assign  the  paper,  and  they  cannot  be  permitted  to  gair. 
say  the  assertion  so  made.*  (Edw.  on  Bills,  p.  250;  Story  on  Prom. 
Notes,  §  80,  5th  ed.) 

Per  Curiam.  —  The  judgment  is  aflfirmed  with  6  per  cent,  damages 
and  costs. 

<  Spp  ypp.  Inst.  L.,  5  110.  A  pocnnd  indor.sor  cannot  deny  the  competency 
of  tho  first  indorser.     Prescott  Bank  v.  Caverly,  7  Gray  (Masa. )  271.  —  H. 


JJllS^y^^       ^~~\,^  FORGED  SIGNATURES.  ,  221 


WILLARD  V.  CROOK. 
21  Appeal  Cases   (Dist.  of  Col.)  237.  —  1903. 

Appeal  by  plaintiff  from  an  order  of  the  Supreme  Court  overruling 
his  motion  for  judgment  against  the  defendants  for  want  of  sufficient 
affidavits  of  defense,  in  an  action  on  a  promissory  note  against  the 
maker  and  several  indorsers. 

The  affidavit  of  defense  of  the  last  indorser  was  that  the  preceding 
indorser,  a  corporation,  had  indorsed  the  note  solely  for  accommoda- 
tion. 

Mr.  Justice  Shepard  delivered  the  opinion  of  the  court: 
*********** 

The  defense  of  Walter  P.  Wilkins,  the  last  indorser  of  the  note,  is 
equally  without  merit.  Whether  the  preceding  indorser,  Wilkins  & 
Company,  incorporated,  had  the  power  to  make  an  accommodation 
indorsement  merely  is  a  question  of  no  importance  so  far  as  his  lia- 
bility under  the  subsequent  indorsement  is  concerned.  If  it  were 
conceded  that  the  corporation's  indorsement  of  the  paper  was  beyond 
its  powers,  and  it  incurred  no  liability  thereby,  its  effect  was,  never- 
theless, to  pass  the  property  therein.  Code,  D.  C,  §  IBge."*  And  the 
subsequent  indorsement  by  Wilkins  to  Willard  was  a  warranty  of  the 
genuinffness  oT  nie^paper,  of  his  own  fitle  thereto,  and  of  the  capacity 
of  all  the  preceding  parties  to  contract.   Idem,  §§  VM^^,  1.370.*    *    *    * 

For  the  reasons  given,  the  order  will  be  reversed  with  costs,  and  the 
cause  remanded  for  further  proceedings  in  conformity  with  this  opin- 
ion.   It  is  60  ordered.^ 


Xm.  Forged  signatures. 

§42  LANCASTER  v.   RALTZELL. 

7  OiLL  &  .ToHNsoN   (Ml).)  4fi8.  —  183r>. 

Action    by    indorsee    asiainst     maker.       Jiidgriionf     for    plaintiff. 
Defendant  afipcals.     Tlic  fn.'fs  appcnr  in  flic  (.jiinioii. 


ftN.  v.,  §41.  —  C. 

"N.  v.,  §§  11,5,  llfi.  —  C. 

7  In  firoum  v.  Donnrll,  49  Me.  421.  tho  court  l.fl.I  that  in  an  actit.n  l.y  the 
indorMPP  of  a  noto  ajrainst  the  maker,  the  plaintiff  is  only  re(|uire(l  to  prove  nn 
indorsement  snffieient  to  pass  the  pr<.jierty  in  the  note."  The  anthority  to  be 
proved  i«  not  one  to  hind  the  corporation  by  ft  eontraet  of  in.lorseni.-nt,  hut 
HJmply  an  authority  to  transfer  the  property  of  the  company.  .  .  .  Ff  the 
indorsement  is  sufricient  to  pass  the  property,  so  as  to  protect  the  maker  in 
paying  the  note,  that  in  all  that  is  necessary  to  render  him  liable  to  the 
indofgpe."     P.  42.5. 

See  also  Oppmhrim    v.   Simnn    Rriqrl  Ciqnr  f'n..   00   N.   Y.    Supp.   3.'i.''i,   po.it, 

P-  ••    "'>■»'•'•  V.    Hf,,ik   of   nhilhrvillr,   89    Ark.   43.'5,  and   cases,  post   Under 

Neg.  Inst.  Law,  §§  1 10-112,  116,  116.  — C. 


322  INTERPRETATION.  [ART.    II. 

Hi'CMANAN,  Cii.  J.,  dolivorcd  tlie  opinion  of  the  court.  A  bill  or 
nott'  payable  to  order  can  only  be  transferred  by  indorsement;  and 
as  an  action  a<jainst  the  acccph>r  or  drawer  can  only  be  sustained  by 
one  who  has  le^al  title,  which  cannot  he  derived  through  the  medium 
of  forfi:ery,  it  is  inciiinhent  on  the  plaintilT  in  such  an  action  to  show 
his  interest  in  the  bill  or  note,  which  must  be  done  by  proving  that  it 
was  indorsed  by  the  person  to  whom,  or  to  whose  order,  it  is  made 
pavalrTe  —  " 

'lliis  is  an  action  by  the  second  indorsee  against  the  maker  of  a 
promissory  note,  payable  to  the  payee  or  order,  which  was  resisted 
at  the  trial  on  the  ground,  that  the  tirst  indorsement,  purporting  to 
be  by  the  payee  was  a  forgery,  of  which  proof  was  offered  by  the 
defendant.  On  the  part  of  the  plaintitfs,  it  was  proved,  that  the 
defendant  on  being  called  on  by  their  counsel,  after  the  indorsement 
to  them,  to  pay  the  note,  examined  it,  and  said  it  was  right,  and  he 
would  settle  it  with  them.  Upon  which  the  court  instructed  tlie  jury 
that  if  they  believed  the  defendant,  when  the  note  was  presented  to 
him  by  the  counsel  of  the  plaintiffs,  had  examined  the  indorsements 
and  said  it  was  right,  the  plaintiffs  were  entitled  to  recover,  although 
they  might  believe  the  indorsement  of  the  payee's  name  had  been 
forged,  and  notwithstanding  that  acknowledgment  had  been  made, 
after  the  transfer  of  the  note  by  these  indorsements  to  them ;  on  an 
exception  to  which  instruction  the  case  is  brought  up. 

Apart  from  the  alleged  conversation  between  the  defendant  and 
the  counsel  ^f  the  plaintiffs,  it  is  very  clear  that  the  plaintiffs  are  not 
entitled  to  recover,  if  the  first  indorsement  in  the  name  of  the  payee 
of  the  note  was  forged ;  as  the  title  was  not  and  could  not  thereby  be 
transferred",  but  continued  in  the  payee,  who  on  obtaining  possession 
of  the  note,  might  sue  upon  it,  and  recover  against  the  maker,  not- 
withstanding he  should  have  paid  it  to  him,  into  whose  hands  it  came, 
through  the  medium  of  forgery ;  for  besides  that  in  such  case  the 
payee  has  not  parted  w^ith  his  title,  the  payee  of  a  note  whose  name  is 
forged  knows  nothing  of  it,  and  the  maker  before  he  pays  it  to  the 
holder  as  indorsee  should  look  carefully  to  the  indorsements.  And 
if  one  is  to  suffer,  the  loss  should  fall  on  him  who  is  most  in  fault,  or 
most  negligent. 

The  only  question  then,  in  this  case  is,  whether,  if  after  the  indorse- 
ments had  been  made,  the  defendant,  on  the  note  being  presented  to 
him  by  the  counsel  of  the  plaintiffs,  examined  the  indorsements  and 
said  it  was  right,  that  makes  any  difference.  And  we  think  it  does 
not.  By  saying  so,  he  gave  no  credit  to  the  note;  and  did  not  thereby 
induce  the  plaintiffs  to  take  it.  That  had  been  done  before,  and  not  on 
the  faith  of  what  he  said.  The  plaintiffs  might  before  they  took  the 
note  have  inquired  whether  the  first  indorsement  was  by  the  payee  or 
not,  and  not  having  done  so,  they  must  abide  by  the  consequence  and 
cannot  throw  the  loss  upon  the  defendant,  who  had  done  nothing  to 


XIII.]  FORGED  SIGNATURES.  »  223 

n^islead  them  or  induce  them  to  take  the  note;  and  who  if  made  to 
pkj  the  amount  in  this  action,  may  be  made  to  pay  it  over  again 
by  the  payee,  whose  right  remains  unimpaired. 

ItiS^not  like  tlie  case  of  a  drawee  of  a  bill,  who  if  on  being  asked 
ifjhe  acceptance  is  in  his  handwriting,  says  that  it  is  and  that  it 
will  be  duly  paid-  cannot  afterwards  set  up  as  a  defense  the  forgery 
of  his  name :  Ihcium'  by  saying  so  he  has  accredited  the  bill  and 
induced  another  to  takt'  it,  wliich  being  his  own  fault  the  loss  ought 
to  fall  on  him,  and  not  on  another,  who  has  been  induced  to  take 
the  bill  on  the  faith  of  his  assurance.' 


^  Judgment  reversed.* 


t 

§42  Wellington  v.  jAcisox,  121  Massachusetts,  157.— (1876). 
Gray,  C.  J. —  "  Although  the  signature  of  Edward  H.  Jackson  was 
forged,  yet  if,  knowing  all  the  circumstances  as  to  that  signature, 
and  intending  to  be  bound  by  it,  he  acknowledged  the  signature  and 
thus  assumed  the  note  as  his  own,  it  would  bind  him,  just  as  if  it  had 
been  originally  signed  by  his  authority,  even  if  it  did  not  amount  to 
an  estoppel  in  pais.  (Greenfield  Bank  v.  Crafts,  4  Allen,  447; 
Bartlett  v.  Tucher,  104  Mass.  336,  341.)  "  ^ 


«  Nor  like  the  case  of  a  drawee  who  accepts  or  pays  a  bill  upon  which  the 
drawer's  name  is  forped.  See  National  Park  Bk.  v.  Ninth  Nat.  Bk..  46  N.  Y. 
77. —  H.  fSee  First  Nat.  Bank  v.  Bank  of  Wyytdmere,  15  N.  D.  299,  post,  and 
State  Bank  of  Chicago  v.  First  Nat.  Bank  of  Omaha,  127  N.  W.  (Neb.)  244, 
poat.  —  C] 

»  Money  paid  to  a  holder  deriving  title  through  a  forped  indorsement  may  be 
recovered  back,  f'hnmhrrs  v.  Union  Bank,  78  Pa.  St.  205;  Fspy  v.  Cincinnati 
Bank.  18  Wall.  ( T.  S. )  604;  Holt  v.  Ross,  54  N.  Y.  472;  Green  v.  Purcell  N.  B. 
(Ind.  Ter. ).  37  S.  W.  Rep.  50.  Contra:  London,  etc..  Bank  v.  Bank  of  Liver- 
pool (1896),  1   Q.  R.  D.  7.  — H. 

fin  Fir.it  Nat.  Bk.  v.  Hhaw,  149  Mich.  362.  it  was  held  that  makers  who 
actually  sipned  a  joint  and  several  note  purportinp  at  the  time  of  its  delivery 
to  have  been  sipned  by  twenty  persons  and  biarinp  notliinp  on  its  face  to  cast 
doubt  upon  any  of  the  sipnatures,  cannot  escape  liability  to  a  bona  f\dr  holder 
upon  the  pround  that  the  names  of  stmie  of  the  purported  makers  were  forped 
before  the  note  was  executed  and  delivered.  See  this  case  reported  with  notes 
in  13  L.  N.  S.  426.  and   12  A.  &  E.  .Ann.  (as.  437. —  C.l 

1  Accord:  Houard  v.  Duncan.  3  T^ansinp  \.  Y.)  174;  TJcfncr  v.  Vnndnlnh. 
62  III.  483.  Hut  non-repudiation  is  not  conclusive  evidence  of  ratification. 
Traders'  N.  B.  v.  Uofjrrs,  167  Mass.  315.  Contra:  Brook  v.  Hook,  L.  H.  6  Ex. 
89;  Workman  v.  Wrif/ht.  33  Oh.  St.  405;  llrnry  v.  Herb,  114  Ind.  275;  Ifctiry 
Chrintinn,  etc.,  Assorinlion  v.  lla/Zorj.  181  Pa.  St.  201;  Owslry  v  Philips  78 
Ky.  517. 

While  there  is  a  sharp  conflict  of  authority  as  to  the  po.ssibility  of  ratifyinp 
a  forpery,  all  of  the  cases  aprec  that  one  may  by  his  admission!-,  or  conduct 
estop  himself  from  rienyinp  the  penuineness  of  his  sipnature  as  apainst  one 
who  has  chanped  his  l<-pal  position  relyinp  on  such  admissions,  representations, 
or  conduct.  HufTcut  on  Agency,  §  -f  3 ;  pases  supra;  Lancaster  v.  Baltzcll,  ante, 
p.  221.  — H. 


224  INTEKPRETATION,  [AUT.    11. 

§42  WAR1?EN  V.  SMITH. 

100  Tacific  Kia-OKTEB  (Utah)    1069.  —  1909. 

The  ISouthern  Pacific  Company  in  March,  1!)()1,  delivered  to  plaint- 
itr,  for  services  rendered,  its  pay  check  payable  to  his  order,  and  drawn 
on  the  treasurer  of  the  Southern  Pacific  Company.  This  action  is  to 
recover  I'roni  liel'emUint  the  money  whit-h  he  collected  on  said  che(;k. 
Judgment  for  defendant  and  plaintilf  ap])eals. 

Stkaup,  C.  J.  *  *  *  The  court  found  the  facts  as  follows: 
That  the  check  was  delivered  to  the  plaintiit  on  March  23d  [1904]  at 
Montello;  that  it  was  stolen  from  him  on  March  3r)th ;  that  the  plaintiff 
had  not  indorsed  the  check,  nor  had  lie  authorized  anybody  to  do  so; 
that  the  plaintiff  had  received  no  part  of  the  money  evidenced  by  it; 
that  the  defendaftt  "became  indorsee  and  indorser  of  said  check  on  or 
about  the  1st  day  of  April,  ino  1,  at  Odgen  City,  Utah ;  that  said  check, 
indorsed  with  tlie  name  of  the  payee,  was  transferred  and  delivered  to 
said  defendant  on  or  al)out  April  1,  1!)0},  by  the  holder,  without  any 
notice  of  any  infirmity,  and  on  the  same  day  the  said  defendant  in- 
dorsed the  said  check  to  the  Commercial  National  Bank  of  Ogden,  who 
thereupon  indorsed  it  to  the  Bank  of  California,  at  San  Francisco,  Cal., 
which  said  last-named  bank  on  April  4,  1004,  presented  said  check  to 
the  drawee,  wiio  paid  it  and  took  possession  of  it,  and  thereafter,  to 
wit,  in  the  spring  of  }90h,  returned  it  to  the  plaintiff  herein,  who 
thereupon  learned  for  the  first  time  that  it  had  been  paid  by  the  drawee, 
and  who  inmiediately  intrusted  an  agent  of  the  said  Southern  Pacific 
Company  with  the  collection  thereof;  that  the  plaintiff  failed  to  pre- 
sent the  check  to  the  Southern  Pacific"*Comp»ny  for  paymCTrT,  and 
failed  -to  demand  payment  of  it  or  from  any  indorser  thereon  ;—that 
neither  the  defendant  nor  any  subsequent  indorser  thereon  had  knowl- 
edge or  notice  of  any  defect  in  the  check  for  more  tlum  one  year  and 
geven  months  after  the  check  had  been  cashed  by  the  defendant.  As 
conchisions  of  law  the  court  found  that  the  plaintiff  delayed  an  un- 
reasonable time  and  was  negligent  in  failing  to  notify  the  defendant 
of  the  forged  indorsement,  and  that  the  plaintiff  was  not  entitled  to 
recover.  Judgment  was  accordingly  entered  for  flic  defendant,  from 
which  the  plaintiff  has  appealed. 

He  contends  that  the  court  erred  in  its  findings  and  conclusions  and 
in  entering  judgment  for  the  defendant  upon  the  facts  found.  We 
think  the  -judgmpnt  is  wrong.  Tt  is  contrary  to  the  findings  and  to  the 
evidence.  Tt  is  shown  beyond  dispute  that  the  check  is  payable  to  the 
order  of  the  plaintiff,  that  it  was  stolen  from  him,  and  that  the  indorse- 
ment of  his  name  thereon  was  a  forgery.  The  court  so  found.  Under 
those  conditions  the  check  came  into  the  TTands  of  the  defendant,  who 
admitted  in  bis  answer  that  he  "collected  thereon  the  sum  of  i^(VA.20" 
the  amount  of  the  check.     While  the  findings  show  that  the  check  was 


XIII.]  FORGED  SIGNATURES.  225 

delivered  to  the  defendant,  without  noticfi.Qf  anv  infim^ity,  yai  thfire  is 

_no  evideifce  to  support  it,^and  neither  the  evidence  nor  the  findings 
show  tliat  lie  paid  a  valuable  consideration  for  the  check.  The  law 
generally  is  to  the  effect  that,  "  although  the  robber  or  finder  of  a  nego- 
tiable instrument  can  acquire  no  title  against  the  real  owner,  still  if  it 
^  indorsed  in  blank,  or  payable  or  indorsed  to  bearer,  a  third  party, 
acquiring  it  from  a  robber  or  finder  bona  fide  for  a  valuable  considera-i 
tion^  anxl  before  maturity  without  notice  of  the  loss,  may  retain  it/ 
UL'^ainst  the  true  owner.  *  *  *  But  under  a  forged  indorsemenii 
even  a  bona  fide  holder  without  notice  acquires  no  title."  Daniels  oil 
Neg.  Insts.  (5th  ed.),  §  1469.  Where  the  negotiable  instruments  are 
stolen,  the  owner  may  pursue  them  and  the  proceeds  of  them,  until 
they  reach  the  hands  of  a  bona  fide  holder  for  value  before  maturity. 
In  like  manner  an  action  of  trover  lies  without  previous  demand  and 
refusal  against  one  who  possesses  himself  improperly  of  the  bill  stolen 
from  the  plaintiff,  or  against  one  who  receives  payment  even  in  good 
faith  of  such  stolen  bill  under  a  forged  indorsement.  3  Randolph, 
Comm.  Paper  (2d  ed.),  §§  1682,  1683.  Furthermore,  though  proof 
had  been  made  that  the  defendant  purchased  the  check  for  value  and 
without  notice  in  due  course,  still,  as  shown  hy  the  authorities  above 
cited,  he  acquired  no  right  or  title  under  the  forged  indorsement  of  the 
plaintiff's  name.  The  general  rules  applicable  to  bona  fide  holders  for 
value  do  not  apply  in  such  a  case.  To  the  same  effect  also  is  our  stat- 
ute.   Section  157.5,2  Tomp.  Laws  1907. 

The  judgment  of  the  court  below  is  therefore  reversed,  and  the  cause 
remanded  for  a  new  trial.    Costs  to  appellant. 

Frick  and  McCarty,  JJ.,  concur.* 


§42    HOFFMAN  v.  AMERICAN  EXCHANGE  NATIONAL 

BANK.  V 

2  Nebraska  (Unofficiat,)  217.  —  1001. 

Hastings,  C.  The  question  in  this  case  is  whether  or  not  the 
defendant  bank  is  liable  to  plaintiff  for  the  amount  of  a  draft  to  his 
order,  procured  at  ElixabetJitown,  Pa_^nnf1  indorsed  to  the  order  of 
Peter "W.  Hruhaker,  and  sent  by  plaintiff  tf>  an  iniposter  at  Lincoln, 
Neb.,  who  claimed  to  be  Rrnbaker,  and  which  was  cashed  for  the 
iniposter  by  the  diiX^^Mhint  bank.  Thf  plaintiff  was  acting  as  disburs- 
ing agent  for  the  executo?7Tf-«n  estate,  from  which  one  Peter  W.  Bru- 
baker  was  entitled  to  receive  $264.15.     The  plaintiff  had  made  con- 

»  N.  Y..  5  42.  —  r. 

s  Rop  nrtiflf  in  19  Bpnrh  and  hnr.  (1.3,  entitled  "  ("onverHJon  of  cluckn  nt-goti- 
ated  on  forged  indorscnicrits."  —  ('. 
NEGOT.  IK8TR1TMKNT8  —  15 


226  INTKUI'KKTATION.  [aUT.    II. 

eidorablo  exertions  to  find  Brubaker  for  tlio  purpose  of  making  tliis 
paymont,  but  had  failed  to  do  so.  Plaintilf  had  nuide  to  Brul)Hker 
two  previous  payments  from  the  estate  —  one  paid  by  a  draft  sent  to 
Illinois  and  receipted  for  by  him,  and  one  payment  made  to  him  in 
person  at  Elizabethtown,  Pa.,  wIumv  phiinlill'  resides.  With  referenee 
to  this  third  and  final  paynu>nt  j)laintifniad  written  to  Omaha  and 
to  Illinois,  aTid  received  no  response.  lie  finally  rei-eived  a  letter  dated 
July  •.',  1S!)5,  saying:  "  Lincoln,  Nebr.,  July  2,'  1895.  Mr.  C.  S.  HolF- 
nian :  i  got  a  letter  from  my  brother  sade  you  wanted  my  address  it 
is  Peter  W.  Brubaker,  Lincoln^  Nebr."  To  this  plaintiff  replied  as 
follows:  "Elizabethtown,  July  5,  1895.  Mr.  Peter  W.  Brubaker: 
This  afternoon  I  received  your  letter.  I  have  been  writing  around  to 
the  different  places  where  you  were  before,  but  the  letters  eame  l^ack. 
You  will  take  the  release  before  a  notary  public,  sign  and  acknowledge 
and  have  some  person  to  sign  as  witness,  and  then  return  it  to  me, 
and  I  will  send  you  draft  for  your  share,  less  expenses.  Yours  truly, 
C.  S.  Hoffman." 

The  release  was  executed  evidently  to  plaintiff's  satisfaction,  for 
on  July  12th  he  sent  the  following  letter:  "  Elizabethtown,  July  12, 
1895.  Mr.  Peter  W.  Brubaker,  Tiincoln,  Neb.  Your  release  to  Jacob 
Risser  executor  of  the  will  of  Peter  Oberholtzer,  dec'd,  came  back  all 
right.  Inclosed  you  find  draft  No.  5774  for  $264.15,  which  with 
$1.75  for  the  expense  of  release  and  draft  is  in  full  of  your  share 
in  the  final  distribution  of  the  estate.  Please  let  me  hear  from  you 
when  you  get  this  so  that  I  know  that  all  is  right.  Yours  truly,  C.  S. 
Hoffnian."" 

The  draft  mentioned  was  cashed  by  the  defendant  bank;  the  recip- 
ient being  identified  as  Peter  W.  Brubaker  by  the  notary,  Walter  A, 
Leese,  of  Lincoln,  before  whom  the  release  had  been  executed,  and  in 
whose  care  the  final  letter  and  draft  were  sent  by  the  plaintiff.  The 
evidence,  however,  shows  conclusively  that  tiie  Peter  W.  Brubaker  who 
was  entitled  to  this  money  was  not  in  Lincoln  at  that  time,  but  in 
Indiana.  He  says  he  received  no  money.  Plaintiff  had  been  called 
upon  to  pay  it  again.  The  draft  cashed  by  the  defendant  bank  was 
never  indorsed  by  the  Peter  W.  Brubaker  who  was  entitled  to  a  share 
in  the  estate  of  which  Hoffman  was  disbursing  agent.  The  draft  was, 
by  the  defendant,  transmitted  to  a  New  York  correspondent,  and 
collected  through  it  from  the  drawer  at  Elizabethtown,  Pa.  It  was 
drawn  to  the  order  of  C  S.  Hoffman,  by  him  indorsed  payable  to  the 
order  of  Peter  W.  Brubaker.  The  District  Court  found  tliat  tlie  above 
facts  did  not  show  any  liability  on  the  part  of  the  defendant  bank,  and 
rendered  judgment  accordingly.  That  judgment  we  are  asked  to 
reverse,  as  not  being  sustained  by  the  evidence,  and  on  the  ground 
that  the  facts  shown  do  constitute  a  liability  against  the  defendant 
bank. 


XIII.]  FORGED  SIGNATURES.  227 

The  trial  court  found,  first,  that  the  plaintiff  intended  the  draft_ 
to  he  paid  to  tIieTiidividual~\vlio~received  the  itioiiey  from  defendant, 
and  thai^  defendant  ivas  ilbt  g^iilty  of  any  negligenee  in  paying  it; 
second,  that  the  defendant  w  as  led  and  indueed  to  pay  tlie  draft  by 
^cts  of  plaintitf,  and  plaintilfs  negligence  prompted  its  payment; 
an (^,  third,  that  tlie  plaintitf  was  not  the  real  party  in  interest,  and 
colild  not  maintain  the  action,  it  appearing  that  he  was  simply  the 
agent  of  Kisser,  the  executor  of  the  estate  from  which  the  money 
came. 

The  liability  of  defendant  is  asserted  on  the  grounds  set  forth  in 
section  4::^  of  the  Negotiable  Instruments  Act  of  New  York,  which 
has  been  enacted  in  etfect  in  fourteen  other  states,  and  is  claimed  to 
be  declaratory  of  the  common  law.  Said  section  12  reads  as  follows: 
"  Where  a  signature  is  forged  or  made  without  authority  of  the  peison 
whose  signature  it  purports  to  be,  it  is  wholly  inoperative,  and  no 
right  to  retain  the  instrument,  or  to  give  a  discharge  therefor,  or  to 
enforce  payment  thereof  against  any  party  thereto,  can  be  acquired 
through  or  under  such  signature,  unless  the  party  against  whom  it  is 
sought  to  enforce  sucL-riglvt  i*  preelnded  from  setting  up  the  foi;gery 
or  want  of  aulliurity." 

It  is  clainieil  that  this  signature  is  a  forgery,  and  the  defendant 
therefore  liable.  As  above  stated,  there  seems  to  be  no  doubt  that  the 
real  Peter  W.  Brubaker  who  was  among  the  heirs  of  this  estate  never 
indorsed  this  draft.  But  it  also  seems  clear  that  the  plaintiff  is  not 
entitled  to  set  up  this  claim.  A  recent  case  in  Rhode  Island  {Tohnan 
V.  American  National  Hank,  22  R.  I.  4G2)  seems  to  sustain  plaintiff's 
contention.  Its  syllabus  has  the  following:  "A  check  drawn  i)ayable 
to  the  order  of  A.  was  procured  by  representations  that  the  person 
to  whom  it  was  given  was  A.,  and  the  indorsement  of  the  latter  was 
forged  thereto,  and  it  was  paid  by  the  bank.  Held,  that  the  baidv  was 
liable  to  the  drawer  for  su(;h  sum,  botli  at  the  common  law  and  under 
the  statute."  Rhode  Island  has  adopted  the  statute  above  cited.  The 
weight  of  authority,  however,  seems  to  be  decidedly  in  favor  of  the 
doctrine  that  where  a  clutck  or  draft  is  drawn  or  indorsed  and  deliv- 
ered to  a  jtarty,  to  be  cashed  by  him  under  tlu!  name  in  which  it  is  made 
out  or  indorsed,  that  his  signatun;  l)y  way  of  iiidoisement  in  that  name 
is  valid  as  l)etwecn  an  innocent  holder  and  the  party  delivering  it  to 
him.  This  is  commonly  put  on  the  ground  lliat  the  payer  of  the 
draft  or  the  j)urchaser  of  it  is  sim})ly  carrying  out  innocently  the 
intention  of  the  maker  or  indorser.  Enqioria  Nat.  Hank  v.  Sholirdt, 
35  Kan.  .'U;0  ;  Meridian  Nal.  Bank  v.  Fird  Nat.  Hank,  7  Ind.  App. 
322;  Robertson  v.  Coleman,  Ml  Mass.  235;  Jjcry  v.  Hank  of  America, 
24  La.  Ann.  220;  Land,  Etc.,  Co.  v.  N.  W.  Hank.  100  Pa.  230.  It 
is  al.'fo  j)ln(ed  sometimes,  as  was  done  in  a  measure  in  this  instance, 
by  the  trial  court,  ori   the  ground  of  negligeiu-e  on   the  part  of  the 


228  INTKUl'UKTATION.  [aRT.    11. 

maker.     It  is  sometimes  lieUi  tlial  tlie  payee  is  a  fictitious  person,  and 
the  eheek  or  ilrat't  tliereloie  payable  to  bearer. 

It  is  suggested  in  defendant's  brief  that  the  exemption  from  liability 
is  more  properly  placed  on  the  ground  of  esto]i])e!,  or,  as  it  is  stated 
in  the  Negotiable  Instrument  Act,  that  the  party  is  "precluded  from 
setting  up  the  forgery  or  want  of  authority."  It  certainly  would  seem 
tiiat  in  this  case  wlien  Mr.  liott'man  was  satisfied  with  the  release  he 
got  and  mailed  the  draft  to  the  maker  of  that  release,  he  asserted  as 
definitely  as  a  man  could  his  desire  that  this  money  should  be  paid 
where  it  was  paid.  After  that  desire  had  been  acted  upon,  and  the 
false  Brubaker  has  received  the  money,  it  would  seem  too  late  for  the 
plaintitf  to  discover  his  mistake,  and  collect  the  money  back  from 
one  who  had  paid  it  out  to  the  individual  he  requested,  though  not 
the  one  he  thought  he  was  requesting  to  have  it  paid  to. 

It  is  recommended  that  the  judgment  of  the  district  court  be 
afiirmed. 

Day  and  Kirkpatrick,  CC,  concur. 

AflBrmed. 
On  Rehearing. 

Albert,  q*** 

The  plaintiff  insists  that  the  sole  question  in  this  case  is  whether 
the  indorsement  of  the  draft  by  the  imposter  was  a  forgery.  We  do 
not  believe  a  determination  of  that  question  will  dispose  of  this  case. 
That  the  indorsement  was  a  forgery  may  be  conceded  ;  but  it  does 
not  necessarily  follow  that  the  plaintiff  is  entitled  to  recover  in  this 
action.  We  think  the  majority  of  cases,  certainly  the  best-considered 
cases,  hold  that,  under  the  circumstances  shown  in  evidence  in  this 
case,  an  innocent  purchaser  is  protected  by  such  indorsement.  Meri- 
dian Nat.  Bank  v.  First  Nat.  Bank,  7  Ind.  App.  332 ;  Emporia  Nat. 
Bank  v.  Shotwell,  35  Kan.  360 ;  Kohn  v.  Watkins,  26  Kan.  691 ;  Land 
Title  &  Trust  Co.  v.  N.  W.  Nat.  Bank,  196  Pa.  230;  Robertson  v.  Cole- 
man, 141  Mass  235;  United  States  v.  Nat.  Exchange  Bank  (C.  C), 
45  Fed.  163;  Crippen,  Lawrence  &  Co.  v.  Am.  Nat.  Bank  of  Kansas 
City,  51  Mo.  App.  508;  Forbes  v.  Espy,  21  Ohio  St.  474. 

It  has  been  suggested  that  the  cases  just  cited  may  be  classified 
under  four  heads,  the  basis  of  such  classification  being  the  ground 
upon  which  the  courts  place  their  respective  decisions,  which  are  as 
follows:  First,  that  such  indorsement  effectuates  the  intention  of  the 
drawer;  second,  that  the  drawer  has  been  guilty  of  negligence;  third, 
that  the  drawer  is  to  be  treated  as  a  fictitious  7)erson ;  fourth,  estoppel. 
But  such  classification  is  unscientific,  and  is  based  on  the  language  of 
the  opinions,  rather  tlian  upon  any  principle  underlying  them.  A 
careful  analysis  of  the  cases  will  show,  we  think,  that  the  controlling 
principle  in  each  is  that  of  estoppel,  which,  to  our  minds,  is  peculiarly 
applicable  to  cases  of  this  character. 


-Till.]  FORGED  SIQ/ffATURES.  229 

The  plaintiff  had  money  which  belonged  to  Peter  "W.  Brubaker.     An 
imposter  assumed  the  name  of  Peter  W.  Brubaker,  and  claimed  the 
noney.      His    identity   was   a,  question   for   the   plaintiff.      Satisfied 
hat  he  was  dealing  with  the  real  Peter  W.   Brubaker^,  the- ^liiTrtiff 
inJor'sed^nd  delivered  tlie  draft  to  the  imposter.     Of  the  contractual 
)bligation  tlius  (  riati-i],  tlie  delivery  of  the  draft  was  an  essential  ele- 
ment, and   stamjit'd  the  impostor  as  the  person  to  whose  order  the 
plaintiff   intended    payment   to   be   made.      In   other   words,   by   the 
A^xwQvy  of  the  draft  to  the  imposter  the  plaintiff  held  him  out  to  the 
world  as  his  indorsee,  and  as  the  person  to  whose  order  he  had,  by 
his  indorsement,  directed  payment  to  be  made.     He  cannot  now  be 
heard  to  complain  that  the  defendant  acted  on  the  indicia  of  identity 
with  which  he  himself  had  clothed  the  imposter. 

The  plaintiff  relies  on  the  case  of  Rogers  v.  Ware,  2  Neb.  29,  wherein 
it  is  held  that,  "  if  a  draft  be  payable  to  some  person  known  at  the 
time  to  exist,  as  the  party  to  whose  order  it  was  to  be  paid,  the  genu- 
ine indorsement  of  such  payee  is  necessary  in  order  to  a  recovery 
thereon  by  an  indorsee,  even  though  he  have  no  interest  in  it  and 
the  drawer  knew  that  fact."  That  case  would  tell  in  favor  of  the 
plaintiff  only  on  the  theory  that,  when  he  indorsed  and  transmitted 
the  draft  to  the  imposter,  he  had  in  mind,  as  his  indorsee,  the  real 
Peter  W.  Brubaker.  But  that  theory  is  not  supported  by  the  facts. 
The  name  the  plaintiff  had  in  mind,  undoubtedly,  was  Peter  W.  Bru- 
baker; but  the  person  whom  he  had  singled  out  as  the  person  bearing 
that  name,  and  as  the  one  entitled  to  the  money  in  his  hands,  was  the 
imposter.  This  becomes  clear,  when  we  remember  tliat  he  insisted  on  a 
release  Ixjfore  transmitting  the  draft,  and  transmitted  it  on  receipt 
of  the  release.  The  person  he  had  in  mind  as  his  indorsee  was  the 
|)erson  who  executed  the  release,  which  was  the  imposter.  The  real 
Peter  W.  Brubaker,  under  the  circumstances,  was  not  entitled  to 
the  draft,  because  he  was  not  the  person  who  executed  the  release. 
His  indorsement  of  the  draft  would  have  been  a  forgery.     *     *     * 

It  is  recommended  that  the  conclusion  reached  in  the  former  ojiinion 
he  adhered  to,  and  that  the  judgment  of  the  District  Court  be  afiirmcd. 

Ames  and  Duffie,  f'C,  concur. 

Per  Curiam.  The  conclusion  reached  by  the  commissioners  is 
approved,  and,  it  appearing  that  the  adoption  of  the  recommendation 
made  will  result  in  a  rigid  decision  of  the  cause,  it  is  ordered  that 
the  ronclupion  reafhcd  in  the  formor  opinion  be  adhered  to,  and  the 
judgment  of  thf  Diptrict  Court  afflnufd. 

Atlirmed.* 


*  See  rritirism  of  this  casp  in  3  Tnl.  T-nw  Rpv.  HHO. 

Rop  fxhauHtivp  not,*-  to  l.aml  TitU-  nml  Truxt  f'n.  v.  N.  W.  Nnt.  Bk..  196  P«. 
230,  in  .^0  L.  R.  A.  75,  entitled  "  Check  or  hill  issued,  or  indorsed,  to  imposter 
—  who  must  bear  loss,"  continued  in  note  to  Harmon  v.  Old  Detroit  Nat.  Bk.. 


230  INTERPRETATION.  [aRT.    II. 

§  42      McKEEHAN,  The  Negotiable  Instruments  Law. 

141   Am.  Law  Keo.,  N.  S.,  pp.  502-509.] 

An  interesting  line  of  cases  is  involved  in  the  discussion  of  this 
section  [§42].  Suppose  A.,  falsely  representing  himself  to  be  B.,  a 
citizen  of  X.  town,  goes  to  C.  for  a  loan.  C.  makes  inquiry  concerning 
B.,  and,  finding  liim  to  be  a  prosperous  and  responsible  merchant  of 
X.  town,  hands  A.  a  check  payable  to  the  order  of  B.,  wlioin  he 
sujtposes  that  A.  is.  A.  indorses  tlie  check  in  B.'s  name  and  A.  or  his 
indorsee  has  it  cashed.  The  question  then  conies  up  between  the  bank 
and  C.  (the  drawer)  as  to  who  shall  bear  the  loss.  This  set  of  facts, 
with  strikingly  few  variations,  has  been  presented  in  numerous  cases, 
all  of  them,  prior  to  the  ease  of  Tolinan  v.  American  National  Bank, 
(22  R.  I.  462)  holding  that  C.  must  bear  the  loss.= 

153  ^ficli.  7.1,  in  17  L.  N.  S.  ."jH.  See  also  article  on  "Loss  by  check  delivered 
to  imposter  "  in  Case  and  romment  for  December,  1900,  p.  75. 

See  also  Cent.  Nat.  Bk.  v.  Nat.  Met.  Bk.,  31  App.  Cas.  D.  C.  391;  Heavey 
V.  Com.  Nat.  Bk.,  27  Utah,  222;  Jamieson  v.  Heim,  43  Wash.  153;  Heim  v. 
Neubert,  4S  Wash.  587. 

It  is  important  to  note  the  distinction  "  between  a  case  where  the  imposter 
assumes  to  be  the  person  by  whose  name  the  payee  is  described  in  the  check, 
and  a  case  where  he  merely  assumes  to  be  the  agent  of  such  person;  it  being 
conceded  even  by  the  courts  which  liold  that  in  the  former  case  the  loss  must 
fall  upon  the  drawer,  that  in  the  latter  case  it  will  fall  upon  the  drawee,  at 
least  in  tlie  absence  of  neoligence  on  the  part  of  the  drawer."  Note  in  17 
L.  N.  S.  at  p.  51(5,  citing  Murphy  v.  Met.  Nat.  Bk.,  191  Mass.  159,  and  Ilou.ier 
V.  Nat.  Bk.,  27  Pa.  Super.  Ct.  G13.  —  C. 

5  V.  S.  V.  Nat.  Bank,  45  Fed.  R.  103;  Meyer  v.  Indiana  Bank,  61  N.  E.  Rep. 
596;  Emporia  Bank  v.  ^hotwell,  35  Kan.  360;  Robertson  v.  Coleman,  141 
Mass.  231;  First  Bank  v.  American  Bank,  49  N.  Y.  App.  Div.  349;  Merch. 
Bank  v.  Metropolitan  Bank,  7  Daly,  137;  Land  Title  and  Trust  Co.  v.  N.  W. 
Bank,  196  Ra.  230;   Metzrjer  v.  Franklin  Bank,  119  Ind.  359. 

And  see  Meridian  Bank  v.  First  Bank,  7  Ind.  App.  322:  Elliott  v.  ^mither- 
man,  2  Dev.  &  B.  (N.  C.)  338;  Forbes  v.  Espy,  21  Oh.  St.  474,  in  which,  though 
the  name  adopted  by  the  swindler  appears  to  have  been  really  fictitious,  the 
loss  is  thrown  on  the  drawer  for  the  same  reason  as  that  which  governed  the 
former  cases. 

The  same  rule  prevails  as  to  the  sale  of  chattels:  Edmonds  v.  Merch.  Co., 
135  Mass.  283;  Samuel  v.  Cheney,  135  Mass.  278;  Dunbar  v.  Boston  R.  R.  Co., 
110  Mass.  26;   Alexander  v.  Hwackhamer,  105  Ind.  81. 

A  case  interesting  (though  not  quite  in  jtoint)  in  connection  with  the  rule 
here  discussed  is  Graves  v.  The  American  Exchange  Bank,  17  N.  Y.  205,  which 
holds  that  if  a  check  be  made  payable  to  one  person  and  another  person  of 
precisely  the  same  name  or  initials,  so  far  as  these  are  written  out  in  the 
check,  comes  wrongfully  or  accidentally  into  possession  of  the  same,  indorses 
it,  and  obtains  the  money  on  it  from  the  bank,  still  the  bank  is  liable  to  make 
good  the  amount  to  the  drawer.  Possibly  this  carries  the  bank's  liability  to 
an  excessive  point.  It  would  seem  that  the  drawer,  having  represented  that 
any  man  named  .lohn  Smith  is  the  payee,  should  be  estopped  to  deny  that  the 
particular  John  Smith  who  indorsed  the  check  and  had  it  cashed  is  the  payee. 


XIII. j  FOBGED  SIGNATURES.  231 

This  result  may  be  readied  in  several  ways,  none  of  which  is 
without  difficulty. 

1.  You  nuiy  hold  that  A.,  albeit  he  is  representing  himself  by  a 
name  falsely  assumed  for  the  purpose  of  deceiving  C,  is  the  real  payee, 
the  person  to  whom  C.  intended  that  the  check  should  be  paid.  Under 
this  view,  any  question  as  to  C.'s  negligence  becomes  immaterial.  He 
must  bear  the  loss,  not  because  he  has  negligently  trusted  a  stranger, 
but  because  the  physical  person  who  stood  before  him  and  with  whom 
he  dealt^is  the  person  whom  he  intended  the  bank  should  pay.     The 

\jiiflS<rulty  with  this  view  is  that  although  C.  intended  that  the  money 
should  be  paid  to  the  person  standing  before  him,  it  is  equally  true 
that  he  intended  that  it  should  be  paid  to  B.  of  X.  town. 

2.  You  may  hold  that  the  drawer  is  liable  because  he  has  negligently 
trusted  a  stranger,  but  this  view  is  unsatisfactory  because  none  of  the 
cases  in  point  go  on  this  ground,  and  because  the  loss  is  thrown  on 
C,  even  when  he  has  admittedly  exercised  all  reasonable  diligence. 

3.  You  may  hold  that  the  payee  is  fictitious,  and  that  the  check 
is  therefore  payable  to  bearer;  but  such  an  instrument  is  payable  to 
bearer  only  when  the  drawer  knows  that  the  payee  is  fictitious.    More- 
over, if  B.,  of  X.  town,  is  in  existence  and  known  to  the  drawer,  such 
a  view  is  clearly  untenable. 

4.  You  may  hold  that  C.  is  estopped  to  deny  that  A.,  to  whom  he 
gave  the  clieck,  is  the  real  payee.  But  estoppel  cannot  operate  unless 
the  fact  represented  be  known  to  and  acted  on  by  the  bank,  and  where 
the  swindler  indorses  the  check  to  a  bona  fide  holder  who  cashes  it 
(and  this  is  what  happened  in  most  of  the  cases)  the  bank  knows 
nothing  of  the  delivery  to  A.  and  does  not  rely  on  the  drawer's  repre- 
sentation that  he  is  the  payee.® 

As  a  matter  of  fact,  the  courts  t)ase  their  decision  on  the  first 
ground,  namely,  that  the  bank  has  merely  carried  out  the  drawer's 
intent.  Here  and  there  an  expression  may  be  singled  out  which  seems 
to  countenance  one  or  more  of  the  other  views,  but  a  fair  reading  of 
the  opinions  shows  that  one  idea  dominates  nearly  all  of  tlieni,  namely, 
that  the  money  has  been  paid  to  the  person  for  whom  it  was  really 
intended.  The  reasoning  is  briefly  this:  A  man's  name  is  tlie  verbal 
designation   by   which   he   is   known,   but   the   man's   visible   })resence 

«  Tlowever.  in  nn  intornstinp;  note  to  Land  Titlr  ami  Tru/it  Co.  v.  linnl-.  50 
T..  R.  A.  83.  ttw  nttovo  ()\i]vrt\(tn  to  tlio  pHtnppel  thoory  is  rlaimod  to  ho  invalitj, 
tlin  ar(;iinicnt  t)finj;:  Wlion  tlic  tmnk  fiayx  a  du-ck  nf)oii  a  forfifd  iiidorsciricnt 
it.  arts  on  thf  hi'liof  that  tlio  pcTHfin  wlin  indorsrd  it  was  tlic  pcrsjui  whom  tlip 
drawf-r  inffiidpd  to  dfKJfjnatf  as  payfp.  Tills  l)fdi«'f  is  larf,'(dy  —  and  when  the 
per«on  who  prpsrntK  tiip  chork  is  not  idontified  —  is  solflv  iiidiicfd  liy  tiu'  fact 
that  tlip  chofk  is,  or  was  at  the  timo  of  indf)rs«'mrnt.  in  the  ini[)ost«'r's  posses 
«ion.  Ttip  drawer  —  hy  (hdivfrinj;  tlic  rhock  to  tin-  inifioKlcr  in  tli<'  hidicf  that 
he  is  the  person  named  as  payee  —  creates  the  appearance  on  wliicli  the  hank 
arts. 


23'3  INTERPRETATION.  [AHT.    II. 

atTords  a  surer  means  of  identification.  C.  was  deceived  as  to  the  man 
he  was  dealing  with,  but  he  dealt  with  and  intended  to  deal  with  the 
visible  man  who  stood  before  him,  identified  by  sight  and  hearing. 
Thinking  that  this  man's  name  was  B.,  he  drew  the  check  to  B.'s  order 
intendijig  thereby  to  designate  the  person  standing  before  him;  so 
the  bank  has  simply  paid  the  money  to  the  person  for  whom  it  was 
intended. 

Such  was  undoubtedly  the  law  prior  to  the  act.  By  section  23 
[N.  Y.,  §  -I'-i],  when  a  signature  is  forged  or  made  without  the  author- 
ity of  the  person  whose  signature  it  purports  to  be,  it  is  wholly  inop- 
erative except  as  against  the  person  who  "  is  precluded  from  setting 
up  the  forgery  or  want  of  authority."  In  the  light  of  the  cases 
above  referred  to,  the  meaning  of  this  section,  as  applied  to  the  point 
under  discussion,  seems  reasonably  clear.  The  drawer  (C.)  "is  pre- 
cluded from  setting  up  the  forgery  or  want  of  authority  "  and  so  the 
signature  is  not  inoperative  as  to  him  and  the  law  remains  unchanged. 

Tn  1899,  Rhode  Island  adopted  the  IS'egotiable  Instruments  Law  and 
in  1901  the  case  of  Tolman  v.  American  National  Bank  arose  in  that 
state. 

In  that  case,  one  Louis  Potter,  representing  himself  to  be  Earnest  A. 
Haskell,  went  to  the  ])laintiflr,  (Tolman)  for  a  loan  of  money,  giving 
the  occupation  and  residence  of  Haskell  as  his  own.  The  plaintiff 
made  inquiry,  and  finding  that  Haskell  was  employed  and  was  living 
as  represented,  gave  Potter  his  check  on  the  defendant  bank  payable 
to  the  order  of  Haskell.  Potter  indorsed  Haskell's  name  and  delivered 
the  check  to  one  A.  R.  Hines,  who  had  it  cashed  at  the  bank.  In  an 
action  by  Tolman  to  compel  the  bank  to  credit  him  with  the  amount  of 
the  check,  the  court  held  that  the  bank  must  bear  the  loss. 

As  Professor  Ames  remarks,  "  the  decision  is  a  surprising  one,  both 
from  the  standpoint  of  common  law  principles,  and  of  Section  23  of 
the  act.  All  the  reported  cases  on  the  point  of  fraudulent  impersona- 
tion are  against  the  decision.  As  a  statutory  question,  but  for  this 
decision,  the  liability  of  the  drawer  would  seem  clear  under  the  last 
clause  of  the  section." 

[After  analyzing  the  opinion  of  the  court  in  the  Tolman  case,  and 
reviewing  Dean  Amos'  and  Judge  Brewster's  discussion  of  it,  Mr. 
McKeehan  continues :] 

It  is  perfectly  e^^dent,  then  —  and  indeed  this  is  Professor  Ames' 
position  —  that  the  trouble  is  not  with  Section  23,  but  with  the  case 
of  Tolman  v.  The  Bank.  Undoubtedly  it  u  unfortunate  that  the  only 
judicial  interpretation  tliat  this  section  has  received  should  serve  only 
to  throw  doubt  on  what  was  previously  well  settled.''     But  the  blame 

7  Tt  is  not  dpnied  that  miioh  miprht  be  said  in  favor  of  the  result  reached  in 
Tolman  v.  The  Bank,  did  the  question  arise  de  novo.     The  point  is  that  when 


XIII.]  FORGED  SIGNATURES.  233 

does  not  belong  to  the  Negotiable  Instruments  Law.  Section  23  — 
copied  from  the  English  act  —  was,  at  the  time  of  its  adoption,  an 
accurate  statement  of  existing  law,  and  in  view  of  the  unanimity  that 
exists  among  the  cases  on  which  it  is  based,  the  doubts  raised  by  Tol- 
man  v.  The  Bank  will  probably  soon  be  dispelled  and  this  section  will 
be  interpreted  as  having  merely  affirmed  a  well  settled  rule. 

once  so  diflRciilt  and  doubtful  a  point  is  clearly  settled,  mischief  and  not  pood 
resuTts-frbm  reopening  the  matter  and  involving  it  in  doubt.     As  matter.s  stand 
j-day,  no  lawyer  could  advise  a  client,  with  any  certainty,  on  this  point. 


ARTICLE  III. 

Consideration  of  iS'jxiOTiABLE  Instruments. 


I.  Presumption  of  consideration. 

§  50  BRISTOL  V.  WARNER. 

19  Connecticut,  7.  —  1848. 
Assumpsit  on  the  following  instrument: 

"  On  demand,  after  my  decease,  1  promise  to  pay  Josiah  W.  Bristol, 
or  order,  eight  hundred  and  fifty  dollars,  without  interest." 

The  making  of  the  instrument  heing  admitted,  the  plaintiff  intro- 
duced the  instrument  in  evidence  and  rested  his  case.  The  court 
charged  that  the  note  imported  on  its  face  a  valuahle  consideration  ; 
that  it  was  a  promissory  note  and  not  a  testamentary  paper.  (Conflict- 
ing evidence  was  given  as  to  the  consideration.     Verdict  for  plaintiff. 

Church,  Ch.  J.  —  1.  The  question  first  presented  by  this  motion, 
is  whether  the  note  in  controversy  imports  on  its  face  a  valuable  con- 
sideration? We  tlmik-it_iiQes ;  and  that  the  charge  to  the  jury  on  this 
point  was  corratit.  It  has  now  beconie  the  settled  law  of  this  state, 
after  a  time  of  some  doubt,  that  a  promissory  note  not  negotiable,  and 
not  purporting  on  its  face  to  be  for  value  received,  does  not  imply  a 
consideration;  and  that  a  plaintiff,  prosecuting  such  a  note,  is  left  to 
prove  one,  or  fail  to  recover.'     {Edgrrinn  v.  Edgerton,  8  Conn.  R.  6.) 

But  this  note  is,  in  form,  negotiable,  though  not  yet  negotiated;  and 
no  consideration  is  expressed  in  it.  And,  therefore,  it  was  claimed  at 
the  trial,  that  it  should  be  treated  as  if  it  were  not  negotiable  paper; — 
that  it,  being  a  simple  contract,  and  as  yet  confined  in  its  operation  to 
the  original  parties  to  it,  required  proof  of  consideration.  Hut  wo 
believe  that  the  negotiability  of  the  note  gave  it  a  character  and  a 
credit  at  its  inception,  then  importing  a  consideration,  as  woll  between 
payer  and  payee,  as  between  the  maker  anfl  indorsers  or  subsequent 
holders.  We  suppose  this  court  so  regarded  it  in  the  case  of  (Uimp  v. 
Tompkinft  (9  Conn.  R.  44n),  in  which  it  is  said,  that  such  instruments, 
as  well  as  bills  of  exchange,  from  their  very  nature,  import  a  considera- 
tion.    Our  statute  making  a  certain  description  of  notes  negotiable. 


;  Centra:  Camwright  v.  Gray,  127  N.  Y.  92.    But  see  Neg.  In.st.  L.,  §  320.  —  H. 

[234] 


1.]  PRESUMPTION  OF  CONSIDERATION.  235 

intended  to  give  to  them  the  same  effect  here,  as  such  paper  -was  known 
to  have  in  England,  and  in  the  commercial  community  generally.  The 
most  respectable  elementary  writers  upon  this  branch  of  the  law,  treat 
this  as  a  well  established  princf]ple.  Mr.  Chitty  says :  "  In  the  case  of 
bills  of  exchange  and  promissory  notes,  they  are  presumed  to  have  been 
on  good  consideration ;  and  it  is  not  necessary  for  the  plaintiff  to  state 
any  in  his  declaration,  or  prove  it,  in  the  first  instance,  on  the  trial," 
etc.  Evans,  in  his  learned  commentary  on  Pothier,  remarks,  that  "the 
case  of  bills  of  exchange  and  promissory  notes  affords,  in  some  degree, 
arrpTTeption  to  the  general  rule,  which  has  been  under  discussion,  when 
they  are  indorsed  over  for  a  valuable  consideration:  the  want  of  con- 
sideration, between  the  original  parties  is  immaterial ;  as  between  them 
a  consideration  is  presumed  ;  but  if  the  contrary  is  shown  it  is  a  suffi- 
cient defense."  Chancellor  Kent,  in  his  commentaries,  speaks  thus : 
"It  is  usual  to  insert  value  received  in  a  bill  or  note ;  but  this  is  un- 
necessary and  value  is  implied  in  every  bill,  note,  or  indorsement."' 
^  (Chitty  on  Bitts,  67 ;  2  Pothier  on  Obligations,  22 ;  3  Kent's  Com.  50 ; 
1  Stephen's  N.  P.  766 ;  Goshen  &  Minisink  Turn.  Co.  v.  Hnrtin,  9 
Johns.  R.  217;  Mandeville  v.  Welch,  5  Wheat.  277;  2  McLean,  212.) 
And  yet,  there  is  an  essential  difference  between  promissory  notes 
before  they  are  indorsed,  and  afterwards,  in  respect  to  their  original 
consideration.  In  the  former  case,  a  consideration  is  implied,  but  may 
be  denied  in  defense;  while  in  the  latter,  only  in  special  cases;  it  can- 
not be  disputed  if  the  hoMor  be  a  meritorious  one,  receiving  the  paper 
before  due.     *     *     *     x^^y  {Yin]  not  to  be  granted.^ 

2  The  floctrine  tliat  a  bill  or  note  roquirrs  anij  con'^irlerntion   is  of  oompara- 
tivrly  rropnt  oripin.     Tt  wa«  iinknown  in  tlip  time  of  Blarkstonp  (2  rnmm.  41fiK 
and  early  American  cases  are  to  be  founrl  in  wliieh  it  appears  to  be  denied  or 
doubted.      { Bourrs  v.   Hurd,    10  Mass.   427;    Lirtriffston  v.    Hastir,   2   Cai.    fN. 
jY.]    240.)       But    the    modern    cases    now    uniformly    hold    that   a    bill    or    note 
[execute  yv!_deTiy£re^Tj)s^  a  ^ift  Js   iiiu'nfor^^  for    want   of  consideration. 

Hill  V.  nurk-niin.itrr,  .5  Pick.  (Mass.)  .301;  farish  v.  Ktonr.  14  Pick.  (Mass.) 
198;  Schnonmnkrr  v.  lioom.  17  .Tf)hns.  (N.  Y.)  301;  Hnrrin  v.  Clark.  .3  N.  Y. 
93.  Nor  will  a  meritorious  consideration  sustain  a  promissory  note  even  in 
equity,  ^\'hitakrr  v.  Whiiakir,  .52  N.  Y.  .108.  See  also  Matter  nf  .lamrs,  140 
N.  Y.  7H   (t»ond  and  mortpaL'c),  but  «ee  .37  Am.  ^..  Rep.  3.T7. 

The  cases  are  uniform  that  a  bill  and  a  nepotiable  note  have  presumjitive 
consideration.  I  Daniel  on  Nep.  Inst..  iJS  101-10.1.  Whether  non-nepotiable 
notes  im[>ort  a  consideration  is  a  matter  r)f  the  construction  of  the  statute  pov 
erninp  promi'-sory  notes.  Ihiil.  §  103;  Art.  W'll.  Div.  T.  3,  pnnt.  .As  to 
burrlen  of  [iroof,  see  Nep.  Tnst.  !>.,  (5  08. 

The  court.H  rlo  not  inquire  into  the  adequacy  of  the  consideration;  but  inade- 
quacy of  consideration  may  be  evifjence  of  bail  faith  or  fraud,  fonr.i  v.  Gor- 
don, L.  R.  2  App.  f'a'^.  01(i;   HufTcut'K  Aniion   (8th  Flnp.  ed.),  pp.  90-92.  —  H. 


236  CONSIDKRATION.  [ART.    HI. 

§  50  TIK^KOK  V.  RFNTTNCi. 

92  ^ViTEuuvTE  Division   (N.  Y.)   107.—  1904. 

O'Brien,  J.  This  ease  has  already  been  before  this  court.  FHckok 
V.  Bunting,  67  App.  Div.  360.  The  action  is  upon  an  instrument  in 
the  nature  of  a  promissory  note,  a  copy  of  which  is  as  follows: 

Nkw  York,  December .  189.3. 

Having  bet'n  cause  of  a  nionfy  loss  to  my  frioiul,  Geraldine  H.  Hickok,  I 
have  given  lier  tliree  tliousand  dollars.  I  hold  this  amount  in  trust  for  her 
and  one  year  after  date  or  thereafter,  on  (lemaiid,  I  promise  to  pay  to  the 
order  of  Geraldine  11.  Hickok,  her  heirs  or  assigns,  Three  thousand  dollars 
with  interest. 

EixA  F.  Bunting. 

216  East  12th  St.,  N.  Y.  1,  16,  '94. 

Upon  the  former  trial,  after  the  plaintiff  had  proved  the  signature, 
and  introduced  the  note  in  evidence,  and  given  some  testimony  in  sup- 
port of  its  validity,  the  defendants  on  their  part  offered  evidence 
which  it  was  thought  by  this  court  threw  doubt  upon  the  delivery  of 
the  note  and  raised  the  question  as  to  whether  or  not  there  was  con- 
sideration therefor.  For  these  reasons  a  judgment  directed  for  the 
plaintiff,  from  which  the  defendants  appealed,  was  reversed,  this  court 
holding  that  there  were  presented  questions  of  fact  which  should  have 
been  submitted  to  the  jury.  Upon  the  new  trial  the  plaintiff  con- 
tented herself  with  proving  the  signature  and  the  amount  of  interest 
due,  and,  relying  upon  the  presumption  of  defivery  from  the  posses- 
sion of  the  note,  offered  it  in  evidence,  and  rested.  The  defendants 
moved  to  dismiss  the  complaint,  and  to  the  denial  of  their  motion  ex- 
cepted, and  then  in  turn  rested  ;  and,  the  plaintiff  having  moved  for 
a  direction  in  her  favor,  that  motion  was  granted,  and  to  this  ruling 
the  defendants  excepted,  so  that  it  is  these  exceptions  to  the  refusal 
to  dismiss  the  complaint  and  to  the  direction  of  a  verdict  for  the  plain- 
tiff which  are  now  urged  upon  our  attention. 

Had  this  been  a  negotiable  promissory  note  in  the  usual  form, 
we  do  not  think  it  would  be  seriously  contended  that  upon  such  a 
record  as  is  here  presented  a  direction  of  a  verdict  would  not  have 
been  proper.  The  defendants  contend,  however,  that,  though  this  in- 
strument be  regarded  as  a  promissory  note,  it  is  of  an  unusual  kind, 
and  that  all  the  parts  of  the  instrument  must  be  read  together,  and 
that,  inasmuch  as  on  its  face  it  purports  to  state  a  consideration  which 
is  neither  a  legal  nor  a  valid  consideration,  the  one  expressed  takes 
the  place  of  the  valid  consideration  which,  if  such  a  statement  had 
not  appeared  upon  the  face  of  the  note,  would  be  presumed.  For  this 
proposition  the  appellant  claims  support  by  taking  certain  language 
in  our  former  opinion  away  from  its  context,  and  considerins:  it  apart 
from  the  suhjeet  in  the  disrussion  of  which  it  was  used.  The  portion 
from  which  the  appellants  get  most  comfort  is  the  following: 


I.]  PRESUMPTION  OF   CONSIDERATION.  337 

"The  recital  is  that  the  deceased  had  been  the  cause  of  a  money  loss. 
This  standing  alone,  would  be  insufficient  to  show  tlie  existence  of  a 
present  legal  consideration,  or  that  an  enforceable  obligation  had  ever 
existed.  *  *  *  Jf  we  eliminate  the  declaration  of  the  plaintiff 
that  the  deceased  o-wed  her  a 'debt,  then  we  have  nothing  in  the  oral 
''testimony  or  in  the  recital  of  the  instrument  to  establish  that  there  at 
any  time  existed  a  legal  enforceable  obligation  against  the  deceased  in 
favor  of  the  plaintiff,  or  that  the  facts  were  of  such  a  character  as  / 
would  estop  the  deceased  from  denying  her  legal  obligation  for  the' 
payment  of  the  money." 

language  was  not  intended  to  be,  nor  was  it,  confined  to  stat- 
ing that  the  recital  which  preceded  the  promissory  portion  of  the  in- 
strument was  conclusive  either  upon  the  plaintiff  or  the  defendant. 
What  the  court  was  discussing  was  whether,  upon  all  the  evidence 
—  that  presented  on  the  face  of  the  instrument,  together  with  such  cor- 
roborating evidence  as  the  plaintiff  adduced  upon  that  subject,  as 
offset  by  the  testimony  offered  by  the  defendants  —  the  situation  was 
one  which,  upon  the  question  of  consideration,  required  that  their 
case  should  be  submitted  to  the  jury  (which  was  tlie  conclusion  we 
reached),  or  whether  the  trial  judge  was  right  on  the  first  trial  in 
directing  a  verdict.  As  we  have  pointed  out,  upon  the  present  trial 
there  was  practically  no  evidence  given  except  such  as  was  needed 
to  entitle  the  paper  to  be  admitted  in  evidence.  Tliat  the  paper  was  a 
promissory  note  was  expressly  held  upon  the  former  appeal,  and  in 
the  following  language: 

"  Following  the  declaration  of  trust  the  instrument  contains  a 
promise  to  pay,  one  year  after  date,  or  on  demand,  to  the  order  of  the 
plaintiff,  her  heirs  or  assigns,  $.'5,000,  with  interest.  There  are  no 
words  of  limitation  of  this  promise  in  the  language  preceding  it.  The 
promise  to  pay  is  express,  and  is  to  the  order  of  the  payee,  and  con- 
tains every  essential  element  to  constitute  a  promissory  note  as  defined 
bv  the  Xeeotiahlc  Tnstrnnionts  Law  (chapter  612,  p.  755,  §  320,  Laws 
1897)  and  by  authority.     Carnvriqhl  v.  (iraij,  127  N.  Y.  92." 

The  contention  of  the  appellants  may  be  well  founded  that  if,  on  , 
the  face^  of  the  instrument,  it  conclusively  appeared  that  there  was  / 
no  consideration,  or  tliat  there  was  an  invalid  consideration,  then  the/ 
instrument   could    not   be   enforced.  •   For   the   reason,   however,   that/ 
neither  of  tbepc  appeared  upon  the  face  of  tho  instnnnent,  we  think 
that,  taking  the  logal  presumption  wliifh  arises  in  favor  of  tliere  hav- 
ing been  a  valid  consideration  for  the  note,  and  in  tlie  absence  of  any 
evidence  to  rebut  it,  a  prima  fnrir  case  was  made  out. 

Tn  TJpqpTvnn  v.  Moon,  131  \.  Y.  ir)2,  tbo  deceased  made  an  instru- 
mont  ns  follows : 

"One  year  aftor  my  death  T  heroby  direet  my  executors  to  pay  to 
■Tosppb  TTefroman,  his  heirs,  executors  or  assigns,  the  sum  of  $1,976  00, 
being  the  balance  due  him  for  cash  advanced  at  various  times  by 


238  CONSIDERATION.  [aRT.    III. 

him  to  Adrian  Hegeman,  my  son,  and  others,  as  per  statement  rendered 
hy  him  this  day  without  interest." 

Tn  that  case,  as  in  this,  tlio  inference  was  sought  to  he  drawn  from 
the  language  employed  in  tlie  note  tliat  tlierc  was  no  legal  considera- 
tion ;  hut  the  court  said  : 

"  The  addition  of  the  words  that  the  money  is  due  the  payee  '  for 
cash  advanced  at  various  times  hy  Inm  to  Adrian  TTegeman,  my  son, 
antl  others,  as  per  statement  rendered  hy  him  this  day,'  does  not  alter 
the  implication  that  the  money  is  due  the  payee  from  the  maker.  It 
simply  states  the  origin  of  tlie  indehtedness  of  the  maker.  It  was  not 
for  money  advanced  directly  to  her,  but  to  her  son  and  others.  There 
is  nothing  inconsistent  with  her  indehtedness  to  the  payee  in  the  fact 
of  this  acknowledged  advance  of  the  money  to  the  maker's  son.  An 
original  indebtedness  may  have  arisen  against  the  maker  by  the  payee 
advancing 'at  the  maker's  request  moneys  to  her  son.  And  when  she 
says  that  a  certain  amount  is  due  the  payee,  and  signs  the  statement, 
with  the  addition  of  the  origin  of  the  indebtedness,  the  implication 
is  neither  forced  nor  unnatural  tliat  she  means  that  the  amount  is 
due  from  her,  or  else  she  would  not  have  signed  the  paper." 

We  think  the  respondent  is  right  in  asserting  that  the  principle  of 
the  TTegeman  case  and  the  one  at  bar  are  precisely  the  same,  and 
that,  as  in  the  former,  the  court  was  bound  to  presume  in  support  of 
the  obligation  that  the  money  advanced  to  a  third  person  hy  the 
payee  was  advanced  at  the  maker's  request,  and  thus  constituted  a 
legal  obligation  on  the  part  of  the  maker,  so,  in  the  present  case,  the 
court  is  bound  to  assume  that  the  money  loss  which  the  plaintifF,  the 
payee,  had  suffered  at  the  hands  of  the  maker,  was  legally  chargeable 
to  the  maker,  and  constituted  a  legal  liability  on  her  part. 

Our  conclusion  therefore  is  that  the  disposition  made  by  the  learned 
trial  judge  was  right,  and  that  the  judgment  appealed  from  should 
1)6  affirmed,  with  costs.  All  concur.^ 

3  Affirmed  182  N.  Y.  5.30,  no  opinion. 

In  fluntinqtnn  v.  Shvie,  180  Maaa.  371,  paypc  suefl  makers  on  a  promissory 
note  containinfj  the  words  "  value  received."  Defense  was  want  of  considera- 
tion. The  trial  jndpe  instnieted  the  jury  that  the  words  "  value  received  " 
were  equivalent  to  a  declaration  and  admission  on  the  part  of  the  defendants 
that  they  had  received  full  value,  and  that  where  as  here  the  makers  had 
admitted  consideration  in  the  note  itself,  the  burden  of  proof  was  upon  the 
defendants  to  show  that  there  was  no  consideration.  Held  error.  "The  rule 
is  well  settled  in  this  Tommonwealth  that,  in  an  action  on  a  promis.sory  note, 
the  burden  of  proof  is  upon  the  plaintiff  to  establish  the  fact  that  it  is  piven 
for  a  valuable  consideration.  While  the  production  of  the  note,  with  the 
admission  or  proof  of  the  signature,  makes  n  prima  facie  case,  yet  if  the 
defendant  puts  in  evidence  of  a  want  of  consideration,  the  burden  of  proof 
does  not  shift,  but  remains  upon  the  plaintiff,  who  must  satisfy  the  jury,  by 
a  fair  preponderance  of  the  evidence,  that  the  note  was  for  a  valid  considera- 
tion. .  .  .  We  can  see  no  reason  for  changing  the  rule  so  well  established 
merely  because  the  note  contains  the  words  '  value  received.' "  Lathbop,  J., 
on  p.  372.  — C. 


11.]  PRE-EXISTING   DEBT.  !339 

n.  What  constitutes  consideration. 

§  61       .  RAILROAD  COMP^^NY  v.  NATIONAL  BANK. 

102  United  States,  14.  —  1880. 

Action  by  the  bank  against  the  railroad  company  on  a  promissory 
note.  Defense,  tiiat  the  note  was  diverted  by  the  defendant's  agent, 
and  that  the  bank  is  not  a  liolder  for  value  and  therefore  subject  to 
the  defence. 

Tiote  was  made  by  the  company  payable  to  AVilliam  V.  Le  Count, 
its  treasurer,  and  indorsed  by  him  in  blank  and  by  Palmer  &  Co., 
owners  of  the  larger  portion  of  the  stock.  The  note  thus  indorsed 
was  placed  by  the  company  in  the  hands  of  Hutchinson  &  Ingersoll, 
note-brokers,  for  negotiation  and  sale  in  order  to  raise  money  for 
the  company.  Hutchinson  &  Ingersoll  pledged  the  note  as  collateral 
for  a  loan,  and  subsequently  agreed  that  it  should  stand  as  collateral 
for  a  loan  previously  made.  No  agreement  was  made  to  extend  the 
pre-existing  debt,  or  to  refrain  from  calling  it  in. 

Mr.  Justice  Harlan,  after  stating  the  facts,  delivered  the  opinion 
of  the  court.     *     *     * 

The  bank,  we  have  seen,  received  the  note,  before  its  maturity, 
indorsed  in  blank,  without  any  express  agreement  to  give  time,  but 
without  notice  that  it  M'as  other  than  ordinary  business  paper,  or 
that  there  was  any  defense  thereto,  and  in  ignorance  of  the  purposes 
for  whicli  it  had  been  executed  and  delivered  to  Hutchinson  &  Inger- 
soll. Did  the  bank,  under  these  circumstances,  become  a  holder  for 
value,  and  as  such  entitled,  according  to  the  recognized  ])rinciples  of 
commercial  law,  to  be  protected  against  the  erpiities  or  defenses  which 
the  railroad  company  may  have  against  the  other  parties  to  the  note? 

This  question  was  carefully  considered,  though,  perhaps,  it  was  not 
abfiolntelv  necessary  to  be  determined,  in  Swift  v.  Tyson  ( H)  Pet. 
1.)      *     *     * 

The  o[)iiiion  in  lh;it  case  has  been  tlic  subject  of  crificistn  in  some 
courts,  because  it  ser'iiied  to  go  beyond  the  [ifecise  [uiint  necessary 
to  be  decided,  when  dechiring  that  the  Jhuki  fide  holder  (.f  ;i  ne^'-oliahle 
note,  taken  as  collateral  security  for  an  anleceileiit  debt,  was  pro- 
tected against  ecjuities  existing  between  the  original  or  antecedent 
fiarties.  The  brief  dissent  of  Mr.  Justice  Catron  was  solelv  upon  that 
ground,  which  renders  it  quite  certain  that  the  whole  court  was  aware 
of  the  extent  to  whicli  the  opinion  carried  the  doctrines  of  the  com- 
mercial law  upon  the  subject  of  negotiable  inslrnnients  transferred  or 
delivered  as  security  for  antecedent  indebtedness.  In  the  judtrnient 
of  this  court,  as  then  constituted  (Mr.  Justice  Catron  alone  excepted), 
the  holder  of  a  negotiable  instrument,  received  before  maturity,  and 
without  notice  of  any  defense  thereto,  is  unafTected  by  the  equities  or 
defengCB  of  antecedent  parties,  equally  whether  (he  note  is  taken  as 


210  CONSIDERATION.  [ART.    III. 

collateral  security  for  or  in  payinenl  of  previous  indebtedness.  And 
we  understand  the  case  of  MvCarty  r.  Roots  (21  How.  432),  to  affirm 
i^irift  V.  Ti/son.  upon  the  ]»oint  now  iindor  consideration.  It  was  there 
said:  "  Nor  does  the  fact  that  the  bills  were  assigned  to  the  plaintiff 
as  collateral  security  for  a  pre-existing  debt  impair  the  plaintiff's  right 
to  recover."  (p.  438.)  "The  delivery  of  the  bills  to  the  plaintiff 
as  collateral  security  for  a  pre-existing  debt,  under  the  decision  of 
Swift  V.  'rj/son.  was  legal."     (p.  439.) 

It  may  be  remarked  in  this  connection  that  the  courts  holding  a 
different  rule  have  uniformly  referred  to  an  opinion  of  Chancellor 
Kent  in  Hay  v.  Coddinrjion  (5  Johns.  Ch.  [N.  Y.]  54),  reaffirmed  in 
Coddington  v.  Baij  (20  Johns.  |  N.  Y.]  637.)  There  is,  however, 
some  reason  to  believe  that  the  views  of  that  eminent  jurist  were  sub- 
sequently modified.  In  the  later  editions  of  his  Commentaries  (vol. 
Ill,  p.  81,  note  b.),  prepared  by  himself,  reference  is  made  to  Stalker 
V.  McDonald  (6  Hill  [N.  Y.]  93),  in  which  the  principles  asserted 
in  Bay  v.  Coddington  were  re-examined  and  maintained  in  an  elaborate 
opinion  by  Chancellor  Walworth,  who  took  occasion  to  say  that  the 
opinion  in  Swift  v.  Tyson  was  not  correct  in  declaring  that  a  pre-exist- 
ing debt  was,  of  itself,  and  without  other  circumstances,  a  sufficient 
consideration  to  entitle  the  hona  fide  holder,  without  notice,  to  recover 
on  the  note,  when  it  might  not,  as  between  the  original  parties,  be 
valid.  But  Chancellor  Kent  adds:  "Mr.  Justice  Story,  on  Promis- 
sory Notes  (p.  215,  note  1),  repeats  and  sustains  the  decision  in 
Swift  v.  Tyson,  and  I  am  inclined  to  concur  in  that  decision  as  the 
plainer  and  better  doctrine."  Of  course  it  did  not  escape  his  atten- 
tion that  the  court  in  Strift  v.  Tyson  declared  the  equities  of  prior 
parties  to  be  shut  out  as  well  when  the  note  was  merely  pledged  as 
collateral  security  for  a  pre-existing  debt,  as  \vhen  transferred  in 
payment  or  extinguishment  of  such  debt. 

According  to  the  very  general  concurrence  of  judicial  authority  in 
this  country  as  well  as  elsewhere,  it  may  be  regarded  as  settled  in 
commercial  jurisprudence  —  there  being  no  statutory  regulations  to 
the  contrary  —  that  where  negotiable  paper  is  received  in  payment 
of  an  antecedent  debt ;  *  or  where  it  is  transferred,  by  indorsement, 
as  collateral  security  for  a  debt  created,  or  a  purchase  made,  at  the 
time  of  transfer; ''  or  the  transfer  is  to  secure  a  debt,  not  due,  under 
an  agreement,  express  or  to  be  clearly  implied  from  the  circumstances, 
that  the  collection  of  the  principal  debt  is  to  bo  postponed  or  delayed 
until  the  follateral  matured  ;  or  whore  lime  ^5  agreed  to  be  given 
and  is  ;ictuarfy  given  upon  a  debt  overdue,  in  consideration  of  the 
transfer  of  negotiable  paper  as  collateral  security  therefor;'  or  where 

*  Accord  :   Mayer  v.  Heidelhach,  12.3  N.  Y.  332.  —  H. 
fi  Bank  v.    Vanderhorst,  32  N.  Y.  553.-11. 

•  The  aprppment  for  extension  must  be  definite  and  binding.  Atlantic  N.  B, 
T.  Franklin,  55  N.  Y.  235.  —  H. 


n.]  PRE-EXISTIi^'G  DEBT.  241 

the  transferred  note  takes  the  place  of  other  paper  previously  pledged 
as  collateral  security  for  a  debt,  either  at  the  time  such  debt  was 
contracted  or  before  it  became  due  —  in  each  of  these  cases  the  holder 
who  takes  the  transferred  paper,  before  its  maturity,  and  without  notice, 
actual  or  otlierwise,  of  any  defense  thereto,  is  held  to  have  received  it 
in  due  course  of  business,  and,  in  the  sense  of  the  commercial  law, 
becomes  a  holder  for  value,  entitled  to  enforce  payment,  without  regard 
to  any  equity  or  defense  which  exists  between  prior  parties  to  such 
paper. 

Upon  these  propositions  there  seems  at  this  day  to  be  no  substantial 
conflict  of  authority.  But  there  is  such  conflict  where  the  note  is 
transferred  as  collateral  security  merely,  without  other  circumstances, 
for  a  debt  previously  created.  One  of  the  grounds  upon  which  some 
courts  of  high  authority  refuse,  in  such  cases,  to  apply  the  rule 
announced  in  ^wift  v.  Tyson  (16  Pet.  1),  is,  that  transactions  of  that 
kind  are  not  in  the  usual  and  ordinary  course  of  commercial  dealings. 
But  this  objection  is  not  sustained  by  the  recognized  usages  of  the 
commercial  world,  nor,  as  we  think,  by  sound  reason.  The  transfer 
of  negotiable  paper  as  security  for  antecedent  debts  constitutes  a 
material  and  an  increasing  portion  of  the  commerce  of  the  country. 
Such  transactions  have  become  very  common  in  financial  circles. 
They  have  grown  out  of  the  necessities  of  business,  and,  in  these  days 
of  great  commercial  activity  they  contribute  largely  to  the  benefit 
and  convenience  both  of  debtors  and  creditors.  *  *  *  Another 
ground  upon  which  some  courts  have  declined  to  sanction  the  rule 
announced  in  Swift  v.  Tyson  is,  that  upon  the  transfer  of  negotiable 
paper  merely  as  collateral  security  for  an  antecedent  debt  nothing  is 
surrendered  by  the  indorsee  —  that  to  permit  the  equities  between  prior 
parties  to  prevail  deprives  liim  of  no  right  or  ndvaTitage  enjovcd  at  the 
the  time  of  transfer,  imposes  upon  him  no  additional  burdens,  and  sub- 
jects him  to  no  additional  inconveniences. 

This  may  be  tine  in  some,  but  it  is  not  true  in  most  cases,  nor, 
in  our  opinion,  is  it  ever  true  when  the  note,  upon  its  delivery  to 
the  transferee,  is  in  such  form  as  to  make  him  a  party  to  the  instru- 
ment, and  impose  upon  liim  the  duties  wliicli,  ae<ording  to  the  com- 
mercial law,  must  lie  discliiirged  by  the  holder  of  negotiable  paper 
in  order  to  fix  linMlity  Uf»on  the  indorser. 

The  bank  did  not  take  llie  note  in  suit  as  a  mere  agent  to  receive 
the  amount  due  when  it  suited  the  convenience  of  the  debtor  to 
make  payment.  It  received  the  note  under  an  obliiration  imposed 
by  tlieTcommercial  law,  to  present  it  for  payment,  and  give  notice  of 
non-paynu'iit,  in  the  mode  prescribed  by  the  settled  rules  of  that  law. 
We  are  of  opinion  that  the  undertnkin<;-of  the  bank  to  fiv  the  lialtility 
of  prior  parties,  by  due  presentation  for  payment  and  due  notice  in 
case  of  non-payment  —  an  undertaking  necessarily  implied  by  becom- 

NKOOT.  IN8TRCMKNTB —  16 


2A.2  CONSIDERATION.  [aUT.    III. 

ing  :i  party  to  the  instniinont  —  was  a  sufficient  consideration  to 
prottrt  it  against  o<iui(ios  existing  between  the  other  {)arties,  of  wliich 
it  had  no  notice.  It  assumed  the  duties  and  responsibilities  of  a 
liolder  for  value,  and  should  have  the  rights  ai\d  privileges  pe"rtaining 
to  tluit  position.     *     *     *  \__ 

Our  eonrlusion,  tlierefore,  is  that  the  transfer,  before  maturity,  of 
negotiable  pa])er,  as  security  for  an  antecedent  debt  merely,  w^ithout 
other  circumstances,  if  the  paper  be  so  indorsed  that  the  holder  be- 
comes a  party  to  the  instrument,  although  the  transfer  is  witiiout 
express  agreeuu^it  by  the  creditor  for  indulgence,  is  not  an  improper 
use  of  such  paper,  and  is  as  much  in  the  usual  course  of  commercial 
business  as  its  transfer  in  payment  of  such  debt.  In  either  ease,  the 
bona  fide  holder  is  unatfected  by  equities  or  defenses  between  prior 
parties,  of  which  he  had  no  notice.     *     *     * 

[Mr.  Justice  Clifford  concurred  in  an  opinion  of  great  learning, 
but  of  too  great  length  to  be  reprinted  here. ) 

Mr.  Justice  Bradley.  I  concur  in  the  judgment  rendered  in  this 
case,  and  in  most  of  the  reasons  given  in  the  opinion.  But,  in  refer- 
ence to  the  consideration  of  the  transfer  of  the  note  as  collateral 
security,  I  do  not  regard  the  obligation  assumed  by  the  indorsee  (the 
bank)," to  present  the  note  for  payment  and  give  notice  of  non-pay- 
ment, as  the  only,  or  the  principal,  consideration  of  such  transfer. 
The  true  consideration  was  the  debt  due  from  the  indorsers  to  the 
indorsee,  and  the  obligation  to  pay  or  secure  said  debt.  Had  any 
other  collateral  security  been  given,  as  a  mortgage,  or  a  pledge  of 
property,  it  would  have  been  equally  sustained  by  the  consideration 
referred  to;  namely,  the  debt  and  the  obligation  to  pay  it  or  to 
secure  its  payment.  If  the  indorsers  had  assigned  a  mortgage  for 
that  purpose,  the  title  of  the  bank  to  hold  the  mortgage  would  have 
been  indubitable.  In  that  case  prior  equities  of  the  mortgagor  might 
have  prevailed  against  the  title  of  the  bank ;  because  a  mortgage  is 
not  a  commercial  security,  and  its  transfer  for  any  consideration 
whatever  does  not  cut  off  prior  equities.  But  the  bona  fide  transfer 
of  commercial  paper  before  maturity  does  cut  off  such  equities;  and 
every  collateral  is  held  by  the  creditor  by  such  title  and  in  such 
manner  as  appertain  to  its  nature  and  qualities.  Security  for  the 
payment  of  a  debt  actually  owing  is  a  good  consideration,  and  suf- 
ficient to  support  a  transfer  of  property.  Wlien  such  transfer  is  made 
for  such  purpose,  it  has  due  effect  as  a  complete  transfer,  according 
to  the  nature  and  incidents  of  the  property  transferred.  When  it 
is  a  promissory  note  or  bill  of  exchange,  it  has  the  effect  of  giving 
absolute  title  and  of  cutting  off  prior  equities,  provided  the  ordinary 
conditions  exist  to  give  it  that  effect.  If  not  transferred  before  ma- 
turity or  in  due  course  of  business,  then,  of  course,  it  cannot  have 
Buch  effect.     But  I  think  it  is  well  shown  in  the  principal  opinion 


11.]  PEE-EXISTING  DEBT.  243 

tiiat  a  traiisier  /or  the  piirpo&u  of  securiug  a  debt  is  a  transfer  in 
due  course.    And  liiat  really  ends  the  argument  on  the  subject. 
Mr.  Justice  Millek  and  Mr.  Justice  Field  dissented. 

Judgment  affirmed.'' 


§  51  GROCERS'  BANK  v.  PENFIELD. 

C9  New  York,  502.—  1877. 

Appeal  from  jndi^nnont  of  the  General  Term  of  the  Supreme  Court 
in  the  first  judicial  dejiartment  reversing  a  judgment  in  favor  of 
defendants,  entered  upon  the  report  of  a  referee.  (Reported  below, 
7  Ilun,  279.) 

I'his  action  was  upon  two  promissory  notes,  on  whieli  defendants 
}\mi field  and  Stone  were  makers,  which  were  made  payable  to  defend- 
ant Truax,  and  by  him  indorsed  and  transferred  to  plaintiff. 

Tiie  referee  found,  in  substance,  that  the  notes  were  executed  by 
the  makers  without  any  consideration;  were  accommodation  notes, 
and  were  received  by  plaintiff  solely  as  collateral  security  for  a  pre- 
cedent debt,  witliout  any  agreement  to  extend  the  time  of  payment 
of  the  debt,  and  thereupon  held  that  plaintiff  was  not  a  bona  fide 
holder  for  value,  and  directed  judgment  dismissing  the  complaint 
as  to  said  makers. 

Rapallo,  J.  We  think  that  the  order  in  this  case  must  be  affirmed 
on  the  ground  stated  by  Brady,  J.,  in  his  opinion  delivered  at  General 
Term.  Whatever  confusion  may  have  existed  upon  the  point,  we 
think  that  we  may  now  safely  say,  in  the  language  of  Professor  Par- 
sons (1  Parsons  on  Notes  and  Bills.  2!)f)),  that  it  is  universally  con- 
ceded that  the  holder  of  an  accommodation  note,  without  restriction 
as  to  the  mode  of  using  it,  may  transfer  it  either  in  payment  or  as 
collateral  security  for  an  antecedent  debt,  and  the  maker  will  have 
no  defense.  (See,  also.  Story  on  Bills,  §  192,  note  in,  and  Story  on 
Notes,  §  19r),  and  authorilies  cited.)  The  existing  debt  is  a  sulTicient 
consideration  for  the  transfer,  and  no  new  consideration'  need  be 
phown.  It  is  only  where  the  note  has  been  diverted  from  the  purpose 
for  which  it  was  entrusted  to  the  payee,  or  some  other  equity  exists  in 

'  "  Wp  arp  of  tlio  opinion  that  a  creditor  to  whom  a  nepotiablp  security  is 
priven  on  nocmint  cf  n  [irr-  pxistinjr  'lelit  IioMh  it  l)y  nn  inrleffasihlo  title,  whether 
it  he  one  jmynMo  nt  .n  fiitnre  time  or  on  ilemanH."  Currir  v.  Mi.ta,  L.  R.  10 
Kx.  1.5.3,  Lord  ('ol(Tiflf.'e,  (".  .1.,  diMoentinp. 

It  wa.H  prolialily  llie  intent  of  the  framers  of  §  T)!  of  the  Nep.  In«t.  T^.  to 
af>oli«ih  the  rule  rst.Thli^^hffl  in  Cmlilinfiton  v.  liny.  20  .Johns.  0.37,  and  ever  Hinoe 
in  force  in  New  ^'ork;  whetJier  the  Innpnape  iised  is  apt  for  that  purpose  will 
he  a  qtiestion  of  iiidicinl  ('eterminntion.  —  TI.  f On  tliiR  point,  see  the  New 
York  cases  rt-ferred  to  in  liiikct  v.  Elicard,  G8  Kan.  295,  poat.  —  C] 


244  CONSIOEUATION.  [aRT.    Ill, 

favor  of  the  maker,  that  it  is  ueeossary  that  the  holder  should  have 
parted  with  value  on  the  faith  of  the  note,  in  order  to  eut  oil"  such 
equity  of  the  maker.  (Cole  v.  Saulpauyh,  IS  Barb.  104;  Bank  of 
Rutland  V.  Buck,  b  Wend.  GG;  Lalhruy  v.  Morris,  3  Sandf.  7.)  It  has 
been  held  by  high  authority  that  an  antecedent  debt  is  sufficient  even 
in  the  case  of  a  note  fraudulently  diverted  to  constitute  the  holder  a 
bona  fide  holder  for  value  without  any  extension  of  time  or  surrender 
of  securities  or  other  now  considerations.  {Swift  v.  Tyson,  16  Peters, 
1.)  But  in  this  State  that  doctrine  does  not  prevail.  {Stalker  v. 
McDonald,  6  Hill,  93.)  The  leading  authorities  upon  tlie  subject  are 
reviewed  in  the  case  of  Maitland  v.  Citizens'  Bank  (40  Maryland,  540). 
Whatever  diiTerence  of  opinion  may  have  existed,  as  to  the  case  of  a 
note  diverted  or  fraudulently  put  in  circulation,  it  must  be  regarded 
as  settled  that  an  indorsee  of  a  negotiable  note  made  for  the  accom- 
modation of  the  indorser,  but  without  restriction  as  to  its  use,  taking 
the  note  in  good  faith  as  collaterial  security  for  an  antecedent  debt, 
and  without  other  consideration,  is  entitled  to  the  position  of  a  holder 
for  value,  and  not  affected  by  the  defense  of  want  of  consideration  to 
the  maker.  We  should  not  have  deemed  it  necessary  to  discuss  the 
point  so  much  at  length,  but  for  the  reason  that  it  does  not  appear 
ever  to  have  been  previously  expressly  adjudicated  in  this  court. 

The  order  should  be  affirmed  and  judgment  absolute,  etc. 

All  concur.  Order  affirmed  and  judgment  accordingly.* 


§61  BIRKET  V.  ELWARD. 

68  Kansas,  295.  — 1904. 

Plaintiff  sues  as  indorsee  upon  a  promissory  note  which  he  acquired 
from  the  payee  as  collateral  security  for  an  existing  debt  of  the  payee 
to  him,  without  any  agreement  for  an  extension  of  time  or  other  new 
consideration.     Judgment  for  defendants  and  plaintiff  brings  error. 

Mason,  j.     *     *     * 

It  is  obvious  that  plaintiff  could  only  recover  on  the  theory  that  he 
was  an  innocent  purchaser,  and  the  sole  question  here  involved,  there- 
fore, is  whether  one  who  takes  commercial  paper  as  collateral  security 
for  an  existing  debt,  without  an  agreement  for  an  extension  of  time 
or  other  new  consideration,  is  ever  entitled  to  protection  as  a  bona 
fide  holder.  If  so,  the  judgment  must  be  reversed  ;  otherwise  it  must 
be  affirmed. 

The  rule  in  the  federal  courts,  as  well  as  in  those  of  England  and 
Canada,  is  that  the  holder  of  a  negotiable  note  taken  as  collateral 
eecnrity  for  a  pre-existing  debt  is  a  holder  for  value  in  due  course 


«  Set  also  Continental  N.  B.  v.  Townsend,  87  N.  Y.  8.  —  H. 


il]  pre-bxistinu  debt.  345 

of  business,  and  as  such  is  protected  against  all  latent  equities  of 
third  parties.  The  state  courts*  that  have  passed  upon  the  question  are 
in  irreconcilable  conflict.  The  cases  are  collected  in  4  A.  &  E.  Encycl. 
of  L.  (2d.  Ed.),  290-293,  and  in  7  Cyc.  932-935.  The  lists  there 
indicate  with  substantial  but  not  absolute  correctness  the  line  of  cleav- 
age^ It  is  to  be  noted  that  in  each  of  them  Kansas  is  wrongly  placed 
among  the  states  that  are  committed  to  the  rule  stated,  upon  the 
strength,  respectively,  of  the  cases  of  Banlc  v.  Dal'in,  54  Kan.  656, 
and  Best  v.  Crall,  23  Kan.  482.  WTiile  these  cases  have  a  tendency 
in  that  direction,  they  do  not  go  the  full  length  indicated.  In  Bank 
V.  Dakin  the  note  involved  was  transferred  as  collateral  security  for  a 
debt  created  at  the  time  of,  and  in  reliance  upon,  such  transfer,  which 
was  therefore  supported  by  a  new  consideration,  sufficient  upon  any 
theory  of  the  law.  In  the  opinion  a  number  of  cases  are  cited  as  support- 
ing the  proposition  that  even  a  pre-existing  debt  would  afford  a  suf- 
ficient consideration  for  the  purpose,  and  among  them  was  included 
Best  V.  Crall.  In  that  case  the  collateral  note  was  in  fact  transferred 
as  security  for  a  debt  that  already  existed,  but  this  was  done  pursuant 
to  a  promise  made  when  such  original  debt  was  created,  so  that  the 
effect  was  tiie  same  as  though  the  transfer  had  actually  been  made  at 
that  time. 

A  careful  examination  of  the  cases  cited  in  tlie  lists  referred  to 
discloses  that  in  the  following  states  the  rule  of  the  federal  court  has 
been  adopted :  California,  Colorado,  Connecticut,  Georgia,  Illinois, 
Indiana,  Louisiana,  Maryland,  Massachusetts,  Minnesota,  Nevada, 
New  Jersey,  Eliodo  Island,  South  Carolina,  Texas,  Vermont,  and  West 
Virginia.  In  California  and  Nevada  the  matter  is  affected  by  statu- 
tory provisions  that  the  acceptance  of  the  security  forfeits  a  right  to 
attach.  Nebraska  is  also  now  committed  to  this  doctrine.  Lashmott 
V.  Prall.  96  N.  W.  152.  Such  citations  fnrther  show  that  in  the 
following  states  the  rule  has  been  denied:  Alabama,  Arkansas,  Iowa, 
Kentucky.  Maine,  Michigan,  Mississippi,  Missouri,  New  Hampshire, 
New  York,  North  Dakota,  Ohio,  Pennsylvania,  Tennessee,  Virginia, 
Wisconsin.  North  Carolina  should  also  be  placed  on  this  list,  but 
•there,  as  well  as  in  Tennessee  and  Virginia,  the  legislature  has  lately 
changed  the  rule  by  statute."  See  Brooks  v.  Svllivnv.  12!)  N.  ('.  lf>0  ; 
Bank  of  Charleston  v.  Johnson,  105  Tenn.  521  ;  I'ayne  v.  ZeU.  98 
Va.  294.'"    In  New  York,  in  1897,  in  a  revision  of  the  law  of  nego- 


•  Namely,  tlio  Nfpotialilo  Tnsf riinipntR  T.aw.  —  (". 

'oSor.  also,  to  tho  snmp  pfTcrt,  flraham  v.  Smith.  ICtf)  Mirli.  fifi.  At  p.  flR, 
Bi.AiB.  J.,  finy«:  "  Tf.  as  contrndoil  hy  (Icffntlaiit's  ooiinvcl,  fho  plaintiff 
recfiivefl  the  note  as  coilatfral  Hppurity  for  an  fxiHtintr  di-ht.  and  the  Nogotiahle 
Instruments  Act,  I'li)..  Arts  lOOr).  p.  .IKO.  No.  205.  has  inlrorliicfd  no  rlianp-  in 
the  law  as  to  »urh  in^t rnmcnts,  plaintifT  was  not  a  lioMor  for  valiif.  Burrouqht 
V.  Plnnl.  7.1  Mioh.  007:  Mnunnrd  v.  Dnyix.  127  ATirli  r.71.  Serf  ion  ?.l  of  the 
aet  is  an  follows:  '  Value  is  any  consideration  auflicient  to  support  a  simple  con- 


246  CONSIDEUATION.  \  [aBT.    MI. 


tiublo  instnuiu'iits,  it  was  eiunted  tlial  "  value  is  any  Consideration 
Builkieut  to  su{)port  a  simple  contract.  An  antecedent  or  pre-existing 
debt  constitutes  value."  "  It  was  lield  in  Brcivster  v.  Slii'ader,  2G  Misc. 
480,  that  this  statute  chaniced  the  law  as  fornierly  administered  in 
that  state,  and  that  under  it  "  an  indorsee  of  a  note  taken  as  collateral 
to  a  pre-existing  indebtedness  is  a  holder  for  value,  unalTected  by 
equities  between  the  original  parties."  But  in  Sutherland  v.  Mead,  80 
App.  Div.  lO:?,  this  was  denied,  and  it  was  said  that  the  new  statute 
was  purely  declaratory.  We  do  not  discover  that  the  New  York 
Court  of  Appeals  has  passed  upon  the  effect  of  this  legislation. 

What  may  fairly  he  called  the  minority  doctrine  originated  in  New 
York  in  Bai/  v.  Coddington,  5  Johns.  Ch.  54,"  the  opinion  being 
written  by  Chancellor  Kent.  The  leading  case  in  this  country  on  the 
majority  side  is  Swift  v.  Tyson,  \i\  Pet.  1,  10  L.  Ed.  805,  the  opinion 
being  written  by  Justice  Story.  It  was  there  declared  that  one  who 
took  negotiable  paper  in  payment  of  or  as  security  for  a  pre-existing 
debt  was  a  holder  for  value  and  in  due  course  of  business,  and  the 
argument  was  made  in  support  of  that  express  i)roposition.  But  the 
reference  to  paper  taken  as  security  was  not  required  by  the  facts  of 
the  case,  and  Justice  Catron  dissented  on  this  ground.  In  Railroad  Co. 
V.  National  Banl-,  102  U.  S.  U,  the  same  reasoning  was  adopted  and 
applied  in  a  case  where  the  transfer  was  made  merely  to  secure  an 
antecedent  debt.  The  note  there  involved  had  several  indorsers,  and 
the  obligation  assumed  by  the  last  holder  to  give  them  notice  of  non- 
payment was  treated  as  a  part  of  the  consideration  of  the  transfer, 
hut  the  decision  did  not  turn  upon  this  treatment.  And  in  American 
File  Co.  V.  Garrett,  110  U.  S.  288,  the  principle  was  applied  where 
there  were  no  prior  indorsers.  In  the  opinion  in  Bailroad  Co.  v. 
National  Banlc  it  was  noted  (citing  3  Kent's  Commentaries,  p.  81, 
note  "  b  ")  that  Chancellor  Kent,  after  the  decision  in  Swift  v.  Tyson, 
indicated  that  lie  was  inclined  to  concur  in  it,  as  the  plainer  and  better 
doctrine. 

tract.  An  antecedent  or  pre-existing  debt  constitutes  value,  and  is  deemed 
such  whether  the  instrument  is  payable  on  demand  or  at  a  future  time.'  Sec- 
tion 29  provides:  'Where  the  holder  has  a  lien  on  the  instrument,  arisin*^ 
either  from  contract  or  by  implication  of  law,  he  is  deemed  a  holder  for  value 
to  the  extent  of  his  lion.'  We  are  of  the  opinion  that  it  was  the  intention  of 
the  Le{.'islature  to  change  the  rule  theretofore  prevailing  in  this  state  'so 
that  any  person  to  whom  a  negotiable  security  has  been  pledged  as  collateral 
■would  be  a  holder  for  value  to  the  extent  of  the  amount  due  him.'  Payne  v. 
Zell,  98  Va.  294;  Mrrnick  v.  Alderman,  77  Conn.  (5.34;  Brooks  v.  Sullivan,  129 
N.  C.  190.  See,  also.  Petrie  v.  Miller,  .'37  App.  Div.  17,  afTirmed  without 
opinion.  173  N.  Y.  59G."  —  C. 

11  §  52. —  C. 

12  A  passing  reference  to  this  case  in  liank  of  America  v.  Waydell,  187  N.  Y. 
115,  serves,  to  some  extent,  to  continue  the  doubt  as  to  what  position  the 
New  York  Court  of  Apjieals  will  take  on  this  (juestion.  Sea  editorial  in  the 
New  York  Law  Journal  for  Jan.  18,  1907,  at  p.  1302.  —  C. 


11.]  PEE-EXISTING  DEBT.  347 

The  Bay-Cuddington  case  and  the  Swift-Tyson  case  are  cited  in 
almost  every  opinion  in  which  1;he  merits  of  the  question  under  con- 
sideration are  discussed,  and  the  state  courts  have  ordinarily  taken 
sides  upon  the  matter  as  the  arguments  of  the  one  decision  or  the 
other  have  appealed  to  them  with  the  greater  force.  In  the  former 
case  it  is  said :  "  It  is  the  credit  given  to  the  paper,  and  the  con- 
sideration bona  fide  paid  on  receiving  it,  that  entitles  the  holder,  on 
grounds  of  commercial  policy,  to  such  extraordinary  protection,  even 
in  cases  of  the  most  palpable  fraud.  It  is  an  exception  to  the  general 
rule  of  law,  and  ought  not  to  he  carried  beyond  the  necessity  that 
created  it."  In  the  latter  case  it  is  said:  "  Receiving  it  [a  negotiable 
instrument]  in  payment  of  or  as  security  for  a  pre-existing  debt  is 
according  to  the  known  usual  course  of  trade  and  business.  And  why, 
upon  principle,  should  not  a  pre-existing  debt  be  deemed  such  a 
valuable  consideration?  Jt  is  for  tlie  benefit  and  convenience  of  the 
commercial  world  to  give  as  wide  an  extent  as  practicable  to  the  credit 
and  circulation  of  negotiable  paper,  that  it  may  pass  not  only  as 
security  for  new  purchases  and  advances,  made  upon  the  transfer 
thereof,  but  also  in  payment  of,  and  as  security  for,  pre-existing  debts. 
The  creditor  is  thereby  enabled  to  realize  or  to  secure  his  debt,  and 
thus  may  safely  give  a  prolonged  credit,  or  forbear  from  taking  any 
legal  slops  to  enforce  his  rights.  The  debtor  also  has  the  advantage 
of  making  his  negotiable  securities  of  equivalent  value  to  cash.  But 
establish  the  opposite  conclusion,  that  negotiable  paper  cannot  be  ap- 
plied in  payment  of  or  as  security  for  pre-existing  debts,  without 
letting  in  all  the  equities  between  the  original  and  antecedent  parties, 
and  the  value  and  circulation  of  such  securities  must  be  essentially 
diminished,  and  the  debtor  driven  to  the  embarrassment  of  making  a 
sale  thereof,  often  at  a  ruinous  discount,  to  some  third  person,  and 
then  by  circuity  to  apply  the  proceeds  to  the  payment  of  his  debts." 

Among  other  arguments  advanced  in  behalf  of  the  majority  view 
are  that  the  question  is  really  ofcc  of  the  law  merchant  —  the  custom 
of  merchants  —  and  that  a  "transfer  by  a  debtor  to  his  creditor  of  a 
negotiable  instrument,  to  pay  or  only  to  secure  a  prior  debt,  makes  the 
creditor  a  bolder  for  value,  by  the  custom  "  (Rigclow  on  Bills,  Xoles  & 
Cheques,  247)  ;  that  the  creditor,  in  accepting  a  negotiable  note, 
whether  or  not  there  are  parties  to  be  charged  by  notice,  does  under- 
take to  exercise  some  degree  of  diligence  (2  Randolph  on  Commential 
F'aper,  §  804),  thereby  affording  a  new  consideration,  or  at  all  events 
that  he  "is  naturally  lulled  into  security  arid  inactivity  by  crediting 
the  face  of  the  note,  and  he  should  not  be  made  to  suffer  by  tlu;  maker 
for  confidence  which  his  own  promise  created"  (1  Daniel  on  Neg. 
Inst.,  §  HIJla)  ;  that  the  true  consideration  for  the  transfer  is  thp  debt 
due  from  the  indorser  to  the  indorsee,  and  the  obligation  to  pay  or 
secure  said  debt;  that  such  trnnsfer  is  a  sufTlcient  consideration, 
U'cause  "  security  for  the  payment  of  a  debt  actually  owing  is  a  good 


2-48  OONSlUKKATlON.  [aKT.    III. 

c'ousideratiou,  and  sullk'ient  to  support  a  transfer  of  property  ''  (sep- 
arate opinion  of  Justice  Bradley  in  Hallroad  Co.  v.  Nat.  Bank,  supra). 
That  tlie  policy  of  the  law  is  to  facilitate  the  transfer  of  negotiable 
paper  free  of  equities  is  illustrated  by  the  fact  that  it  is  almost  uni- 
versally held  that  one  who  acquires  it  in  payhient  df  an  antecedent  debt 
is  a  bona  fide  holder  {Draper  v.  Cowles,  2^  K^n.  484;  4  A.  &  E. 
Encycl.  of  Law  [2d  ed.J  385),  whereas  the  ordinary  rule  in  reference 
to  protection  under  recording  acts  is  that  one  who  accepts  property  in 
satisfaction  of  an  existing  debt  is  not  an  innocent  purchaser  (4  A.  &  E. 
Encycl.  of  L.  f2d  ed.  |  490;  Dolati  v.  Van  Demarlc,  35  Kan.  304; 
Henderson  v.  Gibhs,  39  Kans.  680.)  Even  where  the  New  York  doctrine 
is  accepted,  an  exception  is  made  against  the  plea  of  lack  of  considera- 
tion when  made  by  an  accommodation  party  to  the  pajjcr  transferred  as 
security.  Grocers'  Bank  v.  Penfield,  69  N.  Y.  508 ;  Maitland  v.  Citi- 
zens' Bank,  40  Md.  540;  Smith  v.  Wachob,  179  Pa.  260. 

If  the  question  were  a  new  one,  to  be  determined  upon  consideration 
of  equitable  principles,  there  would  be  strong  reasons  for  holding  that 
he  who  takes  a  note  merely  as  security  for  an  existing  debt  acquires  no 
greater  right  than  his  debtor  had.  The  reasons  given  in  Mann  v. 
National  Bank,  30  Kan.  412,  for  applying  this  rule  to  a  bank  that 
receives  a  note  from  a  depositor,  and  adds  the  amount  to  his  account, 
which  is  not  overdrawn,  would  seem  to  apply  to  the  case  of  one  who 
receives  the  paper  as  collateral  for  an  indebtedness  already  existing. 
He  parts  with  nothing,  and  is  in  no  worse  situation  than  he  was 
before.  It  requires  no  variation  of  usual  procedure  to  save  him  from 
loss.  But  on  the  other  hand,  the  same  arguments  would  reach  the 
case  of  him  who  takes  commercial  paper  in  payment  of  an  existing  un- 
secured debt.  He  likewise  is  in  no  way  placed  in  any  worse  situation 
than  he  was  before,  since,  while  the  original  debt  may  be  regarded  as 
technically  canceled,  he  at  all  events  has  his  remedy  upon  the  collateral 
against  the  person  from  whom  he  received  it,  whatever  defense  might 
be  available  to  the  maker.  He  still*  has  a  valid  claim  against  his 
original  debtor,  and  that  is  all  he  had  in  the  first  place.  See  Ran- 
dolph on  Commercial  Paper,  §§  461-465.  Yet,  as  has  just  been  said, 
one  acquiring  commercial  paper  under  such  circumstances  is  held  to  be 
protected  as  an  innocent  purchaser. 

But  the  question  before  us  is  peculiarly  one  in  which  great  weight 
should  be  given  to  the  authorities,  and  especially  to  the  decisions  of 
the  courts  of  the  national  government,  which  do  not  recognize  any 
local  law  in  such  matters.  Oates  v.  National  Bank,  100  U.  S.  239, 
25  L.  Ed.  580.  The  question  is  one  likely  to  arise  frequently  in 
transactions  between  inhabitants  of  difTcrent  states.  It  is  important 
that  the  law  should  be  uniform  in  the  different  jurisdictions.  It  was 
doubtless  in  recognition  of  this  consideration  that  the  legislatures  of 
North  Carolina,  Tennessee,  Virginia,  and  possibly  New  York,  as 
already  noted,  have  lately  by  statute  brought  their  local  laws  on  the 


III.]  HOLDER  FOR  VALUE.  249 

subject  into  harmony  with  the  general  law  as  administered  by  the 
federal  and  by  the  greater  nuiyber  of  the  state  courts.  We  prefer  to 
hold,  in  accordance  with  tlie  weiglit  of  autliority,  that  an  indorsee 
of  negotiable  paper  taken  as  security  for  a  pre-existing  debt  is  a  holder 
for  value  and  in  due  course  of  business,  and  therefore,  in  the  absence 
of  any  circumstances  charging  him  with  notice,  is  protected  against  a 
claim  of  payment  made  to  the  original  payee.     *     *     * 

The  judgment  is  reversed,  and  the  cause  remanded  for  a  new  trial. 
All  the  justices  concurring.'^ 


III.  Holder  for  value.  / 

§  52  HUNTER  v.  WILSON. 

4  Exchequer  Reports.  489.  —  1849. 

Thls  was  an  action  by  the  plaintiff,  as  indorsee  of  a  bill  of  exchange, 
against  the  defendant,  as  acceptor.  Tlic  defendant  pleaded  (in  sub- 
stance), that  the  bill  of  exchange  was  drawn  by  one  McLean,  at  tiie 
request  and  for  the  accommodation  of  the  defendant,  and  without 
any  consideration  or  value  whatever,  and  that  the  bill  was  indorsed 
by  the  said  McLean  witliout  any  consirleratTon  or  value  given  by  the 
plaintiff  for  such  indorsement,  to  the  defendant,  or  to  the  said  McLean, 
or  to  any  other  person  whomsoever.  The  plaintiff  had  signed  inter- 
locutory judgment  upon  this  plea,  the  defendant  being  under  terms  of 
pleading  issuably.  A  rule  nisi  was  subsequently  obtained,  on  the  part 
of  the  defendant,  to  set  this  judgment  aside,  but  without  any  affidavit 
of  merits. 

Wt//es  now  showed  cause. —  The  plaintiff  was  clearly  entitled  to 
sign  judgment,  for  the  plea  is  not  issuable.  It  is  quite  consistent  with 
tilt'  [)l('a  tliat  there  was  a  good  consideration  given  for  the  bill.  It  may 
have  passed  through  many  hands,  each  party  having  given  con- 
sideration. ( Roi.Fi:,  B. —  It  may  have  been  indorsed  to  A.  B.,  who 
made  a  present  of  it  to  the  plaintiff.]  Or  the  defendant  may  have 
owed  a  debt  to  some  third  party.  The  allegation  that  the  bill  was 
drawn  for  the  accommodation  of  fhe  defendant  is  absurd.  [T?olfk,  B. 
— -The  plaintiff  may  be  fhe  executor  of  a  person  who  gave  full  value 
for  it.]     lie  wns  then  sfopped  by  the  court,  who  called  upon 

Barnard,  in  support  of  the  rule,  who  contended  that  the  plea  was 
good  upon  general  demurrer. 

Pahki:,  B.  The  plea  is  clearly  n*'A  issuabU',  and  fhe  plaintiff  was 
entitled  to  sipn  judgment.  There  in  not  even  nn  nllecration  in  the 
plea,  that   none  of  the  previous  nrties  to  the  bill   had  given   value 


i«  See    this   chrp    reported    with   eyhausL^ve   note   in    1    A.   &   E.    Ann.   Cas. 
272.  —  C. 


250  CONSIDKIUTION.  ^  [ART.    III. 

for  the  indorsement.  The  rule,  therefore,  ought  to  be  discharged, 
and  with  eosts,  as  tlie  defendant  is  not  prepared  with  an  aHidavit  of 
merits. 

Pollock,  C.  B.,  Aldekson,  13.,  and  Kom'k,  B.,  concurred. 

Rule  discharged,  with  costs,^ 

I 

§  62  ARPIN  V.  OWENS.  ^ 

140  Massachusetts,  144. —  1885. 

Judgment   for  defendant  and   plaintiff  alleged   exceptions. 

W.  Allen,  J.  This  was  an  action  by  the  payee  of  a  foreign  bill  of 
exchange  against  the  acceptor.  The  bill  was  dated  February  23rd,  pay- 
able in  thirty  days  after  date,  and  was  accepted  March  1st.  There  was 
evidence  that  the  plaintiff  took  the  bill  from  the  drawer  on  the  day  of 
date,  for  value,  in  the  regular  course  of  business.  The  court  ruled  that 
the  burden  was  on  the  plaintiff  to  prove  that  the  defendant  had 
received  a  consideration  for  the  draft,  and  that,  if  the  jury  should  find 
that  he  received  no  consideration,  they  should  find  for  the  defendant. 
There  was  evidence  of  want  of  consideration  between  the  drawer  and 
the  defendant,  and  evidence  bearing  upon  other  grounds  of  defense, 
which  is  not  material,  as  the  ruling  presented  but  one  question  for  the 
jury.  For  the  purposes  of  tlie  ruling  the  plaintiff  must  be  taken  to  be  a 
bona  fide  purchaser  of  the  bill  for  value,  and  without  notice  of  want 
of  consideration ;  and  the  question  presented  is  whether,  in  an  action 
by  the  payee  of  a  hill,  who  took  it  before  acceptance,  against  the 
acceptor,  want  of  consideration  between  the  drawer  and  acceptor  is  a 
defense;  in  other  words,  whether  in  such  an  action  the  rule  to  be 
applied  as  to  w^ant  of  consideration  as  a  defense  is  that  which  obtains 
between  the  maker  and  payee  of  a  note  or  that  between  the  maker 
and  indorsee.  The  rule  is  stated  thus  in  Byles  on  Bills  (6th  Amer. 
Ed.)   206: 

"  Between  immediate  parties  —  that  is,  between  the  drawer  and 
acceptor,  between  the  payee  and  drawer,  between  the  payee  and  maker 
of  a  note,  between  the  indorsee  and  indorser  —  the  only  consideration 
is  that  which  moved  from  the  plaintiff  to  the  defendant,  and  the 
absence  or  failure  of  this  is  a  good  defense  to  an  action.  But  between 
the  remote  parties  —  for  example,  between  the  payee  and  the  acceptor, 
between  the  indorsee  and  acceptor,  between  indorsee  and  remote  in- 
dorser —  two  distinct  considerations,  at  least,  must  come  in  question : 
First,  that  which  the  defendant  received  for  his  liability;  and,  secondly, 
that  which  the  plaintiff  gave  for  his  title.     An  action  between  remote 

1  Accord:    nofjman  v.  Bank,  12  Wall.    {IT.  S.)    181.  — C. 


III.]  HOLDER  FOR  VALUE.  251 

parties  will  not  fail  unless  there  be  absence  or  failui-e  of  both  these 
considerations."' 

The  payee  of  an  accepted  bill  holds  the  same  relation  to  the  acceptor 
that  an  indorsee  of  a  note  holds  to  the  maker.  There  is  a  very  close 
resemblance  between  an  accepted  bill  and  an  indorsed  note.  The 
indorsed  note  is  evidence  of  a  debt  originally  due  from  the  maker  to  the 
payee,  and  assigned  and  made  due  to  the  endorsee.  The  bill  is  evidence 
of  a  debt  originally  due  from  the  drawee  to  the  drawer,  assigned  and 
made  due  to  payee ;  and  the  rule  that  the  title  of  the  assignee  cannot 
be  impeached  by  showing  want  of  consideration  for  the  original  debt 
is  applicable  equally  to  the  indorsee  of  a  note,  and  to  the  payee  and  to 
the  indorsee  of  an  accepted  bill.  The  reason,  applicable  alike  to  payee 
and  indorsee,  is  tersely  stated  by  Vaughan,  J.,  in  Low  v.  Chifney,  1 
Bing.  (N.  C.)  267:  "How  was  he  to  know  what  had  passed  between  the 
drawer  and  acceptor."     See  Davis  v.  Randall,  115  Mass.  517. 

It  is  contended  by  the  defendant  that  the  rule  does  not  apply  to  the 
case  at  bar,  because  the  acceptance  was  after  the  bill  was  purchased  by 
the  payee,  and  that,  therefore,  it  was  not  taken  by  him  on  the  faith 
of  the  acceptance.  There  is  no  ground  for  this  distinction.  It  is  im- 
material when  an  acceptance  is  made;  it  may  be  made  at  any  time, 
and  the  rights  of  the  payee  and  of  indorsees  are  the  same  after  it  is 
made  whether  they  were  acrinired  in  anticipation  of  it  or  subsequent  to 
it.  It  is  held  in  this  state  that,  upon  the  qnosfion  whether  a  promise 
to  accept  made  by  the  drawee  to  the  drawer  is  an  acceptance  as  to  other 
parties,  the  knowledge  of  the  promise,  and  presumed  reliance  npon  it 
in  becoming  parties,  is  material.  Exchanqp  Bnnl-  of  Sf.  Lonia  v.  Hire, 
98  Mass.  28H.  Rnt  where,  as  in  tho  case  at  bar,  there  is  an  acceptance 
upon  the  bill,  it  makes  no  difference  in  the  rights  of  payees  or  in- 
dorsees whether  they  be.come  such  before  or  after  the  acceptance.  See 
Grant  v.  Hunt,  1  0.  B.  '1 1  ;  Wyrrnc  v.  Rnikrs.  5  East,  514;  Powell  v. 
Mnnnier,  1  Atk.  fill. 

The  instrument  is  negotiable  before  aeceptance,  and  the  acceptance 
is  an  acknowledgment  of  flie  debt  it  represents,  and  an  absolute 
promise  to  pay  it  to  the  person  who  is  or  shall  hecoiiic  Ihc  holder  of 
the  bill;  and  to  allow  a  want  of  consideration  for  tlu;  aeceptance  to 
defeat  the  right  of  a  horia  fide  holder,  whether  he  became  such  before 
or  after  the  acceptance,  would  be  contrary  to  the  nature  and  purpose 
of  bills  of  exchange,  and  to  the  uniform  usage  \u  regard  to  them. 
Exceptions  sustained.^ 


»In  Hruertemattr  v.  Morris,  101  N.  Y.  fi.3.  70.  tho  court  snys:  "  Tf  a  pnrty 
bpcomi>s  R  hnnn  fidr  hnlflor  for  vahip  of  n  t)ill  Ix-foro  its  ncr('f)tanpf'.  it  in  not 
essential  to  his  riplit  to  pnforrc  it  against  a  siil)R<<|iH'nt  arccptor,  that  an  adfli 
tional  consiftorntion  shouM  proroprl  from  him  \o  tho  (irawcc.  Thfi  liill  itsolf 
Iroplipp  n.  roprospntntion  by  thp  Hrawpr  that  thp  Hrawop  in  alroacty  in  rocpipt 
of  ftinds  to  pay,  and  his  rontraot  is  that  tho  drawpp  i^hall  nrrppt  and  pay 
according  to  the  terms  of  the   draft.      (Parsons  on    Hills,   .T2.3,   544;    Arjtin  t. 


252  CONSIDERATION,  [ABT.    III. 

§63  STODDAHl)  v.  KIMBALL. 

6  C'vsHiNO    (Mass.)    469. —  1850. 

Shaw,  C.  J.  *  *  *  hi  the  prosont  case,  it  appearing  that  the 
note  was  ne<zotiated  to  the  phiintitfs  l)efore  it  was  due,  for  a  valuable 
consideration,  and  the  jury  having  found  that  they  took  it  without 
notice  of  the  misapplication  hy  the  maker,  it  is  clear  that  they  have 
a  right  to  recover;  and  the  only  remaining  question  is,  for  what 
amount  they  may  recover.  In  general,  the  holder  of  an  indorsed  note 
will  be  entitled  to  recover  the  whole  amount  of  the  face  of  the  note, 
because  tiie  presumption  of  fact,  in  the  absence  of  counter  proof,  is, 
that  he  gave  the  full  value  for  it,  or  that  he  took  it  from  some  other 
holder  for  value,  to  collect  the  amount,  receive  a  certain  part  to  his 
own  use,  and  account  to  the  party  from  whom  he  took  it  for  the 
surplus.  Having  taken  it  to  secure  a  pre-existing  debt,  of  a  less 
amount,  he  is  a  holder  for  value  in  his  own  right,  only  to  the  amount 
of  the  debt  due  him.  If,  therefore,  it  appears  in  proof,  that  the 
plaintiff  is  not  accountable  to  any  third  person  for  any  surplus, 
then  there  is  no  reason  why  he  should  recover  any  more  than  the 
balance  of  the  debt,  for  which  he  is  a  bona  fide  holder  for  value. 
Here,  it  appears  that  the  plaintiff  received  this  note  of  the  maker, 
for  whose  accommodation  the  defendant  indorsed  it.  It  being  obvious 
that  the  plaintiff  can  recover  nothing  as  trustee  for  the  party  from 
whom  he  received  it,  he  is  liable  over  to  nobody  for  the  surplus,  and 
therefore  can  have  judgment  only  for  the  amount  due  to  himself, 
for  his  own  use  and  in  his  own  right  which  is  so  much  of  the  note 


Chapin,  140  Mass.  144.)  The  drawee  can,  of  course,  upon  presentment  refuse 
to  accept  a  bill,  and  in  that  event  the  only  recourse  of  the  holder  is  against 
the  prior  parties  thereto;  but  in  case  the  drawee  does  accept  a  bill,  he 
becomes  primarily  liable  for  its  payment,  not  only  to  its  indorsees  but  also  to 
the  drawer  himself. 

"The  delivery  of  a  bill  or  check  by  one  person  to  another  for  value  implies 
a  representation  on  the  part  of  the  drawer  that  the  drawee  is  in  funds  for  its 
payment,  and  the  subsequent  acceptance  of  such  check  or  bill  constitutes  an 
admission  of  the  truth  of  the  representation,  which  the  drawee  is  not  allowed 
to  retract.  (Daniel  on  Neg.  Inst.,  5'M;  Parsons  on  Bills,  323,  544,  545.)  By 
such  acceptance  the  drawee  admits  the  truth  of  the  representation,  and  having 
obtained  a  suspension  of  the  holder's  remedies  against  the  drawer,  and  an 
extension  of  credit  by  his  admission,  is  not  afterwards  at  liberty  to  controvert 
the  fact  as  against  a  bona  fule  holder  for  value  of  the  bill. 

"  The  payment  to  the  drawer  of  the  purchase  price  furnishes  a  good  con- 
sideration for  the  acceptance  which  ho  then  >indertakes  shall  be  made,  and  its 
subsequent  performance  by  the  drawee  is  only  the  fulfillment  of  the  contract 
which  the  drawer  represents  he  is  authorized  by  the  drawee  to  make. 

"The  rule  that  it  is  not  competent  for  an  acceptor  to  allege  as  a  defense 
to  an  action  on  a  bill  that  it  was  done  without  consideration,  or  for  accommo- 
dation, as  against  a  bona  fxde  holder  for  value  of  such  paper,  flows  logicallf 
from  the  conclusive  force  given  to  bis  admission  of  funds,  and  U  fle- 
mentary."  —  C. 


IV.]  WANT  OF  CONSIDERATION.  253 

as   may   be   necessary   to   satisfy   the   balance   of  the   debt,   for   the 
security  of  which  he  received  it. 

Judgment  on  the  verdict  for  the  plaintiff  for  the  smaller  sum.' 


IV.  Effect  of  want  of  consideration. 

§  54  OSGOOD  V.  ARTT. 

[Reported  herein  at  p.  507.] 


§  54  STACY  V.  KEMP. 

97  Massachusetts,  166.  —  1S67. 

Contract  upon  a  promissory  note.  Defense,  partial  failure  of 
consideration  in  that  plaintiff,  having  agreed  not  to  peddle  milk  in 
H.,  had  continued  to  do  so,  etc.  The  trial  court  held  evidence  of  this 
inadmissible.     Plaintiff  alleges  exceptions. 

Chapman,  J.,  [after  disposing  of  another  question].  It  was  com- 
petent to  the  defendant  to  prove  that  the  note  was  given  as  well  in 
consideration  of  a  sale  of  the  good  will  of  the  milk  route,  and  an 
agreement  not  to  go  into  business  which  should  interfere  with  it,  as 


8  In  Mersick  v.  Alderman,  77  Conn.  6.34  637,  the  court  said:  "The  defend- 
ants claim  that  the  comfil.Tint  was  inapproyiriate,  in  that  it  was  in  the  ordi- 
nary form  of  one  on  behalf  of  an  indorsee  of  a.  negotiable  note  apain.st  the 
maker,  and  that  the  judgment  did  not  conform  to  the  complaint  in  that  it  was 
rendered  for  the  amount  of  the  indebtedness  which  it  was  given  to  secure.  It 
is  well  settled  that  the  payee  or  indorsee  of  a  note  held  as  collateral  may  sue 
upon  it,  and  such  is  the  plain  implication  of  our  stattites.  fJen.  St.  1902, 
§S  4222-4227  [N  Y..  §§  91-961;  Daniels  on  Negotiable  Instruments.  §  833; 
Hodgen  v.  AasA,  141  III.  .391;  Whittaker  v.  Charleston  Gas  Co.,  16  W.  Va. 
717;  Reed  v.  First  Xntional  Hank,  23  Colo.  380.  The  fact  that  judgment  is 
not  in  such  cases  rendered  for  the  full  amount  of  the  note,  but  for  the  amount 
of  the  indebtedness  securefl  thereby,  does  not  establish  that  the  recovery  is  not 
upon  the  note.  True  it  is  that,  generally  speaking,  a  holder  in  due  course  of 
negotiable  instruments  is  cntitlec!  to  recover  the  full  amount  thereof.  Clen. 
St.  1902,  §  4227  [X.  Y.,  §  96].  Hut  it  has  long  been  an  accepted  principle 
limiting  the  operation  of  the  general  rule,  but  not  repugnant  to  it,  that  one 
who  taken  siich  paper  as  collateral  security  for  a  debt  will  be  limited  in  hin 
recovery  to  the  amount  of  that  debt.  Crnmuell  v.  County  of  Sac,  9(1  V.  S.  60; 
Dunrnu  v.  Cilhrrt.  29  N.  .1.  Law,  ^2\  :  Fishrr  v.  Fisher,  98  Mass.  393:  Ynuuqs 
V.  Lee,  12  N.  Y.  ^^\.  The  recovery,  however,  is  none  the  less  upon  the  paper. 
The  plaintiff  was  justified  in  confining  his  allegations  to  such  as  disclosed  his 
right  prima  farir  to  recover  the  amount  of  the  note,  and  in  leaving  to  the 
defendants  to  set  up  in  their  answer,  as  they  di<l,  the  facts  which  scrvefj  to 
limit  that  right.  Vnnlieir  v.  Hank,  21  III.  .App.  126;  Curtis  v.  ^fohr,  18  Wis. 
61.5;  Duncan  v.  Cilhrrt,  29  N.  J.  Law,  r>2\ .  The  exceptions  to  the  finding 
need  not  be  considered."  —  C. 


254  CONSIDERATION.  [abT.    111. 

of  a  sale  of  the  articles  enumerated  in  the  bill  of  parcels.  Agree- 
ments of  this  character  mv  xalnl,  ami  are  often  specifically  enforced 
in  equity  by  injumtion,  and  at  law  by  actions  for  damages.  Evidence 
that  the  phiinlill'  has  inlorrered  with  the  route  in  the  manner  stated, 
would  tend  to  show;  tiiat  he  bus  deprived  the  defendant  of  a  part 
of  the  consideration  for  which  the  note  is  given.  It  was  formerly 
held  that  such  damages  must  be  recovered  by  a  cross-action,  and 
could  not  be  proved  and  allowed  in  defense  of  an  action  on  the  note,  by 
way  of  recoupment.  V>x\i  the  doctrine  of  recoupwent  of  damages 
was  fully  established  in  this  court,  in  ffarringfan  v.  SImtton,  (22 
Pick.  510.)  (See  Burnett  v.  Smith,  \  Gray,  50.)  Tt  has  since  been 
applied  in  numerous  cases,  and  was  already  well  established  in  New 
York.  It  is  an  equitable  set-ofT  of  damages  which  ought  to  be 
deducted  from  the  plaintiff's  demand,  and  for  the  recovery  of  which 
the  defendant  ought  not  to  be  turned  round  to  a  cross-action.  The 
court  are  of  opinion  that  it  should  be  applied  to  a  case  like  the  yjresent. 
where  the  plaintiff  has  deprived  the  defendant  of  a  valuable  part 
of  the  consideration  of  the  note  in  suit,  if  the  facts  which  were  alleged 
shall  be  proved. 

The  first  exception  must  be  overruled ;  and  the  second  sustained.'' 


V.  Liability  of  accommodation  party. 

§  55  GREENWAY  r.  WILLIAM  I).  ORTHWETN  GRAIN  CO. 
85  Federal  Reporter  (Cir.  Ct.  App..  8th  Cir.)  536.  —  1898. 

Sanborn,  Circuit  Judge.  On  June  27,  1894,  for  the  purpose  of 
enabling  Ed.  Hogaboom  to  borrow  money  upon  it,  and  without  con- 
sideration, the  plaintiff  in  error,  G  C.  Greenway,  signed,  as  one  of 
the  makers,  a  promissory  note  made  by  Ed.  Hogaboom  for  $5,000  and 
interest  at  10  per  cent,  per  annum  after  maturity,  payable  to  tlie  order 
of  Hogaboom.'*  On  July  23,  1894,  Hogaboom  made  his  promis?ory 
note  for  $5,000  with  interest  at  10  per  cent,  per  annum  from  its  dair, 
payable  seven  months  thereafter  to  the  order  of  the  defendant  in  error, 
William  D.  Orthwein  Grain  Company,  a  corporation.  On  that  dnv, 
Hogaboom  indorsed  and  pledged  the  four-month?  note  to  secure  tlie 
payment  of  tlie  seven-months  note,  delivered  them  both  to  the  defend- 

*  Accord:  Torixus  v.  Burhham,  20  Minn.  128;  1  Daniel  on  Xcp;.  Inst.,  §§  201- 
204.  Ono  who  is  "  not  a  holflcr  in  rhio  course  "  stands  in  tlio  same  relation  as 
an  immediatp  party.  Thus  a  transferee  of  overdue  paper  is  subject  to  the 
defense  of  failure  of  consideration.  Bryan  v.  Primm.  1  111.  .33;  Diamond  v. 
Harris,  .33  Tex.  634;  Sauyer  v.  Hoovry,  5  La.  Ann.  153.  —  H. 

rSee  also  nnfhnrn  v.  Whrrltrrif/ht.  90  Me.  351,  reported  in  2  A.  &  E.  Ann. 
Cas.  428,  with  note  entitled  "  Partial  failure  of  consideration  as  defense  to 
action  on  bill  or  note."  —  C] 

»  This  note  was  payable  four  months  after  date.  —  C. 


v.]  ACCOMMODATION   PARTY.  255 

ant  in  error,  and  borrowed  $5,000  of  that  corporation  upon  them. 
Only  $666. 6G  has  ever  been  paid  upon  either  note.  The  grain  company 
Bueu  Greenway  on  the  note  which  he  signed,  and  his  defenses  were:  (1) 
That  he  signed  the  note  without  consideration,  for  the  accommodation 
of  Hogaboom,  and  that  the  defendant  in  error  was  cognizant  of  this 
fact  when  it  made  the  loan  to  him  -  *  *  *  tlie  court  peremptorily 
instructed  the  jury  to  return  a  verdict  for  the  defendant  in  error  for 
the  face  of  the  note  and  interest,  less  the  $666.66  which  had  been  paid. 
This  instruction  is  assigned  as  error.  Accommodation  paper  consti- 
tutes a  loan  of  credit,  without  consideration,  by  one  party  to  another, 
who  undertakes  to  pay  the  paper  and  indemnify  the  lender  against  loss 
on  its  account.  It  is  paper  which  is  made,  indorsed,  or  accepted  by 
one  party,  without  consideration,  for  the  accommodation  of  another, 
for  the  purpose  and  with  the  intention  that  the  latter  shall  obtain 
money  or  credit  upon  it  of  some  third  party.  The  accommodated 
party  can  maintain  no  action  upon  it  against  the  accommodation  maker, 
because  the  latter  has  received  no  consideration  for  it  from  him.  But, 
if  the  party  accommodated  uses  the  paper  in  the  ordinary  course  of 
business  to  obtain  money,  credit,  or  any  other  thing  of  value  from  a 
third  party,  the  law  imputes  the  consideration  which  he  receives  to  the 
acommodation  maker,  indorser,  or  acceptor,  because  the  latter,  by  plac- 
ing his  name  upon  tlie  paper,  has,  in  effect,  requested  him  who  advances 
the  consideration  upon  it  to  pay  that  consideration  to  the  party  accom- 
modated. It  was  for  that  very  purpose  and  with  that  intention  that 
he  placed  his  name  upon  the  paper;  and  when  a  stranger  has  given  a 
valuable  consideration  for  it  to  the  accommodated  party  in  reliance 
upon  this  purpose  and  intent,  the  acommodation  maker  cannot  be  per- 
mitted to  say  that  he  has  not  himself  received  that  consideration.  It 
is  therefore  no  defense  against  one  who  has  acquired  accommodation 
paper,  with  knowledge  of  its  character,  but  in  good  faith,  in  the  ordi- 
nary course  of  business,  and  for  value,  that  the  accommodation  maker 
actually  received  no  consideration  for  it.  Hani,-  v.  WdKiffrr.  2  Pet. 
347,  348;  fron  Co.  v.  Flrniin.  63  .Me.  i;;!);  TonrtrJof  v.  Hrrrf.  6?  Minn. 
384;  Rm  v.  MrDniiald.  68  Minn.  187;  MUlrr  v.  Lnnir<1.  lo:'.  Ill,  r)62, 
571  ;  Israel  v.  Ayrr,  2  S.  ('.  31  1,  318;  Spvrfjiii  v.  Mrl'hrrh'rs.  \2  fnd. 
527.  One  who  takes  commercial 'paper  by  way  of  a  pledge  to  secure 
the  repayment  of  a  simultaneous  loan  made  in  consideration  of  the 
pledge  acquires  it  for  value.  Siriff  v.  Tt/snti.  16  Vci.  1;  Oalrs  v. 
nntilr.  100  V.  S.  230;  Railmnd  Co.  v.  BofiJr,  10?  V.  S.  1  I.  '?S.  The 
first  defense  of  the  plaintifT  in  error  was  tbc'reforc  w  ilhoiit  fouiidatioTK 
♦  ♦♦•******* 

The  charge  of  the  court,  below  was  right,  and  the  judgment  must  be 
nflfirmed.     It  is  ho  ordered.' 


«  S'-e   Stnrhnf}  v.  .fnnrs.   138  Wis.  S2,  post. 


2b6  CONSIDERATION.  [aRT.    III. 

§  65  OPPENHETM  r.  SIMON  RETGEL  CTGAB  CO. 

90  New  York  Supplement  (Sup.  Ct.,  App.  T.)   335.  —  1904. 

Actions  on  promissory  notes.  Judgments  for  plaintiff  and  defend- 
ant appeals. 

BiscMOFF,  J.  The  notes  in  suit  were  discounted  by  plaintiff's  as- 
signor for  tlie  maker,  being  in  the  lat tor's  possession  with  the  indorse- 
ment of  the  payee,  tlie  appellant  corporation.  The  circumstances  im- 
ported the  fact  that  the  indorsement  was  for  accommodation  (Stall  v. 
Baid-,  18  Wend.  466;  Fielden  v.  Lahens,  2  Abb.  Dec.  Ill,  116),  and 
hence  not  within  the  powers  of  a  manufacturing  corporation,  such  as 
this.  Nat.  Park  Bank  v.  G.  A.  Co.,  116  N.  Y.  281.  The  Negotiable 
Instruments  Law  (Laws  1897,  p.  719,  c.  612)  does  not  affect  this  ques- 
tion of  power.  Section  41  provides  for  the  passing  of  title  by  indorse- 
ment, not  the  incurring  of  liability,  and  section  55  does  not  refer  to 
corporations;  therefore  it  is  not  to  be  implied  that  the  Legislature  in- 
tended to  extend  the  powers  of  every  corporation  to  the  making  of 
accommodation  indorsements.  Crawford,  Neg.  Instruments  (2d  Ed.) 
pp.  36,  37.  Upon  the  facts  presented,  the  judgment  charging  the 
appellant  with  liability  is  without  support,  but  it  may  be  that  upon  a 
new  trial  the  plaintiff  might  produce  sufficient  proof  to  bind  the  cor- 
poration upon  principles  of  estoppel.  Therefore  an  absolute  dismissal 
will  not  be  ordered. 

Judgments  reversed,  and  new  trial  ordered,  with  costs  to  appellant 
to  abide  the  event.     All  concur.^ 


Tin  Nat.  Bank  of  Newport  v.  fj.  P.  Snyder  Mfg.  Co.,  117  App.  Div.  (N.  Y.) 
370,  373,  the  court  said:  "It  is  to  be  borne  in  mind  that  the  defendant  in 
this  case  is  a  manufacturing  corporation.  When  an  individual  signs  a  note, 
either  as  maker  or  indorser,  for  the  benefit  of  another,  and  allows  it  to  be  put 
in  circulation,  he  is  liable  to  a  holder  for  value,  although  such  holder  knew 
him  to  be  an  accommodation  party.  Negotiable  Instruments  Law,  §  55; 
National  Bank  of  the  City  of  N.  Y.  v.  Toplitz,  81  App.  Div.  593,  aflirmed  178 
N.  Y.  464.  But  a  manufacturing  corporation  has  no  power  to  bind  itself  as  an 
accommodation  party.  Central  Bank  v.  Empire  f^fone  Dre.iNinfj  Co..  26  Harb. 
23;  Bank  of  Genesee  v.  Patchin  Bank. '13  N.  Y.  309;  National  Park  Bank  v. 
German  Am.  N.  W.  &  H.  Co..  116  N.  Y.  281.  So  that  the  rule  adverted  to 
[that  the  burden  was  Tipon  the  defendant  to  prove  that  the  plaintifT  knew  or 
had  reason  to  suspect  that  the  note  was  accommodation  paper  when  it 
accepted  it]  does  not  obtain  in  this  case,  and  the  plaintiff  must  show  both  that 
it  was  a  holder  for  value,  and  also  that  it  did  not  know  the  accommodation 
character  of  the  defendant's  signature." 

See  also  Cook  v.  Am.  Tnhinq  and  Wehhing  Co.,  28  R.  I.  41,  reported  in 
9  L.  N.  S.  193,  with  note  entitled  "  Power  of  corporation  to  issue  accommoda- 
tion paper."  —  C, 


v.]  ACCOMMODATION    PARTY.  257 

§  56  MORRIS  COUNTY  BRICK  CO.  v.  AUSTIN. 

75  Atlantic  Reporter  (N.  J.  Sup.  Ct.)  550.  —  1910. 

This  is  a  suit  ou  a  promissory  note  dated  Juue  9,  1908,  made  by 
Virgil  to  the  order  of  tlie  plaiutiii  for  the  purchase  price  of  bricks  sold 
him  through  Austin,  who  was  entitled  to  a  commission  upon  the  sale. 
Austin  indorsed  the  note  under  the  following  circumstances:  Upon 
his  demand  for  payment  of  his  commission,  the  plaintiff  refused  to  pay 
until  the  bricks  were  paid  for  by  Virgil,  unless  Austin  would  indorse 
the  note.  Austin  thereupon  indorsed  the  note,  and  was  paid  his  com- 
mission. The  note  was  discounted  at  the  bank,  but  was  not  paid  at 
maturity,  and  Austin's  liability  was  fi.ved  by  due  notice  of  dishonor. 
The  trial  judge  directed  a  verdict  for  tbe  plaintiff  for  the  full  amount. 

Sw.AYSE.  J*  *  *  7t  ^-as  07)en  to  tbe  jury  to  believe  tlie  tes- 
timony of  tbe  defendant  tbat  he  indorsed  the  note  to  enal)le  tbe  com- 
pany to  get  it  discounted,  and  thereby  raise  casb  out  of  which  they 
would  pay  bis  commission.  From  this  it  was  proper  to  infer  tbat 
Austin  was  an  accommodation  party  (Vliet  v.  Easihnrn,  64  N.  J.  Law, 
627),  and  this  is  true  notwithstanding  tbe  language  of  section  29  ^  of 
tbe  act,  which  defines  an  accommodation  party  as  one  who  has  signed 
the  instrument  as  maker,  drawer,  acceptor,  or  indorser,  without  receiv- 
ing value  therefor.  This  language  has  been  criticised  by  Dean  Ames, 
14  Harvard  Law  Review,  248;  and,  if  it  must  be  construed  to  mean 
that  one  who  loans  his  name  to  another  upon  a  negotiable  instrument 
and  receives  payment  for  tbe  accommodation  loses  as  to  that 
person  the  right  of  an  accommodation  party,  it  would  be  subject 
to  very  just  criticism,  since  such  a  construction  would  deprive 
an  accommodati(jn  maker  of  liis  rights,  as  against  the  person 
accommodated,  if  he  bad  received  any  consideration,  bowever  slight. 
A  careful  reading  of  tbe  section  shows  tbat  this  construction  is  not 
necessary.  The  words  are  not  "without  receiving  value,"  but  "without 
receiving  value  therefor."  Tbe  structure  of  the  sentence  is  such  tbat 
the  last  word  can  only  refer  to  the  negotiable  instrument  itself,  not  to 
tbe  loan  of  tbe  name  by  way  of  accommodation.  This  view  was  sug- 
gested by  Mr.  McKeeban  in  41  American  Law  Register,  499,  5fil 
(reprinted  in  Hrannnn  on  tlu'  Xegntiable  Instruments  Act,  at  page 
133).  In  this  case,  moreover,  Austin  flid  not  receive  value  in  any 
sense.  What  he  secured  was  the  payment  out  of  the  proceeds  of  the 
discounted  note  of  tbe  commission  due  him.  Tbat  wns  onlv  the  pay- 
ment of  a  prior  debt,  nf)t  the  giving  of  value  for  Austin's  indorsement. 
'I'he  value  received  within  ffie  meaning  of  sectioti  29  must  precede  or  be 
contemporaneous  with  the  obligation  upon  the  note;  otherwise,  tbe 
party  would  be  an  accommodation  party  when  the  note  was  given  and 

"  N.  v..  §  55.  —  U 

KEOOT.   I.fSTBUMENTS —  17 


'ir^S  CONSIDKHATION.  [aRT.    III. 

would  cease  to  be  such  when  the  subsequent  payment  was  made  him. 
Nor  can  the  promise  to  pay  the  commission  out  of  the  proceeds  of  the 
note  as  distinct  from  the  actual  payment  constitute  value  for  the  en- 
ilorsement,  for  that  promi.^o  was  merely  one  to  perform  an  existing 
loiral  obligation,  and  was  therefore  witliout  consideration.  If  the  jury 
found  that  Austin  was  an  accommodation  party,  they  would  necessarily 
find  that  the  plaintiff  was  the  party  accommodated,  for  no  one  else  was 
concerne<i.  The  maker  had  nothing  to  do  with  the  arrangement.  If 
Austin  loanetl  his  name  to  the  plaintiti'  corporation,  it  acquired  no  right 
of  action  against  him.  Messtnore  v.  Meyer,  56  N.  J.  Law,  31.  *  *  * 
A  jury  question  was  presented,  and  it  was  error  to  direct  a  verdict 
for  the  plaintiff.  The  judgment  must  therefore  be  reversed,  and  the 
record  remitted  for  a  new  trial.     *     "     * 


ARTICLE  IV. 

Negotiation. 
I.  What  constitutes  negotiation  or  transfer. 

§60  Crouch  v.  Credit  Foncier,  L.  R.  8  Q.  B.  374.  (1873.) 

Blackburn,  J.  —  In  the  present  case  the  plaintiff  has  taken  upon 
himself  the  burden  of  establishing  both  that  the  property  in  the 
debenture  passed  to  him  by  delivery,  and  that  the  right  to  sue  in  his 
own  name  was  transferred  to  him. 

The  two  propositions  are  very  much  connected,  but  not  identical. 
The  holder  of  an  overdue  bill  or  note  may  confer  the  right  on  the 
transferee  to  sue  in  his  own  name,  but  he  conveys  no  better  title  than 
he  had  himself.     *     *     * 

But  the  two  questions  go  very  much  together;  and,  indeed,  in  the 
notes  to  Miller  v.  Race  (1  Smith,  L.  C.  9th  ed.,  p.  491),  where  all  the 
authorities  are  collected,  the  very  learned  author  says:  "It  may  there- 
fore be  laid  down  as  a  safe  rule  that  where  an  instrument  is  by  the 
custom  of  trade  transferable,  like  cash,  by  delivery,  and  is  also  capable 
of  being  sued  upon  by  the  person  holding  it  pro  tempore,  then  it  is 
entitled  to  the  name  of  a  negotiable  instrument,  and  the  property  in  it 
passes  to  a  bona  fide  transferee  for  value,  though  the  transfer  may  not 
have  taken  place  Jn  juarket  overt.  But  that  if  either  of  the  above 
requisites  be  wanting,  t.  e.,  if  it  be  either  not  accustomably  transfera- 
ble, or,  though  it  be  accustomably  transferable,  yet,  if  its  nature  be 
such  as  to  render  it  incapable  of  being  put  in  suit  by  the  party  holding 
it  pro  tempore,  it  is  not  a  negotiable  instrument,  nor  will  delivery  of 
\\  pass  the  property  of  it  to  a  vendee,  however  bona  fide,  if  the  trans- 
feror himself  have  not  a  good  title  to  it,  and  the  transfer  be  made  out 
of  market  overt." 

Bills  of  exchange  and  promissory  notes,  whether  payable  to  order 
or  to  bearer,  are  by  the  law  merchant  negotiable  in  both  senses  of 
the  word.  The  person  who,  by  a  genuine  indorsement,  or,  where  it  is 
payable  to  bearer,  by  a  delivery,  becomes  holder,  may  sue  in  his  own 
name  on  the  contract,  and  if  he  is  a  bona  fide  holder  for  value,  he  has 
a  good  title  notwithstanding  any  defect  of  title  in  the  party  (whether 
indorser  or  deliverer)  from  whom  he  took  it.' 


•  For   a    luminous   diflcunsion   of   "  nef^otiability,"   see    Willis   on    Negotiable 
Securities    (1896),  Lectures   I   and   11.        H. 

[25g] 


yOO  NEGOTIATION.  [art.    IV. 

I.    TRANSFEK  by  DELIVERt. 

§60  BITZER  V.  WAGER. 

83  MtCHlGAN,  223.-1890. 

.\cTtON  on  the  followiug  promissory  note: 
$1 00.00.  Hart,  Mtctt.,  March  20.  1889. 

Kii;lit  months  after  date  I  promise  to  pay  to  the  order  of  Marget  A.  lUt/.er 
(or  bearer),  one  hundred  dollars,  at  the  Oceana  County  Savings  Bank,  value 
received,  with  interest  at  the  rate  of  6  per  cent. 

Bebt  Si'ELLMAN.  G.  L.  VVagar. 

Judgment  for  plaintiff.  Defendant  brings  error  on  the  ground  that 
the  court  erred  in  admitting  in  evidence  the  note  in  question  for  the 
reason  (a)  that  the  note  is  payable  to  Margaret  A.  Bitzer,  and  has 
liever  been  indorsed  or  transferred  by  her  to  plaintiff;  (b)  that  said 
note  is  not  competent  evidence,  for  the  reason  that  plaintiff  has  not 
shown  that  he  owns  or  has  property  in  said  note. 

LoN'G,  J.,  [after  disposing  of  another  nuitter].  —  The  note  is  plainly 
payable  to  bearer,  and  suit  could  be  maintained  thereon  in  the  name  of 
any  holder. 

Judijment  affirmed.* 


§  60  COCK  V.  FELLOWS. 

1  Johnson  (N.  Y.)  143. —  1806. 

From  the  return  to  the  certiorari  in  this  cause,  it  appeared  that  an 
action  had  been  brought  by  the  defendant  in  error  against  the  present 
plaintiff,  before  a  justice  of  the  peace,  in  which  he  declared  on  a  writing 
or  note,  in  the  following  words: 

Due  the  bearer  hereof,  31,  18s,  lOd.  whicli  1  promise  to  pay  tn  Abraham 
Thompson,  or  order,  on  demand,  as  witness  my  hand,  this  22d,  11th  month, 
1803. 

[Signed]  Jordan  Cock. 

The  note  was  not  endorsed  by  Thompson,  and  the  declaration  stated 
the  note  was  made  payable  to  the  bearer.  The  justice  gave  judgment 
for  the  plaintiff  below%  for  the  amount  of  the  note. 

Per  Curiam.     The  word  hearor  has  reference  to  Thompson  as  the 


2  Accord:  Grant  v.  Vaughan,  3  Burr.  1516;  Pierce  v.  Craftn,  12  Johns  (N. 
Y.)  90;  Ellis  v.  Wheeler,^  Pick.  (Mass.)  18;  Matthews  v.  Hall.  1  Vt.  316. 
In  Illinois  promissory  notes  payable  "to  A.  or  bearer"  require  indorsement, 
though  not  if  payable  "to  bearer."  Rnosa  v.  Crist.  17  111.  4.50;  Garfield  v. 
Berry,  5  111.  App.  3.55:  cf.  Avery  v.  Lntirr\er.  14  Oh.  542. 

For  meaning  of  "  instruments  payable  to  bearer."  see  §  28,  ante. 

As  to  effect  of  special  indorsement  see  Johnson  v.  Mitchell,  50  Tex.  212, 
post.  —  H. 


J.    2.]  THANSFER   BY    INDOKSEMENT.  261 

payee,  and  as  the  promise  is  expressly  to  pay  liim  or  order,  another  per- 
son could  not  maintain  an  action  on  the  note  without  his  endorsement. 
The  judgment  below  must  be  reversed. 

Judgment  reversed. 


.  i  P 

2.  Transfer  by  Indorsement  and  Delivery. 

(a)    Transfer  by  indorsing  assignment. 

§  60  MARKET  v.  COREY. 

108  Michigan,  184.—  1895.3 

Action  against  Corey  as  indorser.  The  indorsement  read :  "I  here- 
by assign  the  within  note  to  Matthew  M.  Markey  and  Catherine  Sun- 
dars.''  Tiie  note  also  referred  to  a  certain  contract  which  provided 
that  in  case  of  default  in  any  one  of  five  notes  (of  which  the  note 
in  suit  was  one),  all  of  the  notes,  at  the  option  of  the  payee,  might  be 
declared  due  and  payable.*     Judgment  for  plaintiff. 

Long,  J.,  [after  stating  the  facts].  —  The  usual  mode  of  transfer 
of  a  promissory  note  is  by  simply  writing  the  indorser's  name  upon 
the  back,  or  by  writing  also  over  it  the  direction  to  pay  the  indorsee 
named,  or  order,  or  to  him  or  bearer.  Art  indorsement,  however,  may 
be  made  in  more  enlarged  terms,  and  the  indorser  be  held  liable  as 
sucli.  In  Sands  v.  Wood  (1  Iowa,  2^,3),  tlio  indorsement  was,  "I 
assign  the  within  note  to  Mrs.  Sarah  Coffin."  In  Srars  v.  Lnnfz  (47 
Iowa,  658),  the  indorsement  on  the  note  was,  "I  hereby  assign  all  my 
right  and  title  to  Louis  Meckley."  And  in  each  ca.«e  the  party  so 
assigning  was  held  as  indorser,  the  court  in  the  latter  case  saying  of 
Sands  v.  Wood:  "He  used  no  words  that,  in  and  of  themselves,  indi- 
cated that  he  had  bound  or  made  himself  liable  in  case  the  maker,  after 
demand,  failed  to  pay  the  note.  Rut  it  was  held  the  law,  as  a  legal 
ronclusion,  attached  to  the  words  used  the  liability  that  follows  the  in- 
dorsement of  a  promissory  note."  (See,  also,  Pt/ffi/'s  Adm'r  v.  O'Con- 
nor 7  Baxt.  498;  Selhy  v.  Judd.  24  Kan.  10(5;  Brothcrton  v.  Street 
find.  Sup.],  24  N.  E.  1068.)  The  rule  of  the  American  cases  is  well 
stated  in  Daniel  on  Neg.  Inst.,  (§  6S8c),  as  follows:  ''The  question 
arising  in  such  cases,  is  a  nice  one,  and  depends  upon  rules  of  loiral 
interpretation.  The  mere  signature  of  the  payee,  indorsed  on  the 
paper,  imports  an  executed  contract  of  assignment,  with  its  implica- 
tions, and  also  an  executory  contract  of  conditional  liability,  with  its 


•  Reports  in  30  L.  R.   A.    117,  with  note  entitled  "Assignor  of  pminisHory 
note  n'i  nn  in<l"r«f>r."  —  ('. 

*  Ncg.  Inst.  L.,  §  21,  subsec.  3.  —  H. 


262  NKQOTIATION.  [art.    IV. 

implications.'  The  assigniiuMit  would  be  as  complete  by  the  mere  sig- 
nature as  with  the  words  of  assignment  written  over  it.  The  condi- 
tional liability  which  is  executory  is  implied  by  the  executed  contract  of 
assignment,  and  the  signature  under  it,  which  carried  the  legal  title; 
antl  the  question  is,  does  the  writing  over  a  signature  an  express  assign- 
ment, whicli  the  law  imports  from  the  signature  per  se,  exclude  and 
negative  the  idea  of  conditional  liability,  which  the  law  also  imports  if 
such  assignment  were  not  expressed  in  full?  We  think  not.  When 
the  thing  done  creates  an  implication  of  another  to  be  done,  we  cannot 
think  thai  the  mere  expression  of  the  former  in  full  can  be  regarded 
as  excluding  its  consequence,  when  that  consequence  would  follow  if 
the  expression  were  omitted." 

The  language  used  in  the  assignment  to  the  note  in  suit  does  not 
negative  the  implication  of  the  legal  liability  of  the  assignor  as 
indorser,  and  as  the  words  are  to  be  construed,  as  strongly  as  their 
sense  will  allow,  against  the  assignor,  he  must  be  held  as  indorser. 
This  rule  is  fully  supported  in  Hatch  v.  Barrett  (34  Kan.  230;  8  Pac. 
129).  (See,  also,  Adams  v.  Blethen,  66  Me.  19.)  In  the  case  of 
Aniha  v.  Yeomans  (39  Mich.  171),  the  assignment  read  as  follows: 
"I  hereby  transfer  my  right,  title,  and  interest  of  the  wdthin  note  to 
S.  A.  Yeomans."  Mr.  Justice  Marston  said  in  that  case :  "The  right 
or  interest  passing,  therefore,  under  the  usual  and  customary  indorse- 
ment, is  much  greater  than  the  mere  right,  title,  and  interest  of  the 
payee;  and  when  the  transfer,  as  made,  only  attempts  to  pass  the  title 
and  interest  of  the  payee  of  the  note,  no  greater  right  or  interest  than 
he  then  held  can  pass."  In  other  words,  the  learned  justice  seemed  to 
think  that  the  words  used  limited  the  transfer  to  the  right  and  title  he 
then  held.  While  this  holding  appears  to  be  at  variance  with  the  cases 
elsewhere,  we  think  it  readily  distinguishable  from  the  present,  as  here 
the  words  are,  "I  hereby  assign  the  within  note  to  Matthew  M.  Markey 
and  Catherine  Sundars"  and  do  not  purport  to  limit  the  liability  of 
Corey  as  an  indorser.  In  Stevens  v.  TIannan  (86  Mich.  307),  the  note 
sued  upon  was  negotiable  in  form,  and  made  payable  to  Batchelder, 
and  he  assigned  it  before  maturity,  as  follows:  "For  value  received,  1 
hereby  assign  all  interest  in  and  to  this  note  to  Ralph  E.  Watson." 
Defendant  insisted  in  that  case  that  the  plaintiff  could  not  sue  in  his 
own  name,  but  should  have  sued  in  the  name  of  the  payee.  It  was  said 
by  Mr.  Justice  McGrath :  "I  do  not  think  the  point  well  taken.  If 
Batchelder's  indorsement  did  not  affect  its  negotiability,  then  Watson's 
indorsement  entitled  the  plaintiff,  as  holder  of  the  note,  to  sue  in  his 
own  name."  It  must  be  held,  therefore,  that  the  memorandum  on  the 
note  did  not  relieve  Corey  from  liis  liability  as  indorser. 

The  court  was  not  in  error  in  admitting  the  contract  in  evidence, 


B  See  Xeg.  Tnst.  L.,  §  116,  post.  —  H. 


1.    2.]  TRANSFER    BY    INDORSEMENT.  263 

as  its  purpose  was  to  show  that  the  note  was  not  in  fact  limited  by  its 
provisions,  and  those  provisions  of  the  contract  cited  did  not  destroy 
the  negotiability  of  the  note.      (Daniel,  Neg.  Inst.,  §  48.) 
The  judgment  must  be  affirmed.     The  other  justices  concurred." 

§  60      Hall  v.  Toby,  110  Pennsylvania  State,  3l8.  —  1885. 
Action  by  D.  B.  Toby  as  indorsee  under  the  following  instrument 
and  assignment : 
$551.50.  Wabbex,  Aug.  18,   1879. 

For  value  received  I  promise  to  pay  Wm.  Toby,  or  order,  five  hundred  and 
fifty-one  50/100  dollars  with  interest. 

Orbis  Hall. 
[On  the  back  of  this  paper  was  the  following  transfer  or  assignment] : 
For  value  received  I  hereby  assign,  transfer  and  set  over  to  D.  B.  Toby  all 
my  right,  title,  interest  and  claim  in  the  within  note. 

Wm.  Toby, 
D.  B.  Toby. 
Tionesta,  Nov.  21,  1881. 

Per  Curiam.  —  This  note  was  negotiable.     It  contained  an  absolute 
and  unconditional   promise  to  pay  to  Wm.  Toby  or  order  the  sum 
specified.     As  no  time  of  payment  was  therein  expressed,  the  law  ad-  d^i^ 
judges  the  money  to  be  payable   immediately.       A   right  of  action      ^N_-. 
accrued  at  once  and  would  be  barred  by  the  Statute  of  Limitations  at      v^ 
the  expiration  of  six  years  thereafter.     The  note  had  all  the  essential  /    ^'^"^^ 
language  to  constitute  a  promissory  note. 

The  legal  right  of  action  thereon  would  have  passed  by  indorsement  ~  ^ 

and  delivery.     For  purpose  of  transfer  the  assignment  on  the  back  of 
this  note  passed  the  legal  title.''  ~<»i^ 


(h)    Transfer  by  ivdorsing  guaranty. 

§  60  TRUST  COMPANY  v.  NATIONAL  BANK. 

101  United  States,  68.  —  1879. 

Bill  to  compel  surrender  of  note  The  note  with  security  was 
given  by  the  Wyandotte  Bank  lo  the  Cook  (V)unty  Xational  Bank 
to  obtain  credit,  and  not  to  be  negotiated.  The  latter  did  negotiate  it 
to  the  Trust  Company.     At  its  maliirity  (here  was  due  on  it  to  the 


•  Accord:  Maine  Trunt,  etc.,  Co.  v.  Butlrr,  45  Minn.  50fi;  Davidson  v.  Powell, 
114  N.  r.  575;  Mt-rriU  v.  fjvrlpy.  fl  So.  Dnk.  .'592. 

Contra:  Lyonfi  v.  Pivrlhis.  22  T»a.  St.  IH5;  Spenrrr  v.  Halpcrn.  62  Ark.  696; 
Cf.  Aniha  v.   Yrnman/i.  .19  Mich     171.  — H. 

1  Cf.  Aniha  v.  Yromans.  39  Mich.  171.  While  the  indorHcment  passes  title  it 
does  not  make  the  "  nHsignor  "  liable  ai  an  indorser.  Lyons  v.  Dirrlhi.i,  22  Pa. 
St.  185.  Contra:  Henderson  v.  Ackelmirc,  59  Ind.  540;  Adams  v.  Bleihen  88 
Me.  19.  —  H. 


264  NEGOTIATION.  [auT.    IV. 

Cook  County  Xational  Bank  $i;)v,  whit'li  the  Wyandotte  Bank  offers 
to  pay. 

Mi{.  Justice  Stuong  [after  stating  the  facts].  —  The  note  was  not 
indorsed  to  the  Trust  Company,  and  it  was  not,  therefore,  taken  in  the 
the  usual  course  of  business  by  that  mode  of  transfer  in  wliich  negoti- 
able paper  is  usually  transferred.  Had  it  been  indorsed  by  the  (^ook 
County  Hank,  it  may  be  that  the  Trust  (^ompany  would  hold  it  un- 
affected by  any  equities  between  the  maker  and  payee.  But  instead  of 
an  indorsement,  the  president  of  the  Cook  (^ounty  Bank  merely  guar- 
anteed its  payment,  and  handed  it  over  with  this  guaranty  to  tiie  Trust 
Company.  The  note  was  not  even  assigned.  There  was  written  upon 
it  only  the  following:  — 

For  value  received,  we  hereby  guarantee  the  payment  of  the  within  note  at 
maturity,  or  at  any  time  thereafter,  with  interest  at  ten  per  cent,  ptr  annum 
until  paid,  and  agree  to  pay  all  costs  and  expenses  paid  or  incurrod  in  collect- 
ing the  same.  B.  F.  Allkn,  I'rcs't. 

In  no  commercial  sense  is  this  an  indorsement,  and  probably  it  was 
not  intended  as  such.  Allen  had  agreed  that  the  note  should  not  be 
negotiated,  and  for  this  reason  perhaps  it  was  not  indorsed.  That  a 
guaranty  is  not  a  negotiation  of  aliill  or  note  as  understood  by  the  law 
merchant,  is  cerfam.  (Snevihj  v.  Eld,  1  Watts  &  S.  [Pa.],  208;  La- 
mourieux'v.  Hewitt,  5  Wend.  [N.  Y],  307;  Miller  v.  Gaston,  2  Hill 
[N.  Y.],  188).  In  this  case,  the  guaranty  written  on  the  note  was 
filled  up.  It  expressed  fully  the  contract  between  the  Cook  County 
Bank  and  the  Trust  Company.  Being  express,  it  can  raise  no  applica- 
tion of  any  otlier  contract.  Expressum  facit  cessare  taciturn.  The 
contract  cannot,  therefore,  be  converted  into  an  indorsement  or  an 
assignment.  And  if  it  could  be  treated  as  an  assignment  of  the  note, 
it  would  not  cut  off  the  defenses  of  the  maker.  Such  an  effect  results 
only  from  a  transfer  according  to  the  law  merchant;  that  is,  from  an 
indorsement.  An  assignee  stands  in  the  place  of  his  assignor,  and 
takes  simply  an  assignor's  rights;  but  an  indorsement  creates  a  new 
and  collateral  contract.  (2  Parsons,  Notes  and  Bills,  46  et  seq., 
notes.) 

At  best,  therefore,  the  defendants  below  can  claim  no  more  or 
greater  rights  than  those  of  the  Cook  County  Bank,  and  the  complain- 
ants are  entitled  to  a  return  of  the  note  and  of  the  collaterals  on  pay- 
ment of  the  sum  of  $132. 

Decree  affirmed.® 

8  Accord:  Tutllr  v.  Tinrlhnlomew,  12  Met.  (MasR.)  452;  Belcher  v.  Smith,  7 
Cush.   (Mass.)   482;  Canfield  v.  Vaughan,  8  Mart.   (La.)   683. 

Contra:  Myrick  v.  Hasey.  27  Me.  9;  Heard  v.  Dubuque  Bank,  8  Neb.  10; 
Helmer  v.  Hank,  28  Neb.  474;  Kellocffi  v.  Douglas  Co.  Bank,  .58  Kan.  43; 
Dunham  v.  Peterson.  5  N.  Dak.  414,  where  the  question  is  fully  discussed 
and  authorities  collected;  Elgin  City  Banking  Co.  v.  Zelch,  57  Minn.  487, 
infra.  —  H. 


I.   2.]  TRANSFER   BY   INDORSEMENT. 

§  60  ELGIN  CITY  BANKING  CO.  v.  ZELCH. 

67  Minnesota,  487.  —  1894. 

Action  by  indorsee  against  maker.  The  question  was  whether 
plaintiff  was  an  indorsee,  or  an  assignee  and  so  subject  to  the  defense 
of  fraud  or  failure  of  consideration.  'J'he  court  directed  a  verdict  for 
plaintitf.     The  facts  appeaTTiTthe  opinion. 

Mitchell,  J.  —  The  defendant  executed  his  negotiable  promissory 
note,  payable  to  the  order  of  one  Daniel  Dunham,  who  transferred  it 
to  the  plaintiff,  with  the  following  indorsements:  "Pay  the  Elgin 
City  Banking  Co.  D.  Dunham."  "  Payment  Guaranteed.  D.  Dun- 
ham." 

Whether  these  indorsements  be  construed  as  constituting  a  single 
contract,  or  two  distinct  and  separate  contracts,  we  are  clear  that  they 
constitute  an  "indorsement,"  in  the  commercial  sense,  and  that  the 
transferee  is  an  "indorsee,"  and  entitled  to  protection  as  such,  under 
the  law  merchant.  The  fact  that  Dunham  enlarged  his  responsibility 
beyond  that  of  "  indorser,"  by  guarantying  payment,  did  not  change  or 
affect  the  character  of  his  indorsement.  ^    '^Aws.,^ 

Order  affirmed."  yT^^*— 


^;'^^^  r 


»  See  note  1.  ahovp.     "A  piiaranty  of  the  paytnont  nf  a  note  does  not  neces- 
sarily include  a  contract  of  indorsement,  but  wlien  such  guaranty  is  written      .  »         J^ 
upon  the  back  of  the  note  in  <;<'neral   terms  and  -signed   by   the   payee  named      n/^ — ^ 
therein,  the  universal  custom  is  to  treat  such  contract  of  guaranty  as  a  trans-      f  J 

for  of  the  title  of  the  payee  to  the  person  to  whom   the  guaranty  is   made." 
National  Hank  of  Commerce  v.  Galland,  14  Wash.  .'502.  505.     Such  a  guaranty 
constitutes  "  an  indorsement  of  the  note  with  an  enlarged  liability."     Donner- 
hrrtj  V.  Opprnhcimrr.   15   Wash.  2!)0.     "I   guarantee  attorney's   fees   up   to    10  J->-^ 
P"-  cent,  if  this  note  has  to  he  collected  by  law,  and  its  prompt  payment." —      ^Tfc._A_/( 
held    nn    indorsement   by    the    payee    with    an    enlarged    liability.      Pattillo   v. 
Alexander,  9f>  Ga.  fiO.     For  a  distinction  between  the  case  where  the  guaranty    ^ -\jt^ 
i.s  i.\u-utcd  by  tin-  payee  and  wliere  it  is  executed  by  a  third  person,  see  Ion-  ^' 

.-"•»/   V.   Arnolff,  .11   r.a.  2in-,    Crifirr  Mfrj.   Co.  v.  Jones,  90  Ga.  307.     See  title -v.-, 
"Guarantor's  Liability."  poni.  Art.  VT.  Div.  VTT.  ^TML 

Dkmvery.  —  ••  It  has  often  bet  n  decided,  that  the  assignment  ftrnnsferl  of  a 
note  is  not  complete  without  a  delivery,  and  that  where  a  promissory  note  is 
found  in  the  hands  of  one  who  has  nuule  an  indorsement  thereon,  which,  if 
accompanied  by  delivery,  wonld  have  amounted  to  an  assignment  ftransferl, 
the  presumjition  will  be  that  the  assignment  was  never  completed,  and  that  he 
may,  even  after  suit  brought,  strike  out  such  indorsement."  Wul.srhner  v. 
Bells,  87  Ind.  71,  74.     .Accoril :  Spencer  v.  Carnlarphm,  15  Colo.  445. 

NoN  NKfiftTlAnrE  Instrt'MKnt.  -  The  indorsement  and  delivery  of  a  non 
negotiable  nofr  dfu-s  not  ( inflepcrideiif  f)f  sfnfufe)  authorize  the  holder  to  bring 
an  action  in  his  own  name,  and  the  holder  is  subject  to  all  defenses  that  might 
have  been  set  up  against  his  transferor.  Ifobinson  v.  Brnirn,  4  HIackf.  (Ind.) 
12fl;  ^^nule  v.  Crnirforrl,  14  Iltin   (N.  Y.)   19.3;  post,  Art.  XVII,  Div.  I,  3.  —  H. 


266  NEGOTIATION.  [ART.    IV. 

§60        \  JOHNSON  r.  MITCHELL. 

[Ktpoittd  fun  in  at  p.  289.] 


^  60  BKOWN  V.  CURTISS. 

[Reported  herein  at  p.  4(57.1 


II.  Indorsement:  form  required. 

1.     Must  be  Written  on  Instrument  or  Allonge, 

§  61  HERRING  v.  WOODHULL. 

29  Illinois,  92.—  1862. 

Breese,  J.  —  The  first  point  made  in  this  case  is,  that  the  note  was 
not  properly  indorsed,  the  transfer  being  on  the  face  of  the  note. 
Literally,  indorsement  means  a  writing,  in  dorse,  upon  the  back  of  the 
bill  or  note.  But  it  is  well  established,  that  though  such  is  its  import, 
it  may  be  on  the  face  of  the  bill,'  and  numerous  indorsements  may  be 
made  on  a  separate  paper,  called  an  allonge.  (Chit,  on  Bills,  227; 
Yarborough  v.  Bank-  of  England,  16  East,  12;  Rex  v.  Bigg,  1  Strange, 
18;  Story  on  Prom.  Notes,  §  121 ;  Gibson  v.  Powell,  6  Howard  [Miss.] 
60.)  And  any  form  is  sufficient  which  manifests  an  intention  to  trans- 
fer the  note.     {Morris  v.  Bird,  11  Mass.  436.)^ 


§  61  FOLGER  V.  CHASE. 

IS  Pickering   (Mass.)  63. —  1836. 

Action  on  three  promissory  notes. 

Wilde,  J.,  delivered  the  opinion  of  the  Court.  *  *  * 
The  last  objection  is,  that  tlie  indorsement  on  one  of  the  notes  was 
not  made  on  the  back  of  the  original  note,  and  therefore  amounted 
only  to  an  equitable  transfer.  The  indorsement  was  made  on  a  paper 
attached  to  the  back  of  the  note  by  a  wafer,  and  it  liad  been  before  thus 
attached  for  the  purpose  of  entering  thereon  indors^ciiients  of  pnyments, 
the  back  of  the  original  note  having  been  before  covered  with  indorse- 
ments ;  and  several  payments  had  been  indorsed  on  tlie  attached  paper, 

'  Accord:   YouTin  v.  CInrrr.  3  .Tur.  N.  S.  637;   Haines  v.  Dubois,  30  N.  J.  L. 
259;   ffhnin  v.  {^ullii-<in.  lOR  Pal.  20«.     Spp  Nofr.  Tnst.  T>.,  §  36.  subsec.  6.  —  H. 
»  See  Germania  A'ot.  Bank  v.  Mariner,  129  Wis,  544.  ante,  p.  ,  —  C, 


II.]  INDORSEMENTS  FORM.  267 

before  the  note  was  transferred  by  indorsement  to  the  plaintiff.  This 
paper  thus  attached  had  become  a  part  of  the  note,  and  no  good  reason 
can  be  given  why  an  indorsement  made  thereon  should  not  be  held 
a  valid  and  legal  transfer.  Thpj^hjprtinn  is^  fhat  r]]^]]  an  indorsement 
is  notsaa^tioBcd  by  «u&toni;  but  we  tliink  it  is  sjipported  by  the  rea- 
sons on  which  the  cu6tomw^5~^«gifratty~foun3ed.  Bills  of  excliange 
and  promissory  notes  were  indorsed  on  the  back  of  the  bills  and  notes, 
because  it  was  a  convenient  mode  of  making  the  transfer,  and  in  order 
that  the  evidence  thereof  might  accompany  the  note.  Such  an  indorse- 
ment as  this  will  rarely  happen,  and  no  authority  to  support  it  could 
reasonably  be  expected  ;  but  there  is  no  authority  against  it. 

If  a  person  write  his  name  on  a  blank  paper,  to  be  used  as  an  indorse- 
ment of  a  note  to  be  written  on  the  other  side,  and  it  be  filled  up  as 
intended,  the  party  would  be  held  liable  as  indorser  of  the  note, 
although  such  indorsements  are  infrequent,  and  are  not  according  to 
the  customary  form  of  making  a  transfer;  but  they  have  been  held 
to  be  within  the  reason  of  the  custom,  and  are  supported  by  principle. 
(Bayley  on  Bills,  92 ;  Violett  v.  Patton,  5  Cranch.  142.  )=» 

So  in  the  present  case,  as  there  is  no  authority  against  the  validity 
of  the  indorsement,  we  think  we  shall  violate  no  principle  in  iiolding 
it  to  be  a  legal  transfer  of  the  note. 

Judgment  for  the  plaintiffs. 


2.  Must  be  of  Entire  Instrument. 

§62  ITFOTIES  r.  KTDDELL. 

2  Bay  (So.  Cab.).  324.  — 1801. 

Tttir  was  an  action  against  defendant  as  indorser  on  a  note  of 
hand,  in  which  there  was  a  verdict  for  defendant.  The  note  of  hand 
in  question  was  given  by  David  Bush,  of  Camden,  to  the  defendant 
Kiddell,  for  473?.  sterling.  Kiddell  afterwards  made  the  following 
indorsement,  viz :  — 

"  I  assign  over  to  Hudson  Hughes,  the  sum  of  1,I».'50  dollars  and  50 
cents,  88  part  of  this  note  of  hand. 

(Signed.)  Benjamin  Kiddell.'' 

Afterwards  he  maflo  another  indorsement,  and  assigned  over  the 
residue  of  said  note  (to  Hughes.]      (Signed)   Benjamin  Kiddell. 

The  court,  after  hearing  the  arguments,*  refused  to  grant  a  new 
trial,  on  the  ground  tlint  art  inflorsetiienf   for  part  of  a  note  or  hill  is 

•  Rpp  Nfg.  TnBt.  T>..  S  .3.3.  ante.  —  H. 

*  f'otinspl  for  flofondant  arpiiofl  thnt  "  ii  it  wvtp  nllowaldp  fnr  a  man  to 
indor-'o  for  part,  ho  mipht  inrlnrsc  oni'  Imndrpd  to  A.  anotlwr  hundrnfl  to  R, 
and   BO  on;   and  by  that  nicans.  dcfiTKhmt   niijiht   Ixromo  liablp  to  twpntv  dif- 


268  NEGOTIATION.  [aRT.    IV. 

eo,  then  two  vitio 
Rule  discharged. 


bad.      (Ix-x  Mercatoria,  415  Cartli.  i6(l)      And  if  so,  then  two  vitious 
indorsemeuts  <.an  iifver  lonstituU'  a  good  out-. 


in.  Indorsement:  kinds  of. 

I.  Special  Indorsement. 

§  64  REAMER  v.  BELL. 

79  Pennsylvania  State,  292.—  1875. 

Action  by  holder  ajjaiiist  makers  of  a  note  payable  "  to  the  order 
of  William  Diiwortli,  Jr./'  and  indorsed:  "  Win.  Dilworth,  Jr.— Pay 
R.  McCurdy,  Cash."  Defense,  want  of  title  in  holder  (Bell).  Judg- 
ment for  plaintiff. 

'Mm.  Justice  Paxson  delivered  the  opinion  of  the  Court. 

We  think  the  adidavit  of  defense  filed  in  this  case,  while  not  as 
specific  as  it  might  have  been,  was  nevertlieless  sufficient  to  prevent 
judgment.  The  copy  of  the  note  filed  by  t!ie  plain! iff  below  goes  to 
sustain  the  denial  of  his  title  contained  in  tbe  affidavit  referred  to. 
It  is  indorsed  "  Wm.  Dilwortb,  Jr. ;  pay  R.  McCurdy,  Cash."  This 
is  a  special  indorsement,  and  upon  its  face  conveys  no  title  to  the 
plaintiff  below. 

The  further  allegation  that  the  note  in  controversy  was  procured 
by  false  and   fraudulent   representations,  and   that  the  consideration 
thereof  has  failed,  coupled  with  the  denial  of  said  plaintiff's  title,  was 
sufficient  to  put  the  latter  npon  proof  that  be  is  a  hnnn  fdp  bolder.' 
Judgment  reversed  and  a  procedendo  awarded." 


2.  Blank  Indorsement. 


§  64  CURTIS  V.  SPRAGUE. 

[Reported  herein  at  p.  IhhV 

%  65  Evans  v.  Gee,  11  Peters  (U.  S.)  80.—  1837.     Bill  payable  "to 
the  order  of  Thomas  Evans  "  was  indorsed  in  blank  by  payee  (defend- 


ferent  actions  on  the  same  bill.  For  these  reasons,  and  to  guard  against  this 
monstrous  inconveniencp,  the  law  of  merchants  has  ostahlishcd  it  as  a  rule, 
that  a  bill  cannot  be  endorsed  for  part.     Cunn.  on  Pills.  .57." 

To  the  same  effect,  see  Linrtfiay  V.  Price,  23  Tex.  280.  bottom  of  p.  282.  —  C. 

»  See  Neg.  Tnst.  I...  §  98.  post.  —  H. 

«  See  also  Lairrence  v.  Fusxrll,  77  Pa.  St.  4G0.  —  II. 

7"T  see  no  difference  between  a'note  indorsed  in  blnnk  and  one  payable  to 
bearer.  They  both  go  by  delivery,  and  possession  proves  property  in  both 
aises."     Lord  Mansfield  in  Peacock  v.  Rhodes,  2  Doug.  6.3.3.  —  H. 


III.    2.]  BLANK   INDORSEMENT.  269 

ant).  Plaintiff  became  a  holder  in  due  course  and  wrote  over  the  in- 
dorsement, ''Pay  to  Sterling  IT.  Gee."  Mr.  Justice  ^YAYNE:  —  As 
regards  the  right  of  a  bona  fide  holder  of  a  bill  to  write  over  a  blank 
indorsement  to  whom  the  bill  shall  be  paid,  at  any  time  before  or 
after  the  institution  of  a  suit  against  the  indorser,  it  has  long  been 
the  settled  doctrine  in  the  English  and  American  courts ;  and  the 
holder  by  writing  such  direction  over  a  blank  indorsement,  ordering 
the  money  to  be  paid  to  particular  persons,  does  not  become  an  in- 
dorser. (Eden  v.  East  India  Co.,  2  Burr.  1216;  Com.  311 ;  Str.  557; 
Vincent  v.  H alack,  1  Camp.  6;  Smith  v.  Clarke,  Peake,  225.)' 


§65  BELDEN  v.  HANN. 

61  Iowa,  42.  —  1S83. 

QlJESTiON  certified  by  Circuit  Court:  Whether  a  holder  of  a  note 
under  a  blank  indorsement  may  write  above  the  indorsement  "  guar- 
antee payment  at  maturity  to  bearer,"  and  proceed  against  the  in- 
dorser upon  the  guaranty  without  presentment,  demand  and  notice. 

RoTHRocK,  J  *  *  *  It  ig  well  understood  that  the  blank 
indorsement  of  a  promissory  note  by  the  payee  creates  the  liability  of 
an  indorser  as  understood  in  the  law  merchant.  Such  indorsement 
creates  the  same  liability  from  the  indorser  to  the  indorsee,  as  if  it 
were  in  full.      (Bean  v.  Brigga  cf-  P^elthouser,  1   Towa,  488.)^ 

But  the  contract  of  indorsement  is  very  different  from  a  contract 
of  guaranty,  and  the  holder  of  a  note  with  a  blank  indorsement  by 
the  payee  has  no  legal  right  to  change  the  obligation  of  the  indorser^'^" 
by  writing  a  contract  of  guaranty  over  the  name  of  the  payi^e,  "  with-/^'^*w..<^^ 
out  tlif  knowledge  or  fonsent  of  the  payee." 

What  the  rights  of  the  parties  may  be  to  show  by  parol  llio  ronl  "^''M^ 
contract  entered  into  by  the   indorser,  nocfl    not    lie  considcnMl   Iumo,  j-^ 
because    no   such    question    is   certified    to    us.     W'v    ;in'    rcfjuired    to      '   ^^ 
determino  the  questions  rortifiod,  nnd  not  questions  of  fact  or  law  in 
the  case  which  are  not  certified,  and  we  cannot  consider  the  question 
as  to  the  rights  of  the  parties  upon  a  guaranty  upon  a  chattel  inort- 
p;age  given  to  secure  this  note,  as  we  are  requested  to  do  liy  counsel. 
Taking  these  questions  as  they  arc  certified,  we  answer,  unliesitatingly, 

"  Accorrl :  Lnvrll  v.  Hvrrt/tnn.  11  .Tolins.  (N.  Y.)  ri2.  Wliilo  it  is  proprr.  it  in 
not  norrs'-nry,  for  n  hnUIor  fo  fill  up  Hio  indorspmont  hpforn  brinfjinfr  an  .notion 
or  ofTorintr  Hif  nolo  in  ovidonrp.  Rirh  v.  Starhurk.  51  Tnfl.  S7 ;  Grrrrioiiqh  v. 
Rmt^nd,  .1  Oh.  St.  41.'5;  Pnlmrr  v.  Snsunu  Hnvk.  7H  Til.  .ISO.  fontr.i :  Day  v. 
Lyon,  fi  Harris  k  .Johns.  (Md.)  HO;  f'rnslrr  v.  Rnhhin.i,  ,*?  Mot.  (Mass.) 
164.  — H. 


'270  NEGOTIATION.  [AUT.    IV. 

as  did  the  court  below,  that   the  guaranty  written  over  defendant's 
name,  without  his  knowledge  or  consent,  was  void. 

Affirmed.' 


§  65  SCOTT  V.  CALKIN. 

139  Massachusetts,  529.  —  1885. 

Action  against  Calkin  as  maker  and  Cherrington  as  subsequent 
guarantor  of  a  note.  Cherrington's  name  was  in  blank  on  the  back 
of  the  note  and  she  defended  on  the  ground  that  she  had  received 
no  notice  of  dishonor.  Calkin  made  and  delivered  the  note,  secured 
by  mortgage,  to  Pierce  and  the  latter  indorsed  it  to  plaintiff.  Calkin 
then  sold  the  real  estate  covered  by  the_niortgage  to_Cherrington 
who  assumed  and  agreed  to  pay  the  mortgage  deBfTTn  consideration 
of  plaintiff's  forbearance  to  foreclose  the  mortgage  Cherrington  agreed 
with  him  to  pay  the  note  and  signed  her  name  on  it.  She  now  pleads 
(1)  want  of  notice  as  indorser;  (2)  statute  of  frauds  as  guarantor.' 
Plaintiff  was  permitted  to  write  above  C's  name,  "  I  guarantee  the 
payment  of  the  within  note,"  and  had  judgment. 

W.  Allen,  J. —  The  indorsement  of  the  note  by  the  defendant 
Cherrington,  under  the  circumstances  proved,  imported  a  guaranty 
of  the  payment  of  the  note  to  the  plaintiff,  and  gave  him  authority 
to  write,  over  her  name,  the  contract  implied  by  law;  and  this,  if  nec- 
essary at  all,  could  be  done  during  the  trial.  (Josselyn  v.  Ames,  3 
Mass.  274;  Tenney  v.  Prince,  4  Pick.  38.5. )2 

The  finding  of  the  court  renders  immaterial  the  question  whether 
demand  and  notice  were  necessary. 

Judgment  for  the  plaintiff. 


§  65  '         CLARKE  v.  PATRICK. 

60  Minnesota.  269.  —  1895. 

Canty,  J. —  This  is  an  action  against  the  defendant  as  indorser 
of  a  negotiable  promissory  note  The  answer  admits  the  making  of 
the  note  to  defendant,  and  thejndorsement  of  it  byJiirii_Jo  plaintiff 
for  a  valuable  consideratfon  before  matunTy^  as  alleged  in  the  com- 
plaint; but  alleges  that  the  Transaction  between  the  parties  was  a 
sale  by  defendant  to  plaintiff  of  the  note  and  a  mortgage  securing  the 


9  The  holdrr  cannot  enlarge  the  liahility  of  the  indorser.     Hood  v.  Robbina, 
98  Ala.  484.  — H. 

1  The  consideration  need  not  be  expressed  in  a  contract  of  guaranty.     Masa. 
Pub.  St.,  c.  78,  §  2.  —  H. 

2  See  Kiatner  v.  Peters,  223  111.  607.  —  C. 


III.    3.]  RESTRICTIVE  INDORSEMENT,  271 

same,  which  was  evidenced  by  a  written  assignment,  and  that  said 
indorsement  was  not  intended  by  the  parties  as  a  giiaranty  of  payment 
of  the  note,  but  was  made  merely  in  aid  of  said  assignment.  Such 
written  assignment  is  not  inconsistent  with  defendant's  liability  as 
indorser,  and  it  is  well  settled  that  the  legal  effect  of  an  indorsement 
cannot  be  thus  varied  by  parol. ^  The  answer  states  no  defense,  and 
judgment  on  the  pleadings  was  properly  ordered  for  plaintiff. 

The  judgment  appealed  from  is  affirmed.* 


3.  Eestrictive  Indorsement, 

§  66  POWER  V.  FINNIE. 

4  Call  (Va.)  411.— 1797. 

Action  by  Power  against  drawer  (Finnic)  and  payee-indorser 
(Tabb)  upon  a  bill  indorsed  by  Tabb  in  these  words:  "Pay  the 
within  contents  to  Jack  Power  only."  There  is  a  good  defense  (of 
which  evidence  is  offered  and  received  against  plaintiff's  objection), 
unless  plaintiff  is  a  bona  fide  holder  for  value.  Judgment  for  defend- 
ant.    Plaintiff  appeals. 

Ro.ANE,  Judge.  —  In  the  case  of  a  negotiable  bill  no  consideration 
is  necessary  to  be  proved,  and  the  indorsee  is  not  affected  by  the  want 
of  it.  But  a  negotiable  bill  may  be  restrained  by  special  indorse- 
ment, as  was  decided  in  the  case  of  Ancher  v.  The  Bank  (Dougl. 
615)  ;  and,  in  questions  upon  such  restrictions,  the  intent  must  be  col- 
lected from  the  face  of  the  indorsement  only.  An  absolute  indorsement 
imports,  upon  the  face  of  it,  a  valuable  consideration  received,  and 
that  the  payee  has  transferred  his  right ;  after  which  receipt  and  sale, 
he  can  have  no  pretense  for  limiting  the  indorsement,  as  it  must  be 
immatfrial  to  him,  to  whom  it  is  paid.  But  a  limited  iTidorsoment  is 
a  pn'suiiiptive  evidence  that  the  indorsee  is  agent  only;  otherwise  it 
would  be  his  interest  not  to  accept  of  il  in  ilint  form,  as  it  would 
impede  the  future  transfer  of  the  bill. 

Therefore,  wlienever  such  a  prohibition  appears,  il  may,  T  think, 
be  infermd,  that  the  indorsement  was  not  intended  to  be  nl)solute. 
If  the   transfer   to   Power   had,   in   fact,  been   absolute,   his   interest 

»Tlii<!  f1op«  not  nppiv  to  "  frrocrulnr  inf1or'<r'monfn."  Prtrr.tnn  v.  Ruxi^rll,  ft2 
Minn.  220.     Spp  NVg    Timt.  T...  §^   113.  114.  — fl. 

♦  Whpth.T  a  blank  indorHcniont  is  a  written  contract  and  «o  not  to  he  varied 
by  parol,  or  pvidcnrp  of  a  rontrnrt  not  yot  rodiioffi  to  writing  and  so  .subjoct  to 
pstablisbmcnt  by  parol,  is  open  to  Hispnto.  1  D.Tnirl  on  Nop.  Tn5<t.,  (5!5  717-723. 
Pep  pnKt.  p.  48.').  notp.  —  If.  f,<>pp  Johnston  v.  Srhnnhnuw.  Rfi  Ark.  R2,  reported 
in  17  T-.  N.  S.  H.18  witb  note  pntitjpd  "  Rijjht  to  pHow  by  parol  that  indorsement 
unrentricted  in  form  was   made   for   purpoflps  of  coilpction   only."  —  C] 


272  NEGOTIATION.  [aRT.    IV. 

wo\iKl  have  prompfod  hiin  to  ol)jei't  to  tlie  words  restricting  the 
ncgotiabilitv.  wIhmi  the  ri'slriction  would  liavo  tondod  to  losscn  tlie 
vahio  of  tjjojiill.  'i'lic  presumption,  thcrcforo,  is  fair,  that  no  con- 
pideration  was  p;iid  for  it:  hut  that  presumption  might  have  been 
ropollod  hv  proving  a  consideration  aftually  paid.  That,  l.owever, 
was  not  done:  and,  therefore,  1  infer  that  Power  was  an  agent  only, 
aiut  not  a  purchaser.  I  think,  therefore,  that  the  evidence  was 
proper. 

Fleming.  Judoe.  —  "On  the  present  occasion,  the  indorsement  is 
to  Jack  Power  or  his  order  only ;  which  furnislies  a  strong  presump- 
tion that  he  was  but  an  agent,  and  paid  no  consideration  for  the  hill, 
as  there  is  no  evidence  to  the  contrary."-  -^ 

Cakrington,  Judge.  —  "  Something  must  have  been  meant  by  this 
indorsement  so  out  of  the  common  way.  It  aflfords  a  very  strong  pre- 
sumption that  the  endorsee  was  an  agent  only." 

Pendleton,  President.  — "  The  word  only  which  is  not  com- 
monly used,  could  have  been  used  for  no  other  purpose  than  to  restrict 
the  negotiability  of  the  bill,  and  make  Power  an  agent." 

Judgment  affirmed.'* 


§  66  ,  LEAVITT  r.  PUTNAM. 

3  New  York,  404.—  1850. 

HuRLBUT,  J. —  On  the  2nih  day  of  August,  1S44,  Messrs.  J.  W. 
&  E.  Leavitt  made  their  note  for  $1,570.52,  payable  to  the  order  of 
T.  Putnam  &  Co.  (the  defendants),  eight  months  after  date.  A  few 
days  after  the  maturity  of  the  note  the  defendants  indorsed  it  as  fol- 
lows: "Pay  the  wnthin  to  A.  Thacher,  value  received,  May  21,  ^P<i^. 
T.  Putnam  &  Co."  Thacher  indorsed  without  recourse,  and  delivered 
the  note  for  a  valuable  consideration  to  the  American  E.xchange  Bank, 
in  whose  behalf  this  action  is  brought. 

On  the  trial  the  defendants  urged,  among  other  grounds  of  objec- 
tion to  the  plaintiffs'  recovery,  that  the  defendants'  indorsement  was 


•'■  "  If  the  word's  '  to  A.  B.  only  '  wore  inserted,  T  should  think  it  would  not  be 
restrictive;  at  least  it  should  be  left  to  the  jury  .  .  .  Where  a  man  says 
'  pay  to  A.,'  the  law  says  it  is  '  to  A.  or  order.'  He  then  says,  I  intend  it 
should  not  be  so.  What  sipnifies  what  you  intend.  The  law  intends  other- 
wise."    Dkni.sox.  .T.,  in  Edie  v.  EaKf  India  Co..  1   Wm.  Bl.  295 

"Whether  this  indorsement  is  only  an  authority  to  A.  B.  to  receive  the 
money  for  the  use  of  the  indorser,  or  for  his  own  use,  if  made  for  value  received, 
or  whetber  in  this  last  case  the  restriction  is  not  void,  and  A.  B.  may  further 
negotiate  it.  seems  not  to  be  settled.  Tf  the  property  of  the  note  be  vested  in 
A.  B..  perhaps  he  will  hold  it  with  its  nepotiable  quality,  notwithstanding  the 
restriction.  But  of  this  we  pive  no  opinion."  Paesons,  C.  J.,  in  Rioe  r. 
Stearns,  3  Mass.  225,  post.  —  H. 


HI.    •>.]  BESTBICTIVE  INDORSEMENT.  273 

in  eti'ect  a  new  thaft  payable  to  Thaclier  only,  and  not  negotiable,  so 
tliat  no  action  could  be  maintained  upon  it  in  the  name  of  the  plain- 
tit!.  In  this  they  were  sustained  by  the  court,  and  the  plaintiff  was 
iionsuited. 

The  other  objections  taken  by  the  defendants  on  their  motion  for 
ii  nonsuit  were  not  considered  by  the  court  below,  and  under  the 
circumstances  of  the  case  cannot  be  noticed  on  this  appeal;  so  that 
the  onlv  thini:  fttr  us  to  consider  is,  whether  the  indorsement  of  a 
note  made  after  due,  differs  from  one  made  before  maturity  in 
respect  to  its  neiifotiability?  * 

It  was  conceded  on  the  arirument  that  no  express  authority  could 
be  found  sustaininij  the  distinction  upon  which  the  decision  of  the 
superioi-  court  was  based;  but  it  was  ur<jed  tbat  the  defense  could 
be  sustained  upon  the  principle  that  a  dishonored  note  loses  its  mer- 
cantile character,  and  its  indorsement  becomes  an  orio^inal  contract 
which  must  be  made  expressly  negotiable  in  terms,  or  it  could  not 
be  held  to  possess  the  character  of  negotiability.  There  is  unques- 
tionably a  did'ereiice  between  the  indorsement  of  a  note  after  due 
und  one  while  it  is  running  to  maturity,  but  this  relates  only  to  a 
Kingle  point  arising  fiom  the  necessity  of  the  case,  to  wit,  the  time 
of  payment,  which,  in  the  latter  indorsement,  is  fixed  at  a  future 
day  by  the  express  agreement  of  the  parties,  while  in  the  former,  it 
is  declared  by  law  to  be  within  a  reasonable  time,  upon  dcitumd. 
Hut  in  all  other  respects  the  contract  is  the  same  as  an  indorsement 
in  the  iifual  course  of  trade;  and  it  is  difficult  to  perceive  bow  the 
Fingle  difference  referred  to  can  at  all  affect  the  negotiability  of  the 
indorsement.  A  bill  or  note  does  not  lose  its  negotiable  character  by 
being  flislonored.  lJLiiri;'-irin]lv  neTpfjable,  it  may  still  pass  from  hand 
to  banfl  /id  iiLfLniium  until  paid  by  tlic  draw^cr.  AJoreover,  TTTe  fn- 
dorser  after  mntiirity  ^^i^cg  in  thp  camp  for^-p  nnd  is  bound  only'u] 
tbe  same  condition  of  dcmnnd  upon  the  drnwcr  nnd  notice  of  nW 
jiayment   as  aTfy utlii'i-jii'tMr-.  r.     Tims   flir   |i:i|mt   [ncserves  its  incT-  ^. 

cantilc  cx^i^ti'MiT  and  rcialns  tbe  main  attributes  of  a  pro])cr  bill  or 
note,  and  circulates  as  such  in  the  cotriniercial  communitv. 

Exceptions  to  a  general  niN'  affect  ini:  so  iinpoitant  and  tinin.'rous 
a  f  la.'-s  of  transactions  as  tbe  one  umler  consirjeration  must  be  pro- 
(hictivc  of  great  ini onveniiMice,  and  will  not  be  indulged  except  for 
urgent  reasons;  and  nothing  has  been  made  to  appear  in  tbe  argu- 
ment or  seems  to  exist  in  the  case,  which  warrants  the  court  in 
treating  the  ordinary  ijidorsement  of  a  dishonored  bill  or  note  as 
without  tbe  law  merchant  and  not  negotiable.  While  it  was  (pies- 
tinned  whether  stub  a  note  was  negotiable,  and  whether  the  indorser 
was    chargeable    exce])t    upon    the    usual    condition    of    drniand    and 

"  Spp  Ncg.  Inst.  L.,  §  26,  ante,  and  cases.  —  H. 

NBOOT.   INBTRHMKNTS  —  18 


274  NEOOTIATION.  [aBT.    IV. 

notice,  there  was  perhaps  reason  enough  to  sustain  tlie  decision  of 
the  court  below.  But  since  both  the  note  and  its  indorsement,  by 
a  long  course  of  decisions,  liave  been  treated  as  within  the  law  mer- 
chant in  respect  to  their  main  attributes,  the  indorsement  ought  to 
be  regarded  as  negotiable  to  the  same  extent  as  an  indorsement  before 
maturity.  The  latter  follows  the  nature  of  tlic  original  bill  and  is 
equally  negotiable.  {Edie  v.  East  India  Co.,  2  Burr.  1316;  Milford  v. 
Walco'tt,  1  Ld.  Raym.  574;  AUwood  v.  HazeUon,  2  Bailey's  S.  C.  R. 
457;  Bishop  v.  Dexter,  2  Conn.  R  419;  Berry  v.  Eohinson,  9  John. 
121.) 

The  note  in  the  present  case  was  upon  its  face  transferable,  and  its 
character  in  respect  to  negotiability  could  only  have  been  changed 
by  an  indorsement  containing  express  words  of  restriction.  The 
defendant's  indorsement  was  a  full  one,  containing  the  name  of 
the  person  in  whose  favor  it  was  made,  but  omitting  the  words  "  or 
order,"  the  legal  effect  of  which  was,  nevertheless,  to  make  the  note 
payable  to  him  or  his  order,  and  his  indorsement  therefore  was  eflfect- 
ual  to  transfer  the  note  to  the  plaintiff.  (Chitty  on  Bills,  136;  Story 
on  Prom.  Notes,  §  139.) 

I  am  of  opinion  that  the  judgment  of  the  superior  court  should  be 
reversed,  and  a  new  trial  awarded. 

Judgment  reversed. 


§  66   CENTRAL  RAILROAD  v.  FIRST  NATIONAL  BANK 
OF  LYNCnBURO. 

73  Georgia.  3S3.  —  1884. 

Blandfokd,  Justice.  —  The  defendant  in  error  brought  its  action 
for  money  had  and  received,  against  the  plaintiff  in  error,  alleging 
that  plaintiff  in  error  had  received  from  one  Mayer  and  Glauber  a 
sum  of  money  due  on  a  draft  of  which  the  following  is  a  copy: 
$276.85.  Lynchbt;rg.  Va..  Feb.  17,  1881. 

Sixty  days  after  rlntp.  pay  to  tlip  orrlpr  of  Allen  W.  Tally,  rnsliier,  two  hun- 
dred and  seventy-six  dollars  and  eighty-five  cents,  with  current  rate  of  exchange 
on  New  York,  value  received,  and  charge  the  same  to  account  of 

HuNTKJi  &  Marshall. 

To  R.  Mayer  A  Oi.aubf.r. 

Albany.  Georjjia. 

fOn  the  hack  of  the  draft  were  the  following  indorsements:   First]: 
Pay  W.  H.  Patterson,  cashier,  or  order,  for  collection  for  account  of   First 
National  Bank,  Lynchburg,  Va. 

(Signed)   Allen  W.  Tally,  Cashier. 
[Second  1 : 

"  Pay  to  .John  A.  Davis,  agent,^  or  order,  for  account  of  Citizens'  Bank  of 
Georgia,  Atlanta,  Ga. 

(Signed)   W.  H.  Patterson,  Cashier." 

T  Davis  was  the  agent  of  the  railroad  company,  the  plaintiff  in  error.  —  C. 


HI.    3.]  RESTRICTIVE  INDORSEMENT.  275 

The  evidence  showed  that  the  plaintiff  in  error  had  collected  this 
draft;  upon  demand  being  made  on  plaintiff  in  error  for  the  pay- 
ment of  the  money  thus  collected  by  the  attorney  for  defendant  in 
error,  payment  was  refused;  the  railroad  claimed  that  the  Citizens' 
Bank  was  indebted  to  it,  and  that  they  had  given  that  bank  credit 
for  the  amount  thus  collected.  It  was  further  shown  that  the  Citi- 
zens' Bank  had  failed  before  the  money  had  been  collected  by  the 
Central  Kail  road  and  Banking  Company. 

The  court  below  held  that  the  Central  Railroad  and  Banking 
Company  was  liable  to  the  defendant  in  error,  and  this  ruling  is 
assigned  as  error. 

1.  The  qualified  indorsements  on  the  back  of  this  draft  by  the 
cashier  of  The  First  National  Bank  of  Lynchburg,  whereby  he  directs 
payment  to  be  made  to  W.  H.  Patterson,  cashier  of  the  Citizens'  Bank, 
or  order,  for  collection  for  account  of  First  National  Bank,  Lynch- 
burg, Va.,  was  nothing  more  nor  less  than  a  warrant  of  attorney 
authorizing  the  indorsee  to  collect  the  amount  due  on  the  draft  for 
the  indorser.  It  conveyed  no  title  to  the  paper,  but  was  notice  to  all 
persons  subsequently  dealing  with  this  paper,  that  defendant  in  error 
had  not  parted  with  the  title  or  intended  to  transfer  the  ownership 
of  the  proceeds  to  another.  The  legal  import  and  effect  of  the  in- 
dorsement was  to  notify  the  plaintiff  in  error  that  the  defendant  in 
error  was  the  owfwr- of  t1if*  draft,  and  tliat  tlie  Cifizfiis'  Rank  was 
merelylfs'agenT  hjv  (.ullcction  ;  that  a  qualifird  litl.'  (nv  thi>  |iurpose 
only,  and  no  "''  '  r.  '•.;!-  if-  ttie  Citizens'  Ijank.  (Moi'se  on  Banks,  n^i; 
Swift  V.  Ti/snt,.  It;  !'.(.!-,  1  ;1  Howard,  234;  3  Penn.  Stat.  3tS;  22 
Md.  148;  1  Wall.  lGf5;  102  U.  S.  658;  1  Bond,  389;  11  R.  T.  110;  51 
Iowa,  15.)' 

2.  But  it  is  insisted  that  there  was  no  privity  between  those  parties 
respecting  the  transaction,  so  as  to  authorize  this  action.  Wlien  the 
plaintiff  in  error  received  from  Mayer  &  dauber  the  money  duo~7)Tl 
the  d ra ft,  thfi^VLXece i vod  something  which  belonsred  to  jhil  lli'Ti'iidaiit'S' 
in  error;  it  was  their  money,  and  this  act  put  them  in  privity  for  the 
purpose  of  this  aetion.  Where  one  person  is  in  possession  of  money 
whieb  of  right  and  in  ef|uity  belongs  to  auftther,  this  aetion  may  be 
maintained  for  its  recovery.  The  law  implies  a  promise  on  the  part 
of  any  person  who  has  received  the  money  of  another  to  pay  that 
person  on  demand.  The  reception  of  money  by  one  and  tlu'  demand 
by  the  other  makes  all  the  privity  that  is  necessary  to  maintain  this 
action. 

And  we  are  clear  that  plaintiff  in  error  had  no  right  to  retain  the 


*  ArrnrA:  Commrrrinl  Ilnnk  v.  Armilrovq.  14fi  l\  R.  oO;  Rutrhrr.i'.  rtr..  Rank 
V.  nuhhnll,  117  N.  Y.  384;  Freeman's  Bank  v.  Matronal  Tube  Works,  151  Maai. 
413. —  H. 


2^6  NKOOTIAI'ION.  [ahI'.    iV. 

proei'ods  of  lliiri  ilral't  as  })a\  iikiiI  of  or  i?L'i'urity  I'or  any  balance  which 
the  Citizeus'  Bunlc  might  Ix'  iliu-  it. 

Judgment  affirmed.' 


§  66  BROOK,  OLIPITANT  &  CO.  v.  VANNEST. 

58  Nkw  JilRsky  Law,  1G2.  —  1895. 

Van  Syckel,  J.  —  This  is  an  action  to  recover  the  amount  due 
upon  the  followini^  promissory  note: 
$4,986.25.  Trenton.  N.  J.,  .funj/.  .SO.  1891. 

Four  iiioiitlis  after  date,  we  jironiisc  to  pay  to  tlie  order  of  ourselves,  forty- 
nine  huiuiri'd  ami  lighty-six  25/100  dollars  at  the  oHice  of  Wni.  B.  Brook  & 
Co.,  at  40  .lolin  iSt.,  New  York  City,  value  reeeived. 

[Indorsedl  Brook.  Oliphant  &  Co. 

Brook.  Omph.vnt  &  Co. 

For  discount  and  credit  of  the  Central  Rubber  Selling  Co. 

John  H.  Brixton,  Treas. 

This  note  was  executed  l)y  Brook,  one  of  the  firm  of  Brook,  Oli- 
phant &  Company,  in  favor  of  said  firm,  and  passed  to  tlie  Central 
Rubber  Company,  without  consideration. 

It  was  fliscounted  in  New  York  for  the  Central  Rubber  Company, 
and  was  taken  up  by  that  company  before  it  was  due  and  put  in  its 
safe  at  Trenton,  in  this  State. 

The  manager  of  the  Central  Rubl)er  Com])any,  after  that  and 
before  tlie  maturity  of  the  note,  passed  it  to  Vannest,  wlio  is  the 
plaintiff'  l)elow. 

The  makers  of  the  note  set  up  in  defense  in  the  trial  court  —  first, 
that  the  plaintiff  below  acquired  no  legal  title  to  the  note  under  the 
special  indorsement  of  the  treasurer  of  the  Central  Rubber  Company; 
secondly,  that  the  plaintiff  below  was  not  a  bona  fide  holder  for  value. ^ 

It  is  un(loul)tediy  true  that  if  the  note  had  fallen  into  the  hands  of 
anyone  before  it  had  reached  the  bank  which  fliscounted  it,  he  could 
not  have  acquired  or  passed  to  another  any  valid  title  to  it. 

The  special  indorsement  would  have  been  notice  of  an  infirmity 
in  the  holder's  title. 


9  If  a  bill  or  note  be  indorsed  without  restriction  by  the  payee  and  de|)osited 
in  bank  for  collection  and  the  banker  pledj^e  or  sell  it,  the  pledf^ee  or  buyer  gets 
pood  title.  Crillins  v.  Martin.  1  Bn«anqupt  &  Puller.  048;  Ayfr  v.  Tildrn,  15 
Gray  (Mass.)  178:  Hank  v.  Vanderhor.it.  32  N.  Y.  553.  Rut  if  the  hill  or  note 
be  restrictively  indorsed  "  for  collection  "  or  "on  account  of  A."  (indorser),  or 
B.  I  a  third  person),  the  pledgee  or  buyer  gets  no  title  other  than  that  held  by 
the  bank  as  agent  or  trustee.  Trevttel  v.  Barandon,  8  Taunton,  100;  lAoyd  v. 
Higourney,  5  Bingham,  525:  First  N.  B.  of  Clarion  v.  Greeqfi,  79  Pa.  St.  384 
(semble) .  —  H. 

1  The  portion  of  the  opinion  relating  to  this  second  point  is  omitted.  —  C. 


ill.    3.]  RESTKiCTiVE  iNDOfiSEMENT.  2"^^ 

But  after  that  indorsement  had  served  its  purpose,  and  the  note 
came  back  to  tlie  Central  Rubber  Company,  that  company,  by  pass- 
ing it  to  Vannest.  gave  him  as  good  a  title  as  if  tlie  indorsement  liad 
not  been  special  but  general.     *     *     * 

There  is  no  error  in  the  proceedings  below,  and,  therefore,  the 
judgment  should  be  affirmed.^ 


§  66  HOOK  V.  PRATT. 

78  New  York.  371.—  1879. 

Thi.s  action   was   brought  by   plaintiff,   as   trustee  of  Charles   H. 
Hook,    against    defendants,   as   executors   of    the    will    of    James    P. 
Haskin,  deceased,  upon  a  draft  signed  and  indorsed  by  said  testator, 
of  which  the  following  is  a  copy : 
$5.0n0.  Syracuse,  N.  Y.,  September  13,  1872. 

Orrin  Welch,  Treasurer  Morris  Run  Coal  Co.  Pay  to  the  order  of  myself, 
one  year  after  date,  five  thousand  dollars,  for  value  received. 

(Signed)  J.  P.  Haskin. 

[Indorsed]  Pay  to  the  order  of  Mrs.  Mary  Hook,  35  King,  for  the  benefit 
of  her  son  Charlie. 

(Signed)  J.  P.  Haskix. 

Defendants  waived  demand  upon  the  drawee  and  notice  of  protest. 

Upon  the  trial  defendants'  counsel  moved  for  a  nonsuit,  in  sub- 
stance, upon  the  ground  that  the  indorsement  was  restrictive  and  did 
not  import  a  consideration,  but  imported  a  gift.  The  motion  was 
denied  and  said  counsel  excepted. 

R.\p.\i.LO,  J.  —  The  point  mainly  relied  u[)on  by  the  apjiellant  is 
that  the  draft  and  indorsement  upon  which  this  action  is  brought  do 
not  on  their  face  import  a  consideration.'  The  draft  was  drawn  by 
the  defendants'  testator  upon  the  treasurer  of  an  incor})oraled  com- 
pany, payable  to  the  drawer's  own  order  and   purported   to  be   for 

2  In  Moore  v.  First  ^at.  Bank,  38  Colo.  330  (quoting  the  headnote),  "a 
note,  after  having  hecn  indorsed  to  a  hank,  was  indorsed  by  tlie  bank  to  its 
president  for  C(-llf'C'tion,  who  later  re  indorsfd  it  to  the  bank  witliont  n'course; 
and  the  hittfr,  without  striking  out  its  indorsement  to  tlie  |)resid('nt,  or  adding 
further  indfirsi'mcnt,  transferrer!  the  note  by  (hdivery  to  phiintiir.  'I'he  inchirse- 
ment  was  not  hft  l)y  mistake,  accidimt,  or  oversight.  Held,  that  the  bank  is 
estopped  to  deny  its  liability,  regartllfss  of  whcthor  the  re  issue  was  before  or 
after  maturity;  and  tliat  sueh  indorsement  pa«sed  the  legal  title,  fixed  the 
indorscr's  lijiliility.  and  niithnri/fd  an  aetion  direet  against  it  as  indorser." 
Reported  witli  notfs  in  10  L.  N.  S.  2fi0  (where  the  correctness  of  the  decision 
is  questioned),  VH\  Am.  St.  Rep.  120,  and   12  .\.  &  E.  .\nn.  Cas.  268.  —  C. 

•''  In  the  court  below  it  was  said  that  "  Tlie  only  question  in  this  case  is 
whether  the  pafxT  siicfl  rm  inifiorts  a  consideration,  in  view  of  the  restrictive 
character  of  the  iiidoiscmcnt,  or  if  it  does  not,  whether  a  consideration  was 
proved."     14  Hun,  3'JU,  397.  —  C. 


1)  "^  w 


NEGOTIATION.  [aKT.    IV. 


value  received.  It  was  indorsed  by  (lie  diawer  by  a  special  indorse- 
ment "  Pay  to  the  order  of  Mrs.  Mary  Hook,  for  the  benefit  of  her 
son  Charlie."  Tiie  appellant  claims  that  this  is  one  of  those  restrictive 
indorsements  wliich  do  not  purport  to  be  made  for  a  consideration, 
and  do  not  entitle  the  indorsee  to  maintain  an  action  on  the  hill, 
without  provinj;  a  consideration. 

As  a  general  rule  an  indorsement  of  a  negotiable  bill  which  pur- 
ports to  jiass  the  title  lo  the  bill  to  the  indorsee,  imports  a  considera- 
tion, and  the  burden  of  jjroving  want  of  consideration  rests  upon  the 
party  allcirinir  it.  The  restrictive  indorsements  which  are  held  to 
negative  the  presumption  of  a  consideration  are  such  as  indicate  that 
they  are  not  intended  to  pass  the  title,  but  merely  to  enable  the 
indorsee  to  collect  for  the  benefit  of  the  indorser,  such  as  indorse- 
ments "  for  collection  '*  or  others  showing  that  the  indorser  is  entitled 
to  the  proceeds.  These  create  merely  an  agency,  and  negative  the 
presumption  of  the  transfer  of  the  bill  to  the  indorsee  for  a  valuable 
consideration. 

But  where  the  indorsement  purports  to  pass  the  title  to  the  bill 
therein  from  the  indorser,  and  divest  him  of  all  beneficial  interest,  a 
consideration  for  such  transfer  is  presumed.  All  the  cases  cited  by 
the  counsel  for  the  appellant  rest  upon  these  principles.  The  cita- 
tion from  3  Kent  Com.  92,  states  the  principle  to  be  that  when  the 
indorsement  is  a  mere  authority  to  receive  the  money  for  the  use 
or  according  to  the  directions  of  the  indorser,  it  is  evidence  that  the 
indorsee  did  not  give  a  valuable  consideration  for  it  and  is  not  the 
absolute  owner.  This  accords  with  the  statement  of  the  principle 
by  Wilmot,  J.,  in  Edie  v.  E.  India  Co.  (2  Burr.  1227).  So  an  indorse- 
ment "  Pav  to  S.  W.,  or  order,  for  our  use,"  (Sigonrney  v.  Lloyd,  8 
B.  &  C.  622  ;  s.  c.  3  Y.  &  J.  220),  was  held  to  create  a  mere  agency, 
and  the  addition  even  of  the  words  "  value  received "  to  such  an 
indorsement  has  been  held  not  to  vary  its  effect.  (Wilson  v.  Holmes, 
5  Mass.  543.)  Tn  Edie  v.  East  India  Co.  (2  Burr.  1221),  the  examples 
of  restrictive  indorsements  put  by  way  of  illustration  are,  "  Pay  to 
my  steward  and  no  other  person,"  or  "pay  to  my  servant  for  my 
use."  These  show  that  there  was  no  intention  to  pass  the  title  to 
the  bill;  and  the  same  effect  has  been  given  to  an  indorsement,  "  Pay 
to  P.  only."  It  was  held  that  these  words  indicated  that  the 
indorsee  was  agent  only,  and  paid  no  consideration  for  the  bill,  as  a 
purchaser  would  not  have  accepted  such  an  indorsement.  (Power 
?.  Finnie,  4  Call  [Va.],  411). 

But  an  indorsement  to  one  person  for  the  use  or  benefit  of  another, 
affords  no  such  indication.  The  indorser  parts  with  liis  whole  title 
to  the  bill,  and  the  presumption  is  that  he  does  so  for  a  considera- 
tion. The  only  effect  of  such  an  indorsement,  by  way  of  restriction, 
\b  to  give  notice  of  the  rights  of  the  beneficiary  named  in  the  indorse- 


111.    3.]  BESTBICTIVE  INDORSEMENT,  279 

nient,  and  protect  him  against  a  misappropriation.''  Wlieu  a  bill  is 
indorsed  "'  Pay  to  A.  or  order  lor  the  use  of  B.,"  A.  cannot  pass  the 
bill  off  for  his  own  debt,  but  he  can  by  indorsing  it  transfer  the  title, 
and  will  hold  the  proceeds  for  the  benefit  of  B.,  and  be  accountable  to 
him  for  them.  {Evans  v.  CramUnyton,  Carth.  5,  affirmed  in  the 
Exchequer  Chamber,  2  Vent.  309.)  In  Treuttel  v.  Barandon  (8 
Taunt.  100),  cited  by  the  appellants,  drafts  payable  to  the  drawer's 
own  order  were  indorsed  by  him  to  De  lioure  &  Co.,  or  order,  "  for 
the  account  of  Treuttel  &  Wurz."  It  appeared  that  De  Roure  &  Co. 
were  the  agents  of  Treuttel  &  Wurz,  and  the  latter  were  held  entitled 
to  maintain  trover  for  the  drafts  against  a  party  to  whom  De  Koure 
&  Co.  had  pledged  them  for  their  own  debt.  There  is  nothing  in  this 
case  to  sustain  the  proposition  that  a  draft  thus  drawn  and  indorsed 
does  not  import  a  consideration,  or  that  the  indorsee  could  not  main- 
tain an  action  upon  it  against  the  drawer  and  indorser  without  proving 
a  consideration.  The  effect  of  the  special  indorsement  was  simply  to 
give  notice  of  the  interest  of  Treuttel  &  Wurz,  and  prevent  De  Roure 
&  Co.  from  appropriating  the  drafts  to  their  own  use.  Blaine  v. 
Houine  (11  Rh.  I.  119),  is  to  the  same  point. 

In  the  present  case  the  indorsement  did  not  purport  to  restrain 
the  indorsee  from  negotiating  the  draft,  for  it  was  "  Pay  to  the  order 
of  Mrs.  Mary  Hook  "  for  the  benefit  of  her  son  Charlie.  She  was  con- 
stituted trustee  of  her  son  and  held  the  legal  title.  (3  Kent's  Com. 
89.)  The  indorsement  gave  notice  of  the  trust,  so  that  if  she  had 
passed  it  off  for  hor  own  debt,  or  in  any  other  manner  indicating  that 
t!ie  transfer  was  in  violation  of  the  trust,  her  transferee  would  take 
it  subject  to  the  trust,  but  there  was  nothing  reserved  to  the  drawer 
and  indorser.  He  retained  no  interest  in  it.  Tlie  ]iresumption  is 
that  the  draft  was  drnwn  and  indorsed  by  him  for  a  consideration 
received  eitfier  from  the  indorsee  or  tlie  beneficiary.  If  the  vouth 
of  the  beneficiary  should  be  d(>emed  to  afford  a  presumption  that  no 
consideration  was  paid  by  him,  the  presumption  would  be  that  it 
emanated  from  bis  mother.  The  fac-ts  admitted  on  the  trial  do  not 
establish  that  thf  ronsideration  was  iljfgal.  TIipv  show  that  the  boy 
lived  with  his  mothfr  and  was  taken  care  of  by  her.  There  is  nothing 
illegal  in  an  undertaking  by  a  putative  father  to  support  his  illegiti- 
mate child,  or  to  f)ay  a  sum  of  inoney  in  consideration  of  such  sup- 
port being  furnished  by  another,  though  it  be  the  mother  of  the  child. 
If  such  was  the  consideration  of  this  obligation,  and  it  was  furnished 
by  Mrs.  Hook,  she  was  at  liberty  to  take  it,  |)ayable  to  herself  in  her 
own  right,  or  for  the  benefit  of  her  child,  (llicks  v.  Gregory,  8  C.  B. 
378 ;  Smith  v.  Roche,  fi  C.  B.  [N.  S.]  223 ;  Nichole  v.  Allen,  3  C.  &  P. 

«  Neg.  Inst.  L.,  §  91,  po»t.  —  H. 


!880  NKUUTIATION.  [>»T.    IV. 

3(i;  Jciniintjs  v.  Brown,  !•  Moos.  &  W.  49G ;  Knowlman  v.  Bluett,  9  L. 
R.  [Excli.J  1,  307;  i>a/t;i  v.  H/z/ZA/o/^  I  J.  ("h.  3:57,  338.) 

Tlio  judgiuout  should  bo  allirnied.'' 


§67  SMITH  V.  BAYER. 

46  Oregon,  143.  —  1905. 

This  is  an  action  on  a  promissory  note  for  $290,  executed  and 
delivered  by  the  defendants  to  the  Concordia  Loan  &  Trust  Company 
of  Kansas  City,  Mo.,  on  January  30,  1896,  due  on  or  before  August 
1st  following.  The  complaint  alleges  the  execution  of  the  note,  its 
indorsomont  to  the  plaintilT  before  maturity,  the  making  of  certain 
payments  thereon  by  defendants,  and  prays  judgment  against  them 
for  the  balance.  The  answer  admits  the  genuineness  of  the  note, 
denies  that  it  was  indorsed  to  the  plaintiff  before  maturity  at  all,  and 
anirmativelv  alleges  that  it  remained  the  property  of  the  payee  named 
tlierein  until  after  maturity,  when  it  was  transferred  to  the  Fidelity 
Trust  Company,  and  that  thereafter  the  defendants  paid  the  note  to 
the  trust  company  and  satisfied  it  in  full.  The  reply  denies  the  allega- 
tions of  the  answer,  and  affirmatively  pleads  that  at  all  the  times  men- 
tioned the  plaintiff  was  and  now  is  the  owner  in  his  own  right  of 
two-sevenths  of  the  note,  and  since  the  21st  day  of  July,  1896,  has  been 
and  now  is  the  owner  of  the  remaining  five-sevenths  for  collection. 
Upon  the  trial  plaintiff  produced  the  note,  with  an  indorsement 
thereon  as  follows:  "  Pay  to  the  order  of  Milton  W.  Smith  for  collec- 
tion and  return  to  Concordia  Loan  &  Trust  Company,  A.  D.  Hider, 
treasurer,  0.  K.  F.  Amelung."  He  testified  that  he  received  the  note 
in  due  course  of  mail  from  the  loan  and  trust  company,  inclosed  in  a 
letter  which  the  witness  produced,  and  which  stated,  in  substance,  that 
the  note  was  remitted  for  collection.  *  *  *  The  note  was  tlien 
admitted  in  evidence  over  defendants'  objection  on  the  ground  that  the 
indorsement  did  not  transfer  such  title  to  the  plaintiff  as  would  sup- 
port an  action  thereon  in  his  own  name,  and  because  the  genuineness 
of  the  indorsement  had  not  been  sufficiently  proved.*  The  witness 
was  also  permitted  to  testify,  over  defendants'  objection  and  exception, 
that  he  was  in  fact  the  owner  in  his  own  right  of  two-sevenths  of  the 
note,  and  the  court  instructed  the  jury  that  any  settlement  made  by 
the  defendants  with  the  payee  or  owner  of  the  note  after  the  indorse- 
ment thereof  to   the   plaintiff  would   not  be  a   defense  against  the 


5  Whethf-r  thf  indorsement  "  pay  to  A.  B.  trustee,"  is  restrictive,  see  dis- 
cussion of  instruments  payable  "  to  A.  B.  trustee,"  post,  p.  'iTA.  —  H. 

•  That  part  of  the  case  relating  to  the  genuineness  of  the  indorsement  is 
omitted.  —  C. 


III.    3.]  EESTRICTIVE  INDORSEMENT.  281 

plaintiffs  two-sevenths  interest  therein,  although  it  would  be  such 
defense  against  the  otlier  five-scvontlis.  The  verdict  and  judgment 
were  in  favor  of  tlie  plaintifT,  and  the  defendants  appeal. 

Bean,  J.  *  *  *  The  only  points  of  real  importance  on  this 
appeal  are:  (1)  Whether  the  indorsement,  being  on  its  face  "for  col- 
lection and  return  ''  to  the  payee,  vested  plaintiff  with  such  a  title  as 
will  enable  him  to  maintain  an  action  tluMTon  in  his  own  name;  and, 
if  so,  (2)  whether  the  court  erred  in  admitting  parol  testimony  tend- 
ing to  show  that  plaintiit'  was  in  fact  the  owner  of  two-sevenths  of  the 
note,  and  in  instructing  the  jury  that,  if  such  was  the  case,  any 
settlement  with  the  payee  or  assignee  subsequent  to  the  date  of  the 
indorsement  to  plaintiff  would  be  no  defense  as  against  plaintiff's 
two-sevenths. 

The  indorsement  of  a  promissory  note  by  the  payee  with  the  words 
"  for  collection,''  or  the  like,  is  not  strictly  a  contract  of  indorsement, 
but  rather  the  creation  of  a  power,  the  indorsee  being  the  mere  agent 
of  the  indorser  to  receive  and  enforce  payment  for  his  use.  The  title 
to  the  note  and  the  proceeds  thereof  remain  in  the  payee,  and  he  may 
maintain  suitable  actions  and  proceedings  to  enforce  his  right.  White 
v.  Xniiotml  Bnnl\  102  U.  S.  658;  Commercial  Banl'  of  Pennsylvania 
v.  Armstrong,  148  IT.  S.  50;  Sweneij  v.  Easter,  1  Wall.  lOG;  Williams, 
Deacon  tf-  Co.  v.  Jones,  77  Ala.  294;  People's  Bank  of  Lewishiinj  v. 
Jefferson  County  Savings  Bank,  106  Ala.  524  ;  Central  Railroad  v. 
First  National  Bank  of  Lynchburg,  Virginia.  7.3  Ha.  .'^8.'^. 

There  is,  in  the  absence  of  a  statute,  some  conflict  in  the  decisions 
as  to  whether  such  an  indorsee  can  sue  in  his  own  name.  The  weight 
of  authority  seems  to  be  in  favor  of  his  right  to  do  so.  4  Am.  &  Kng. 
Kncy.  Law  (2d  ed.),  274;  Freeman  v.  Exchange  Bank,  87  Ga.  45; 
Iioherfs  v.  I'arrish ,  17  Or.  583;  Falconio  v.  Larsen.  .'il  Or.  l.'^7; 
Selover,  Bank  ("ol lections,  §  28.  And  it  is  now  so  provided  hy  statute 
in  this  state.  B.  &  V.  (,'omp.  §  4439;"  Selover,  Negotial)le  Instruments 
Law,  §  L'>5 ;  Crawford,  Neg.  Inst.  Law,  §  67.  We  arc  therefore  of  the 
opinion  that  the  present  action  was  rightfully  brought  in  the  nain(>  of 
the  plaintiff. 

It  was  o[K'n,  however,  as  against  him,  to  all  defenses  which  could 
have  been  riuide  if  the  notes  had  ren)aincd  in  the  hands  of  the  indorser, 
and  the  action  had  been  brought  by  it.  Wilson  v.  Tolsnn,  70  Oa.  137, 
3  S.  E.  nOO;  Leary  v.  BlancharJ,  A9,  Me.  260.  The  indorsement  did 
not  pass  the  title,  nor  did  it  deprive  the  defendants  of  any  defense 
they  may  r)(}u'rwise  have  against  the  note.  Tt  merely  created  the  plain- 
tiff the  agent  of  the  payee  for  collection  with  the  right  to  sue  in  his 
own  name.  The  plain  meaning  of  sneh  an  indorsement,  as  said  by 
Mr.  Justice  Mim.KR  {While  v.  National  Bank,  102  TT.  S.  658,  26  L. 
Ed.  250),  is  that  the  maker  of  flie  note  "  is  to  pay  it  to  the  indorsee 

•  N.  Y„  S  87.  —  C. 


28"v*  NEGOTIATION.  [aRT.    IV. 

for  tho  use  of  tho  indoisor.  Tlu*  indorsee  is  to  receive  it  on  account  of 
the  iiulorser.  It  does  not  inir|iort  to  transfer  the  title  of  the  paper 
or  the  owuersliip  of  the  money  when  reeeived.  Both  these  remain,  by 
the  reasonable  and  almost  necessary  mt'aning  of  the  language,  in  the 
iudorser." 

Such  being  the  ell'ecl  of  the  restrictive  indorsement  and  the  char- 
acter of  the  nilc  ar(|iiii('(l  hy  the  plaintiff  by  reason  thereof,  it  neces- 
sarilv  foUows  that  the  court  was  in  error  in  admitting  evidence  to 
contradict  the  I'ontract  of  indorsement  by  sliowing  that  the  note  was 
not  transferred  to  the  [ihiintitf  for  collection  as  shown  on  its  face,  but 
that  he  actually  owned  two-sevenths  thereof  in  his  own  right,  and  in 
instructing  the  jury  that  a  settlement  made  with  the  payee  after  the 
indorsement  to  plaintiil'  would  be  no  defense  against  plaintiff's  two- 
sevenths.  The  contract  of  indorsement  is  in  writing.  The  terms 
thereof  are  plain  and  unambiguous,  and  parol  evidence  is  not  admis- 
sible to  vary  or  contradict  it.  }yhite  v.  National  Bank,  102  U.  S.  G58, 
26  L.  Ed.  250;  Lcary  v.  Blanchard,  48  Me.  269;  Howe  v.  Taylor,  9 
Or.  288. 

The  plaintiff's  action  is  based  on  the  indorsement,  and  not  on  any 
interest  he  may  have  in  the  note.  He  is  made  by  the  indorsement  the 
mere  agent  of  the  payee  for  its  collection.  The  defendants'  obligation, 
notwithstanding  the  indorsement,  is  to  the  payee  or  subsequent  owner 
of  the  note,  and  not  to  the  plaintiff.  If  they  settled  and  paid  the  note 
to  the  payee  or  assignee,  such  settlement  is  a  complete  defense  to  an 
action  thereon  by  plaintiff  as  a  mere  agent  for  collection. 

It  mav  be  sugsrested  that,  because  the  Jury  found  a  verdict  in  favor 
of  plaintiff  for  the  entire  amount  sued  for,  they  must  have  found  that 
the  settlement  alleged  as  a  defense  was  never  made,  and  therefore  the 
error  of  the  court  in  charging  the  jury  in  relation  thereto  was  harmless. 
The  ruling  of  the  court  upon  this  point  and  its  instructions  to  the 
jury  injected  into  the  case  an  issue  not  proi)er  to  be  tried,  the  result 
of  which  was  to  confuse  and  mislead  the  jury,  and  we  do  not  think  it 
can  be  said  that  the  error  was  harmless. 

From  these  views  it  follows  that  the  judgment  of  the  court  below 
must  be  reversed,  and  a  new  trial  ordered.  Many  of  the  other  ques- 
tions argued  in  the  briefs  will  probably  not  arise  on  a  retrial,  and  need 
not,  therefore,  be  noticed  at  this  time. 


§  67      Bleckley,  C.  J.,  in  FREEMAN  v.  EXCHANGE  BANK. 

87  Georoia,  45.  —  1891. 

1.  An  indorsement  for  collection,  or  the  like,  is  not  a  contract  of 
indorsement,  but  the  creation  of  a  power,  the  indorsee  being  a  mere 
agent  to  receive  or  enforce  payment  for  the  indorser's  use.      {Central 


III.    3.]  BESTRICTIVE  INDORSEMENT.  283 

Railroad  v.  First  National  Bank,  73  Ga.  383;  Tiedeman,  Com.  Pap., 
§  268;  1  Danifl,  Xeg.  Inst.,  §  698-698(d)  ;  2  Kandolph,  Com.  Pap., 
§  724-5-6-7,  1009;  1  Morse  Banks,  §  217;  2  Id.  §§  583,  593;  Bolles' 
Banks  and  Depositors,  §§  220,  384(e),  et  seq.j  Benj.  Chalmers'  Bills, 
Notes  and  Checks,  (2  Am.  ed.),  132;  Commercial  National  Bank  v. 
Armstrong,  39  Fed.  Kep.  684;  [s.  e.  148  U.  S.  50] ;  National  B.  &  D. 
Bank  V.  Hubbell,  117  N.  Y.  384.) 

A  suit  is  not  maintainable  by  the  indorsee  against  the  indorser. 
(White  V.  National  Bank,  102  U.  S.  658.  And  see  Lee  v.  Chillicothe 
Bank,  1  Bond,  387.) 

To  sue  other  parties  in  order  to  enforce  payment  is  deemed  within 
the  delegated  power  of  the  agent ;  and  by  reason  of  the  great  favor 
shown  by  the  law  to  commercial  paper,  the  restricted  indorsee  is 
allowed  in  some  jurisdictions  to  sue  in  his  own  name.  (Wilson  v. 
Tolson,  79  Ga.  137;  Boyd  v.  Corbitt,  37  Mich.  52;  2  Randolph,  Com. 
Pap.,  §  726;  Benj.  Chalmers'  Bills,  Notes  and  Checks  [2  Am.  ed.], 
133,  149.)^ 

The  maker  of  a  restricted  indorsement  can  follow  the  bill  or  its 
proceeds  over  any  number  of  subseriuont  indorsements,  the  terms  of 
his  indorsement  being  notice  of  his  title.  (Elementary  Works  cited 
supra:  First  Nat'l  Bank  v.  Reno.  Co.  Bank,  3  Fed.  Rep.  257;  Bank  of 
the  Metrop.  v.  First  Nat'l  Bank,  19  Id.  301;  First  Nat'l  Bank  v. 
Bank  of  Monroe,  33  Id.  408:  In  Re  x\rmstrong.  Id.  405;  Commercial 
Nat'l  Bank  v.  Hamilton,  42  Fed.  Rep.  880.)  The  last  case  is  criti- 
cisf'fl  from  the  standpoint  of  banker?,  but  only  with  reference  to  trans- 
mitting the  proceeds  of  collection  from  the  collecting  bank  to  the 
intermediary  through  whom  the  bill  was  received.  The  expert  opinion 
seems  to  be  that  transmission  according  to  custom,  by  correspondence 
and  proper  entries  of  debit  and  credit  founded  thereon,  the  entries 
being  made  after  collection,  will  serve  commercially,  and  therefore 
legally,  as  the  equivalent  of  paying  over  the  money  or  forwarding  it 
by  mail  or  express;  and  consequently  that  transmission  by  such  en- 
tries, each  bank  making  the  appropriate  entry  itself,  will  discharge 
the  collecting  bank.  (See  45  Bankers'  Magazine,  241  ;  4  Banking 
Law  Journal,  3.)  The  learned  United  States  circuit  jiulgo  who 
decided  the  case  which  is  thus  criticised  took  a  different  view.    *    *     * 

A  deposit  of  paper  in  bank  by  a  customer,  he  indorsing  il  "  For 
deposit,"  may  operate  to  clothe  the  bank  with  title  under  certain 
circumstances.  (Nafionnl  Commrrrinl  Bank  v.  Millrr,  77  Ala.  168; 
2  Morse  on  Banks.  §  577.)  But  the  general  rule  is,  that  by  a  restric- 
tive indorsement  the  depositor  retains  the  title.  (Bolles  on  Banks 
and  Depositors,  §  220.) 


"f  Cnnirn:   Fork  Count ji  N.  H.  v.  rjollistrr,  21  Minn.  .IS.*).     Tn  any  pvrnt.  only 
the  special  indorspe  can  sue.     Laurence  v.  FusarU,  77  Pa.  St.  460.  —  H. 


284  NEGOTIATION.  [AKT.    IV. 

Lllold:  Tliat  where  A.  dejtosited  a  bill  with  B.  indorsed  "for 
deposit  to  tlie  eredit  of  A,"  and  li.  indorsed  it,  "  Pay  C.  for  eollec- 
iion  aeeount  of  B/'  and  ('.  eollceted  it,  the  funds  were  sul)je(*t  to 
garnishment  in  C's  hands  by  the  creditors  of  A.,  for  as  yet  they  had 
not  actually  been  deposited  in  the  hands  of  B.  The  lecjal  import 
of  the  indorsement  is  to  make  B.  an  agent  for  collection  and  deposit. 
"  The  proceeds  would  be  impressed  with  A.'s  ownership  until  they 
were  actually  so  deposited."]  * 


4.  Qualified  Indorsement. 

§  68  RICE  V.  STEARNS. 

3  Massachusetts,  225.  —  1807. 

Assu^iPRiT  by  indorsee  ajrainst  makers,  upon  a  note  payable  to 
Jonathan  Symonds,  or  order,  and  indorsed  by  him  in  these  words: 
"  for  value  received  I  order  the  contents  of  this  note  to  be  paid  to 
Merrick  Rice  at  his  own  risk."  The  defendants  denied  their  signa- 
tures, and  Symonds  was  oiTered  as  a  witness  to  prove  the  execution 
of  the  note,  and  was  objected  to  as  a  witness  on  tlie  ground  that  he 
was  interested.  Objection  overruled.  Judgment  for  Plaintiff. 
Defendants  appeal. 

Parsons,  C.  J.  —  The  interest  of  Symonds  must  depend  on  the 
effect  of  his  indorsement. 

A  security  negotiable  in  its  creation  must,  during  its  negotiation, 
preserve  its  negotiable  quality;  otherwise,  when  assigned,  the 
assignee  would  hold  a  contract  by  the  assignment  different  from  tlie 
contract  assigned.  Tt  is  for  this  reason  settled  that  a  nogotiablo 
note  indorsed  in  blank,  or  by  a  direction  to  pay  the  contents  to  A. 
B.,  omitting  the  words,  "or  his  order,"  is  further  netrotiable  by  the 
holder  under  such  indorsement.  Tt  is  also  settled  that  when  a 
negotiable  security  is  indorsed,  "  pay  (lie  contents  to  my  use,"  or,  "  to 
the  vse  of  a  third  person''  or,  "  carry  this  hill  to  the  credit  of  a  third, 
person,"  such  an  indorsement  is  not  an  assignment  of  the  security,  but 
is  only  an  authority  to  pay  the  money  agreeably  to  the  direction  of 
the  indorsement.  There  are  other  restricted  indorsements  also  made ; 
as  "  pay  the  contents  to  A.  B.  only."  Whether  this  indorsement  is 
only  an  authority  to  A.  B.  to  receive  the  money  for  the  use  of  the 

8  There  is  some  conflict  as  to  the  lepal  effect  of  an  indorsement  "  For  Deposit." 
Some  courts  hold  that  title  passes  iinrler  such  an  indorsement.  Ditch  v.  Wrstt- 
ern  A\  B..  79  Mf).  192:  S.  c.  47  Am.  St.  Rep.  .37.5  and  nntr.  Others  hold  that 
title  Hoes  not  p-ts«.  hnt  that  the  hank  is  a  bailee  for  collection  until  the  money 
is  actually  in  its  hands,  when  it  becomes  a  debtor  as  in  the  usual  case  of 
money  deposits.     Beal  v.  City  of  Homerville,  50  Fed.  Rep.  647.  —  H. 


m.    4]  QUALIFIED  INDORSEMENT.  285 

indorser,  or  for  his  own  use,  if  in;i(lc  for  value  received,  or  whether 
1.1  tliiti  last  case  tlie  resliictiou  is  not  \oul,  mid  A.  1>.  luuy  further 
negotiate  it,  seems  not  to  l)c  settled.  IT  [iw  I'lopLitv  of  tiie  note  be 
vested  iu  A.  B.,  perhaps  he  will  hold  it  with  its  iicgotialjlc  quality  not- 
withstanding the  restiiction.     But  of  this  we  give  no  opinion. 

The  case  at  bar  i>  a  restricted  indorsement  of  anotlier  kind,  and 
which  in  practice  is  very  common.  The  promisee  of  a  negotiable 
note  indorses  it  to  a  third  person,  or  his  ordei,  lor  value  received, 
stipulating  that  the  indorser  is  not  to  he  rcsponsilde,  if  the  maker 
does  not  pay  it.  If,  notwithstanding  this  stipulation,  the  indorser  is 
answerable,  if  the  maker  do  not  pay  the  note,  then  the  witness, 
Symonds,  is  interested,  and  ought  not  to  have  been  sworn. 

Upon  consideration  we  are  of  opinion  that  the  promisee,  indorsing 
the  note  under  this  express  stipulation,  is  not  eventually  holden  to 
pay  the  note,  if  the  maker  should  not.  As  the  promisee  htTd  the 
property  of  the  note,  he  might  dispose  of  it  on  what  terms  he  pleased, 
with  the  assent  of  the  purchaser,  and  the  latter  cannot  complain  of 
the  necessary  effect  of  his  own  agreement ;  and  the  indorser  cannot 
be  charged  upon  his  own  contract,  directly  against  the  e.xpress 
intent  of  it.  If  this  opinion  is  correct,  Symonds,  after  this  restricted 
indorsement,  had  no  interest  in  the  event  of  the  suit,  and  was  a 
competent  witness. 

Another  jwint  of  some  importance  arises,  which  involves  the  ques- 
tion, whether,  by  this  restricted  indorsement,  the  property  of  tlie  note 
passed  to  the  indorsee,  so  that  he  may  sue  upon  it  in  his  own  name. 
If  the  restriction  applied  to  the  quality  of  the  contract,  so  as  to 
render  a  negotiable  security  no  longer  negoiial)Ie,  there  would  bo 
some  difficulty  in  allowing,  consistently  with  legal  principles,  an 
indorsement  of  this  effect  to  operate  as  a  transfer  of  the  note.  But 
this  is  not  the  effect  of  the  restriction;  the  note  remains  negotiable 
in  the  hands  of  the  indorsee,  although  he  has  no  remedy  against  the 
inflorser:  and  in  whose  hands  soever  the  note  may  come,  the  maker 
is  still  lial)le.  according  to  the  teriris  of  hi*!  oriijinal  contract,  to  pay 
to  the  promisee  or  bis  orrler.  '^riic  note.  tlicrefon\  being  the  absolute 
property  of  the  plaintiff,  and  Symonds  being  a  competent  witness, 
the  verdict  must  stand,  and  judgment  be  entered  accordingly. 


§68  EVANS  r.  FI.'KKMAN. 

142  NoHTir  Cakoi.ina,  (il.-    lOon. 

Plafntii  r  sued  upon  a  negotiable  instrument  which  bad  been  trans- 
ferred to  him  by  the  following  indorsement  :  "  For  value  received,  I 
hereby  transfer  and  assign  all  my  r\'^]\\,  title  and  interest  in  and  to 
the  within  note  to  J.  I).  Evans,"  etc.  Judgment  for  plaintiff  and 
defendant  appeals. 


286  NEGOTIATION.  [ART.    IV 

TNai.kkh.  .1.     *     *     * 

'I'liero  is  oin"  otlur  tiKilUr  whicli  rt'(]uircs  some  attention.  The 
defendant  rDtiU'iulcd  that  I  lie  [daintill'  was  not  a  holder  in  due  course, 
beeause,  by  tlie  tiiirs  of  the  iiulorsenient,  he  was  put  on  notice  of  any 
and  all  equities  and  (lofiMises  of  the  maker  as  ai;ainst  the  payee,  Askew, 
the  reason  being  tliat  only  the  right  and  title  of  the  payee  was  trans- 
ferred and  the  indorsee  a(((uire(]  no  better  title  under  such  indorse- 
ment than  his  indorser  himself  had,  but,  ex  vi  termini  only  his  right 
and  title,  which  were  subject  to  the  defense  set  up  in  this  action. 

There  was  at  one  time  very  strong  and  convincing  authority  for 
such  a  position,  Atiiha  v.  Veomans,  39  Mich.  171,  and  there  was  much 
also  said  against  it,  1  Daniel  Neg.  Inst.  (5th  ed.)  §  G88c.  But  we 
think  the  controversy  has  finally  been  settled  by  the  "Negotiable  In- 
struments Law  "  as  recently  adopted,  Revisal  1905,  c.  54. 

OtTrs  is  a  qualified  indorsement,  under  Revisal  1905,  section  2187,* 
and  while  the  indorser  is  constituted  a  mere  assignor  of  the  title  to 
the  instrument,  it  is  provided  that  such  an  indorsement  shall  not 
impair  its  negotiability.  A  qualified  indorsement  may,  by  the  express 
terms  of  that  section,  be  made  by  adding  to  the  endorser's  signature 
the  words  "  without  recourse,  or  any  words  of  similar  import."  It  has 
been  settled  in  commercial  law  that  a  transfer  by  indorsement  of  the 
"  right  and  title  "  of  the  payee  or  an  indorser  to  a  negotiable  note  is 
equivalent  to  an  indorsement  "  without  recourse  "  and  words  such  as 
were  used  in  this  case  are  therefore  in  their  meaning  or  "  import  " 
similar  to  such  an  indorsement,  and  this  is  their  reasonable  interpre- 
tation. 1  Daniel,  supra,  §§  700  and  700a;  Norton  on  Bills  and  Notes 
(3d  Ed.)  120;  Hailey  v.  Falconer,  32  Ala.  536;  Rice  v.  Stearns,  3 
Mass.  225;  Randolph  Com.  Paper  (2d  Ed.),  §§  721,  722,  1008;  God- 
dar  V.  Lyman,  14  Pick.  (Mass.)  268;  Borden  v.  Clark,  26  Mich.  410; 
Eaton  &  Gilbert  on  Commercial  Paper,  §  61, 

However  the  law  may  have  been,  it  is  now  true,  as  it  appears  from 
the  statute  and  the  authorities  just  cited,  that  such  an  indorsement 
does  not,  in  law%  discredit  the  paper  or  even  bring  it  under  suspicion, 
nor  does  it  in  any  degree  affect  its  negotiability.  The  indorsee  is  sup- 
posed to  take  it  on  the  credit  of  the  other  parties  to  the  instrument, 
Revisal  1905,  §  2187,  though  the  indorser  may  still  be  liable  on  cer- 
tain warranties  specified  in  the  statute.  Revisal  1905,  §  2214.'  This 
conclusion  we  believe  to  be  in  accord  with  the  intention  of  the  Legis- 
lature in  enacting  the  Negotiable  Instruments  Law,  as  the  leading 
purpose  was  to  afford  as  much  protection  to  the  holders  of  commercial 
paper  as  is  consistent  with  a  just  regard  for  the  rights  of  other  inter- 
ested parties,  and,  by  freeing  its  transfer  of  unnecessary  fetters,  to 

•  N.  Y.,  5  68.  —  r. 

1  N.  v.,  5  11.5.  On  this  point,  see  also  State  v.  Cornintj  St.  Sav.  Tik.,  139 
Iowa.  338.  —  r. 


IIL    5.]  CONDITIONAL  INDORSEMENT.  287 

promote  its  easy  circulation  and  to  give  it  greater  currency  as  a 
medium  of  exchange.  Our  decision  on  this  part  of  the  case  is  confined 
to  the  particular  evidence  rejected  and  does  not  extend  to  any  other 
oflFer  of  proof  made  by  the  defendant.  If  the  defendant  is  able  to 
show  that  the  note  was  indorsed  to  the  plaintiff  after  its  maturity  or 
that  the  latter  is  not,  in  fact,  a  purchaser  for  value  and  without 
notice,  his  defense  will  be  available  to  him,  but  the  burden  to  establish 
either  of  those  facts  is  upon  the  defendant,  as  the  plaintiff  is  deemed 
prima  facie  to  be  a  holder  in  due  course  if  he  has  possession  of  the 
note  under  the  indorsement.^ 

[On  other  grounds,  however,  the  judgment  was  reversed  and  a  new 
trial  granted.] 


5.  Conditional  Indorsement. 

§e9  JOHNSON  I'.  BARROW. 

12  Louisiana  Annual,  83. —  1857. 

Spofford.  J.  —  This  suit  is  brought  against  the  indorser  of  a  pro- 
missory note  of  the  following  tenor: 

DONALDSONVILLE.  30th   Oct.,   1851. 
One  year  after  date,  I  promise  to  pay  to  the  order  of  Robert  R.  Barrow  the 
sum  of  five  hundred  dollars,  for  value   received,   payable  at  the  office  of  tlie 
Recorder,  Donaldsonville. 

(Signed)  John  Hut.son. 
[The  indorsement  is  in  these  words:] 

HouMA,  Parish  of  Tkrrehonne. 

1  indorse  the  within  note  for  the  benefit  of  Mrs.  Ilut.son  in  the  purcliase  of 
%  tract  of  land  from  Gov.  H.  .Johnson. 

(Signed)  R.  R.  Barrow. 

The  defendant  pleaded  that  this  restrictive  indorsement  does  not 
bind  him,  inasmuch  as  the  special  object  for  which  it  was  given  was 
never  consummated,  Mrs.  Ilutson  not  having  purchased  a  tract  of 
land  from  the  [)laintiT  Johnson. 

There  was  judgment  in  the  defendant's  favor,  and  the  plaintiff  has 
appealed. 

It  is  needless  to  recapitulate  any  other  facts  than  that  Mrs.  Hut- 
son  did  not  buy  a  tract  of  land  froni  Henry  .lohnson,  nor  contract  to 
do  8o  in  any  manner  that  could  bind  her. 

The  condition  with  which  the  defendant  clogged  his  indorsement 
of  the  note  never  having  been  accomplished,  the  plaintiff  has  no 
action  against  him. 

The  judgment  is,  ttierefore,  aflinned  with  costs.* 

2  Accord :  Lomax  v.  Picot.  2  Randolph   (Va.)   247.  —  C. 

"In  Ifobrrt.ion  v.  Krnftinqtnn  (4  Taiinf.  30),  the  indorsrnn'nt  was  "  Pay  th« 
within   sum   to   A.,   or   order,   upon    my   name   apix-aring   iri   the   '  fiazette  '   »,* 


5i88  NEGOTIATION.  [aKT.    IV. 

IV.  Indorsement:     Methods  and  effect. 

1.  Indorsrmknt  of  Instrument  I^ayable  to  Rearer. 

§70  lUDEK  V.  TALNTOJJ. 

4  Allkn   (Mass.)   356. —  1862. 

Contract  uj)oii  the  rollowinf;  promissory  noti;: 
$107.  Lek,  Dec.  1,  1860. 

Six  months  from  date,  for  value  received,  I  promise  to  pay  Stephen  K. 
Avery,  or  bearer,  one  hundred  and  seven  dollars,  with  use. 

Albert  J.  Taintor. 
[Tlie  note  bore  tlie  following  indorsement:] 
Pay  E.  A.  Bliss,  cashier,  or  order. 

Warrkn  Newton,  Cashier. 

At  the  trial  in  the  superior  court,  it  appeared  that  the  j)Iainti[T  had 
purchased  the  note  in  suit  before  it  ])ecame  due  for  a  full  considera- 
tion, but  the  bill  of  exceptions  stated  that  "  there  was  no  evidence 
that  E.  A.  Bliss,  to  Mhom  said  note  had  been  indorsed,  had  trans- 
ferred or  indorsed  said  note  to  the  plaintiff;"  or  "that  the  plaintiff 
had  any  title  in  said  note  from  said  Bliss,  or  that  said  note  was  sued 
with  the  knowledge  or  assent  of  said  l^liss."  Rockwell,  J.,  I'uled 
that  the  plaintiff  was  entitled  to  recover,  and  the  jury  returned  a 
verdict  accordingly;  and  the  defendant  alleged  exceptions. 

BicELOW,  C.  J.  —  The  contract  of  the  promisor  of  the  note  declared 
on  is  to  pay  the  sum  due  on  the  note  at  its  maturity  to  tiie  person 
who  shall  then  be  the  bearer.  The  production  of  the  note  l)y  the 
plaintiff  is  therefore  evidence  of  his  title;  and,  accompanied  as  it  was 
in  the  present  case  with  proof  tiiat  the  plaintilf  had  become  the  owner 
of  the  note  by  purchase  before  it  became  due,  established  a  conclusive 
right  to  recover  against  the  defendant. 

en.sipn  in  any  regiment  of  the  line,  between  the  1st  and  tiic  64tii,  if  within  two 
months  from  this  date."  In  this  form  the  bill  was  accepted  by  defendants,  who 
subspfpiently  paid  the  bill  to  ?".,  a  remote  indorsee  of  A.  The  payee's  name 
did  not  appear  in  the  '  Gazette,'  and  he  brought  an  action  against  the  ac- 
ceptor. Held:  plaintiff  could  recover.  It  is  the  rule  of  this  case  tha',  is 
changed  by  §  69  of  the  Neg.  Inst.  Law.  A  conditional  indorsement  does  not 
affect  the  negotiability  of  the  instrument.  Tupprtn  v.  Elji.  l.'j  Wend.  ( N.  Y.) 
362.  The  indorsee  is  a  trustee  for  the  conditional  indorser  if  the  condition  is 
not  fulfilled. —  H. 

["The  payee  indorses  to  A.,  specifying  in  the  indorsement  tiiat  it  is  upon  the 
express  condition  precedent  that  the  indorsee  shall  within  two  days  deliver 
to  indorser  a  certain  horse.  The  condition  is  not  fulfilled.  .At  maturity  the 
maker  pays  the  indorsee.  At  common  law  the  maker's  payment  would  not  lie 
availing,  and  the  indorser  could  collect  from  him.  Robertson  v.  f\rnsinf;ton, 
4.  Taunt.  31.  The  section  changes  this  and  protects  the  maker.  The  indorser 
nmst  look  to  the  indorsee  for  redress."  Professor  L.  M.  Greeley  in  2  111.  Law 
Rev.,  at  p.  151.  — C] 


IV.]  INDORSEMENT  :  METHODS  AND  EFFECT.  289 

The  indorsement  of  a  third  person,  directing  the  payment  of  the 
note  to  be  made  to  the  order  of  another,  did  not  change  the  contract 
of  the  promisor,  or  enable  him  to  set  up  in  defense  that  the  plaintiff's 
title  was  imperfect,  merely  because  he  had  not  obtained  the  signature 
of  the  person  to  whom  some  intermediate  holder  had  ordered  the  note* 
to  be  paid.  {Wilbour  v.  Turner,  5  Pick.  52G;  Waynatn  v.  Bend,  1 
Camp.  1T5;  Story  on  Notes,  §  132.) 

Exceptions  overruled.' 


§  70  JOHNSON  V.  MITCHELL. 

50  Texas,  212.  —  1878. 

The  facts  are  stated  in  the  opinion. 

Gould,  Assoct.^te  Justice.  —  This  suit  was  brought  by  B.  F. 
Mitchell  against  appellants.  W.  L.  Johnson  and  C.  R.  Bedford,  the 
makers  of  a  promissory  note,  payable  January  1,  1873,  to  J.  W. 
Crabtree.  or  bearer,  and  against  Crabtree,  who  had  indorsed  the  note 
a.s  follows:  "I  hereby  assign  the  within  note  to'  S.  L.  Gilbert  for, 
value  received,  and  guarantee  the  solvency  of  the  makers  of  said 
not€,  11th  of  September,  1873.    J.  W.  Crabtree." 

The  averments  of  Mitchell's  petition  as  to  his  right  or  title  to.  the 
instrument  sued  on  were,  that  he  was  the  legal  holder  and  owner  ^if. 
the  note;  that  Crabtree  sold  and  transferred  it  to  Gilbert,  setting 
out  the  assignment  as  indorsed,  and  that,  after  said  transfer,  he,* 
(plaintiff)  purchased  the  note  from  Gilbert,  who  transferred  it  to 
him  by  delivery.  The  only  evidence  of  ownership  introduced  by 
Mitchell  was  the  note  and  indorsement.  The  defendants  had  all  filed 
a  general  denial,  but  produced  no  evidence.  A  jury  being  waived, 
the  court  gave  judgment  against  Johnson  and  Bedford  as  principals 
and  Crabtref  as  guarantee.  Johnson  and  Bedford  asked  for  a  new 
trial,  claiming  that  the  evidence  was  insufficient  to  support  the  judg- 
ment; nnd  their  motion   being  overruled,  they  alone  have  appealed. 

It  is  insisted,  on  their  pari,  that  tlie  y)n)dnction  of  the  note,  trans- 
ferred as  it  was  to  Gilbert,  did  not  establisli  that  Mitchell  was  the 
legal  holder  or  owner. 

As  Crabtree  does  not  complain,  the  sole  question  is  as  to  the  legal 
effect  of  possession  of  a  note  payable  to  bearer  and  indorsed  in  full 
by  the  payee,  as  against  tlie  makers. 

Feeling  that  uniformity  of  decision,  in  all  cases  important,  is  not 
least  so  in  questions  of  commercial  law,  and  failing  to  find  decisions 
directly  in  point,  we  have  given  the  authorities  hearing  on  the  (jues- 
tion  a  careful  examination. 

According  to  the  elcmi-ntary  authorities,  a  hill  or  note  payable  to 
order  and   indorsed   in   blank,  so  long  as  the  indorsement  continues 

KEOOT.  INBTRUMKNT8—  19 


290  KEOOTlATlON.  [aRT.    IV. 

blank,  "is  in  efToet  payable  to  bearer."  (Chitty  on  Bills  [lltli  ed.] 
•."37;  :\  Kent  [IMli  ed.  |  side  p.  8;» ;  Story  on  BillH,  §  GO;  2  I'ara.  on 
Notes  and  Bills,  ]^.  l!i,  note  w;  p]dws.  on  Bills  and  Notes,  131,  269; 

1  Dan'l.  on  Neg;  Iiwt.  §  693;  Grceneaux  v.  Wheeler,  6  Tex.  522; 
Weihvrcd  v.  Smitli,  9  Tex.  626;  Whithed  v.  McAdams,  18  Tex.  553; 
Ross  V.  Sniifh,  19  Tex,  172.) 

Lord  Mnnsiield  said,  in  Peacock  v.  Rhodes:  "  I  see  no  difference 
betM'een  a  note  indorsed  in  blank  and  one  payable  to  bearer;"  and 
Chancellor  Kent  said,  in  Conroy  v.  Warren:  "A  note  indorsed  in 
blank  and  one  payable  to  bearer  are  of  the  same  nature.  They  both 
go  by  delivery,  and  possession  passes  property  in  both  cases."  (2 
Doug.  636;  3  Johns.  Cases,  263.)  So  "  a  note  payable  to  the  maker's 
Order  becomes,  in  legal  effect,  when  indorsed  in  blank,  a  note  payable 
to  bearer."  (Byles  on  Bills,  ch.  7,  p.  68;  Brown  v.  De  Winton,  6  M. 
G.  &  S.  [60  Eng.  Com.  Law],  336.) 

From  these  authorities,  we  conclude  tliat  Mitchell's  possession  was 
at  least  as  satisfactory  evidence  of  liis  ownership  as  it  would  have  been 
had  the  note  been  payable  to  Crabtree  or  order,  indorsed  in  blank  by 
Crabtree,  and  then  indorsed  in  full  by  Gilbert  and  someone  other  than 
Mitchell. 

The  negotiability  of  a  note  payable  to  hearer  is  certainly  not  further 
restrained  by  an  indorsement  in  full  than  would  be,  by  the  same 
indorsement,  the  negotiability  of  a  note  payable  to  order  and  indorsed 
in  blank  by  the  payee.  But  the  rule  is  well  settled,  that  "  if  a  bill  be 
once  indorsed  in  blank,  though  afterwards  indorsed  in  f\dl,  it  will  still, 
as  against  the  drawer,  the  payee,  the  acceptor,  the  blank  indorser,  and 
all  indorsers  before  him,  be  payable  to  bearer,  though  as  against  the 
special  indorser  himself  title  must  be  made  through  his  indorsee." 
(Byles  on  Bills  [.5th  ed.],  109;  cited  by  Pollock  in  2  Exch.,  infra; 
Chitty  on  Bills,  228,  230a  ;  3  Kent,  side  p.  90;  Story  on  Prom.  Notes, 
§  139;  2  Pars,  on  Notes  and  Bills,  19,  26;  Walker  et  al  v.  McDonald, 

2  Exch.  [Welsbv,  H.  &  G.],  531 ;  citing  Smith  v.  Clark,  1  Peak.  N.  P. 
C.  295,  and  1  Esp.  180;  Mitchell  v.  Fuller,  15  Penn.  270;  Huie  v. 
Bailey,  16  La.  213;  Little  v.  O'Brien,  9  Muss.  423;  Dugan  v.  The 
United  States,  3  Wheat.  172;  Edw.'s  on  Bills  and  Notes,  275;  citing 
Dolfus  V.  Frosch,  1  Denio,  367;  Savanah  National  Bank  v.  Ilaskins.) 

We  conclude,  then,  that  however  it  might  have  been  as  against 
Crabtree,  on  which  point  we  express  no  opinion,  as  against  the  makers 
of  the  note,  its  production  l)y  Mitchell  was  sufficient  evidence  of  title. 

Tt  may  be  objected  that  the  safe  transmission,  by  mail  or  other- 
wise, of  notes  and  bills  payable  to  bearer  requires  a  different  rule. 
The  answer  is.  first,  that  such  a  consideration  will  not  justify  a 
departure  by  the  courts  from  established  j)rinciples  and  precedents, 
second,  that  what  is  known  as  a  "  restrictive  "  indorsement  stops  the 
currency  of  negotiable  paper.     (Chitty  on  Bills,  232;  Story  on  Prom. 


IV.]  INDORSEMENT  :  METHODS  AND  EFFECT.  291 

Notes,  §  142,  et  seq.;  2  Pars,  on  Notes  and  Bills,  21 ;  1  Dan'l.  on  Neg. 
Inst.,  §  698.) 

Whilst  we  have  disposed  of  the  case  on  the  assumption  that  Crab- 
tree's  transfer  was  equivalent  to  an  indorsement  in  full  to  Gilbert  or 
order,  it  is  not  intended  to  pass  upon  that  question.  Looking  to  the 
original  nature  of  the  note,  which  was  that  it  should  pass  by  delivery, 
and  following  what  was  long  since  said  to  be  the  settled  rule,  "  that 
the  assignment  follows  the  nature  of  the  thing  assigned,"  it  may  be 
questioned  whether  that  indorsement  does  not  receive  full  effect  by 
treating  it  as  intended  to  secure  Crabtree's  liability  as  guarantor  to 
Gilbert  or  bearer.  (See  Edie  v.  East  India  Co.,  2  Burr.  1216;  Lane  v. 
Krekel,  22  Iowa,  400.) 

The  judgment  is  atiirmed. 

Affirmed. 


§  70       McKEEHAN,  The  Negotiable  Instruments  Law. 

[41  Am.  Law  Reg.,  N.  S.,  pages  454-462.] 

Section  9  [N.  Y.,  §  28],  par.  1-5: 

"The  instrument  is  payable  to  bearer  (1)  when  it  is  expressed  to 
be  so  payable;  or  (5)  when  the  only  or  last  indorsement  is  an  indorse- 
ment in  blank." 

Section  40  [N.  Y.,  §  70],  which  is  involved  in  the  discussion  of 
Section  !>,  par.  1-5,  reads: 

"  When  an  instrument,  payable  to  bearer,  is  indorsed  specially,  it 
may  nevertheless  be  further  negotiated  by  delivery;  but  the  person 
indorsing  specially  is  lial)le  as  indorser  to  only  such  holders  as  make 
title  through  his  indorsement." 

One  or  two  preliminary  observations  may  aid  to  a  })roper  under- 
Btanding  of  the  criticisms  made  of  these  sections. 

Blank  indorsements  were  unknown  to  the  early  law  of  Trills  and 
Notes,  which  re(juired  that  the  name  of  the  indorsee  should  be  con- 
tained in  tilt'  indorsement.  A  practice  later  arose  by  which  the  payee 
often  wrote  only  his  own  name  on  the  back  of  a  bill,  leaving  a  blank 
above  his  signature  for  the  name  of  the  indorsee.  Hence  the 
term  "blank  indorsement."  The  bill  being  transferred  in  this  condi- 
tion, the  transferee  or  any  8ubse(]nent  holder  has  an  ini[»lied  authority 
"  to  write  above  the  signature  an  order  of  ytayment  to  himself,  or  to 
bearer,  or  to  anyone;  to  whom  he  may  wish  in  turn  to  transfer  the  bill; 
and  the  blank  indorsement,  when  so  filled  up,  takes  effect  by  relation 
from  the  time  of  tlie  original  delivery  by  the  indorser."*  The  trann- 
feree  or  any  subsef|uent  holder  is  the  indorser's  agent  for  this  piirpose. 

*  Atnea'  Cases  on  "  Bills  and  Notes,"  Vol.  2,  p.  837. 


20?  JJEGOTIATIOJJ.  t^^l'-    ^V. 

For  a  long  tinio  it  was  necessary  to  exercise  this  authority  and  fill 
out  all  the  blank  indorsements  on  a  bill  at  or  before  trial.  Gradually 
this  last  re(]uirenu'nt  was  dispensed  witii,  and  thus  a  bill  payable  to  the 
order  of  A. — -with  A.'s  name  written  on  the  back  (no  indorsee  being 
named)  could  be  recovered  on  by  the  holder/'  Such  instruments  are 
said  to  be  payable  to  bearer,  and  indeed  they  are  so  while  the  indorse- 
ment remains  blank,  but  although  the  necessiiy  of  filling  up  a  blank 
indorsement  has  been  dispensed  with,  the  right  to  do  so  has  never  been 
abridged,  and  the  holder  of  a  bill  or  note  has  to-day,  as  he  always  liad, 
the  right  to  fill  up  any  or  all  blank  indorsements  on  the  instrument 
and  thus  make  it  payable  only  to  order. 

It  is  to  be  observed  —  and  this  is  important  —  that  these  rules  in  no 
way  violate  the  original  tenor  of  the  instrument.  The  maker  has 
promised  to  pay  "A  or  order  "  and  A.,  by  signing  his  name  with  a 
blank  above  it  and  handing  it  to  B.,  authorizes  B.  or  any  subsequent 
holder  to  designate  the  person  entitled  to  receive  payment.  Until' 
they  do  so  designate  him,  the  holder  is  tlie  man  entitled.  Now,  sup- 
pose B.  indorses  specially  to  C.  or  order,  and  then  C.  transfers  the 
paper  to  D.  by  mere  delivery.  Sliould  D.  be  allowed  to  sue  the 
maker  as  on  a  note  payable  to  bearer?  Xo,  for  since  the  maker  has' 
promised  only  to  pay  to  A.'s  order  — and  since  A.  has  given  B.  or  any 
holder  authority  to  designate  the  one  to  wl)om  the  sum  shall  be  paid  — 
and  since  B.  has  designated  tliat  it  shall  l)e  paid  "to  C.  or  order" — 
plainly  no  one  who  cannot  trace  title  through  C.  comes  within  the 
terms  of  the  maker's  promise.  That  is  the  logical  view,,  audi  it  is  the 
view  that  the  merchants  and  hankers  adopted,  i.  e.,  a  blank  indorse- 
ment of  a  note  payable  to  order  is  controlled  by  the  subsequent  special 
indorsement. 

But  the  courts  held  otherwise.  In  the  case  of  Smith  v.  Clarke,^ 
decided  in  1794,  a  bill  originally  payable  to  order,  was  indorsed  in 
blank  by  the  payee  and  was  subsequently  indorsed  specially.  Lord 
Kenyon  held  that  the  bill  was  payable  to  bearer  as  long  as  the  first 
indorsement  remained  blank,  and  that  the  holder  misfht  therefore 
strike  out  the  special  indorsement  and  recover  as  on  a  bill  payable  to 
bearer.  Smith  v.  Clarle  has  been  generally  followed  both  in  Eng- 
land and  America.''     This  decision  was  opposed  to  the  view  held  by 

'This  af^flpfl  a  new  torm  to  flip  inrlorspr's  ordor.  i.  e.,  that  until  the  blank 
wa«  flllpf]  lip  thp  instnimpnt  should  be  payable  to  bearer. 

6  Ppake,  22.5.  Although  in  a  case  which  arose  some  years  earlier.  Ancher 
V.  Hank  of  Enfjland.  2  Douglas,  p.  6.'?7  (1781).  Lord  Mansfield  evidently  agreed 
with  the  understanding  of  mercJiants  that  a  blank  indorsement  was  controlled 
by  a  subsequent  special  indorsement.  TTowever,  the  exact  point  decided  in 
Smith  V.  Clarke  was  not  involved  in  that  ease. 

T  Walker  v.  Macdonald,  2  Wels.  Hurl.  &  Cordon.  520  (1848);  Hoiiie  v. 
Bailetj.  16  La.  21.3  (1840);  Xaiional  Bank  v.  Hask'ms,  101  Mass.  370  (1869); 
Eoury  v.  Eppinger,  34  Mich.  31    (1876);   Watervliet  Bank  v.  White,  1   Denio, 


IV.]  tNDORSEMEll^f  I  METHODS  AND  EFFECT,  29^ 

the  business  community,  and  so,  in  1882,  framers  of  the  English  act, 
in  order  "  to  bring  the  hnv  into  accordance  with  the  mercantile  under- 
standing, by  making  a  special  indorsement  control  a  previous  indorse- 
ment in  blank,"  '  provided  in  section  8,  par.  3  : 

"  A  bill  is  payable  to  bearer  which  is  expressed  to  be  so  payable,  or 
on  which  the  only  or  last  indorsement  is  an  indorsement  in  blank." 

The  provisions  of  section  9  [N.  Y.,  §  28],  par.  1-5  of  the  Ameri- 
can act  are  tlie  same  as  those  of  the  English  act  and  werf  inserted  for 
the  same  reason. 

It  is  further  to  be  observed  that  Smith  v.  Clarice  and  all  of  the  cases 
which  follow  it  are  cases  of  instruments  originally  payable  to  order. 
None  of  these  cases  contains  a  syllable  about  instruments  originally 
made  payable  to  hearer.  There  is  an  important  distinction  between 
the  two  kinds  of  instruments.  For  reasons  which  I  have  referred  to 
above,  the  custom  of  merchants,  which  has  now  been  adopted  by  both 
the  English  and  American  acts,  says  that  in  the  case  of  an  instru- 
ment originally  payable  to  order,  a  blank  indorsement  is  controlled  by 
a  subsequent  special  indorsement,  because  in  such  a  case  the  maker's 
promise  embraces  only  those  who  make  title  through  the  special 
indorsement.  But  a  note  originally  payable  to  hearer  is  another  mat- 
ter. Tt  is  a  violation  of  the  plain  tenor  of  such  a  note  to  treat  it  as 
other  than  payable  to  bearer.  That  is  the  maker's  absolute  promise : — 
to  pay  the  bearer.  His  promise  cannot  be  qualified  or  changed  in  any 
way  by  a  subsequent  holder.  The  only  effect  of  a  special  indorsement 
on  such  a  note  is  that  the  indorscr  can  be  held  only  by  those  who  make 
title  throufrh  his  indorsement.® 

This  distinction  between  instruments  originally  payable  to  bearer 
and  instruments  oriirinally  payable  to  order  and  then  indorsed  in 
blank  is  preserved  both  in  tbe  English  and  American  acts.  Under 
Itoth  acts,  a  note  orifjinally  payable  to  bearer  and  specially  indorsed 
Kjntinues  payable  to  bearer,  while  an  instrument  oriirinally  payable 
{.}  order  is  payable  to  bearer  only  when  the  last  indorsement  is  in 
blank.  Profes.sor  Ames  says  that  this  distinction  is  '*  illoi^ical  and 
undesirable "  thoutrh  he  pives  us  no  reasons.  Judfre  Brewster's 
reply  is  equally  brief:  "The  reason  why  such  a  rule  is  'illogical  and 
undesirable  '  is  not  clear."  Tt  is  submitted  that  for  the  reasons  noted 
above,  this  distinction  is  decidedly  "  logical,"  and  inasmuch  as  it 
appears  to  ol)tain  fjenerally  throufrlifiut  tbe  business  enirimunity,  its 
continued  observance  by  flie  fode  would  seem  to  be  "desirable." 

Professor  Ames  further  eriticises  this  sub-seclion,  as  follows: 


r,08  (1S4.')):  Prvtz  v.  WintprhnHom.  B  Dpnin.  51  nR47)  ;  Frenrh  v.  Harney, 
1  TrMplI.  219  (lH4n);  Mitchrll  v.  Fuller,  15  Pa.  2fl«  (1850);  Rand  v.  Dovey, 
8.T  F'ii.  280   (1877).     Contrji:    MynH  v.  Friind,  1   Rnruloipli,  12   (1821). 

"  Chalnipr!"'  P.illw  nf  Kxplianpc.  5fli  ((litifin.  |i.  24. 

•  Story,  Bills  of  Exriiangp,  §  207;  Weocl's  BjIps  on  Rills  and  Notes,  161. 


594  NEGOTIATION.  [ART.    IV. 

"  If  an  iiistruinont  indorsed  in  blank  and  substMjuently  indorsed 
specially,  so  that  it  is  no  longer  payable  to  bearer,  is  transferred  by  the 
special  indorsee  by  delivery  merely,  the  transferee  laiiiiot  sue  })arties 
prior  to  the  special  indorser  in  his  own  name,  bnt  only  in  the  name  of 
his  assignor.  This  puts  the  assignee  to  unnecessary  inconvenience. 
As  owner  of  the  instrument,  although  not,  according  to  this  sub- 
section, holder,  he  ought  to  have  the  right  to  strike  out  the  special 
indorsement,  thus  making  the  instrument  once  more  payable  to 
bearer,  and  as  bearer  to  sue  upon  it  in  his  own  name."  /.  e.,  A. 
makes  a  note  to  B.  or  order.  B.  indorses  in  blank.  C.  indorses  it  "  to 
D.  or  order"  and  D.  delivers  it  (without  indorsement)  to  E.  Profes- 
sor Ames  thinks  that  E.  should  have  the  right  to  strike  out  C.'s 
indorsement  and  sue  A.  or  B.  as  on  a  note  payable  to  bearer. 

Why  should  he  have  this  right?  It  has  long  been  the  law  (and 
still  is  under  section  48)^  that  the  holder  may  strike  out  any  indorse- 
ments which  are  not  necessary  to  his  title.  The  law  has  never  per- 
mitted him  to  strike  out  indorsements  which  are  necessary  to  his  title. ^ 
Now,  so  long  as  Lord  Kenyon's  doctrine  ''  prevailed,  the  holder  had 
the  right  to  strike  out  all  indorsements  subsequent  to  the  first  blank 
indorsement  because  the  instrument  was  by  that  first  blank  indorse- 
ment payable  to  bearer  and  a  subsequent  special  indorsement  did  not 
change  its  tenor  and  was  therefore  not  necessary  to  his  title.  But  this 
sub-section  was  inserted  for  the  express  purpose  of  doing  away  with 
Lord  Kenyon's  doctrine.  Everybody  agrees  that  a  blank  indorse- 
ment of  an  instrument  originally  payable  to  order  ought  to  be  affected 
by  a  subsequent  special  indorsement.  What  does  this  change  mean, 
then?  Why  it  means  (taking  the  case  Professor  Ames  supposes  for 
us)  that  by  virtue  of  the  special  indorsement  by  C.  the  note  has 
again  become  payable  only  to  order,  and  therefore  C.'s  indorsement  can- 
not be  stricken  out  by  a  subsequent  holder  because  it  is  necessary  to 
his  title.  Suppose  D.  had  in  his  turn  indorsed  specially  to  E.  The 
latter  (though  now  a  holder  within  the  meaning  of  the  act)  could 
not  strike  out  the  indorsements  of  C.  and  D.  Why?  Because  the 
instrument  being  now  again  payable  to  order  only,  the  indorsements 
of  C.  and  D.  are  necessary  to  his  title,  and  so  section  48  gives  him  no 
right  to  strike  them  out.  Professor  Ames  says,  "As  owner  of  the 
instrument,  he  ought  to  have  the  right."  But  ownership  of  a  bill  or 
note  gives  the  holder  no  right  to  alter  it  —  to  change  the  tenor  of  any 
of  the  promises  which  it  evidences. 

1  Section  48  fN.  Y.,  §  78]:  "The  holder  may  at  any  time  strike  out  any 
indorsement  which  is  not  necessary  to  his  title.  The  indorser  whose  indorse- 
ment is  struck  out,  and  all  indorsera,  subsequent  to  him  are  thereby  relieved 
from  liability  on  the  instrument."  , 

*  Story,  Promissory  Notes,  §  208. 

•  Smith  V.  Clarke,  supra. 


IV.]  INDORSEMENT  :  METHODS  AND  EFFECT.  295 

Judge  Brewster  answers  this  criticism,  however,  in  another  way. 
lie  first  agrees  with  Professor  Ames  that  E.  (in  the  case  supposed) 
ouglit  to  be  allowed  to  stiike  out  C.'s  special  indorsement,  and  then 
he  tries  to  give  him  this  right.*  He  first  points  to  section  48,  which 
gives  the  right  to  strike  out  indorsements  not  necessary  to  title.  Hut 
Professor  Ames  reminds  him  that  section  48  confers  this  right  only 
on  holders  and  that  K.  is  not  a  holder,  for  "holder"  is  defined  in 
section  191  [N.  Y.,  §  2]  to  mean  "  The  payee  or  indorsee  of  a  bill  or 
note  who  is  in  possession  of  it,  or  the  bearer  thereof,"  and  "  bearer  "  is 
defined  by  the  same  section  to  mean  "  The  person  in  possession  of  a  bill 
or  note  which  is  payable  to  bearer."  Both  ignore  the  fact  that  in  the 
case  supposed  C.'s  indorsement  is  necessary  to  E.'s  title. 

In  order  to  give  E.  the  right  to  sue  the  maker,  Judge  Brewster 
next  refers  to  section  40,  which  provides  inter  alia  that  "  When  an 
instrument  payable  to  bearer  is  indorsed  specially,  it  may  nevertheless 
be  further  negotiated  by  delivery." 

"  This  section,"  says  Judge  Brewster,  "  which  authorizes  a  transfer 
by  delivery  seems  to  give  the  transferee  the  right  to  sue  in  his  own 
name,  otherwise  the  note  would  not  be  negotiated  within  the  meaning 
of  the  act."  But  if  section  40  applies  to  a  note  originally  payable 
to  order  —  then  indorsed  in  blank  and  made  payable  to  bearer  —  and 
then  indorsed  specially  —  if  such  an  instrument  may  still  be  negoti- 
ated by  delivery,  then  the  rule  of  Smith  v.  Clarke  is  still  in  full  force, 
and  section  9,  par.  T),  which  was  inserted  to  overthrow  Smith  v.  Clarke 
is  a  nullity.    That  carries  us  to  the  next  criticism. 

Professor  Ames  insists  that  section  40  completely  nullifies  section 
9,  par.  5,  and  that  for  this  reason  only  may  E.  sue  the  maker  in  the 
case  supposed.  ITis  position  is  that  section  9,  par.  5,  was  inserted  to 
change  the  old  rule  that  an  instrument  "  payable  to  bearer  (or  in- 
dorsed in  blank)"  ^  although  afterwards  specially  indorsed,  was  still 
negotiable  by  delivery  —  that  "then,  in  apparent  forgetfulness  of 
the  effect  of  section  9,  par.  T),"  section  40  was  inserted  providing  that 
an  instrument  payable  to  bearer  and  indorsed  speeiall}  is  still  nego- 
tiable by  (h.'livery,  the  special   indorsee  being   liable  only  to  such  as 

«  Mr.  FarroII  answers  Professor  Ames  ns  follows:  "In  answer  to  this,  it  in 
necessary  only  to  say  tliat  in  most  jnrisdief ions  he  ninv  lirintr  suit  in  his  own 
name,  Ix-inj,'  the  real  party  in  interest."  (The  Nepotiahle  Instruments  Law,  by 
.Ino.  I.awrenee  Farrell.  Hrief  of  Phi  Delta  IMii,  Vol.  Ill,  No.  2,  First  Quarter, 
IJtOl.)  Put  tlie  statutes  wliieh  permit  an  assipnee  to  sue  in  his  own  name 
have  etTeeted  merely  a  proeedural  ehanfje.  Fie  is  still  an  assij^nee  merely  and 
can  Ix*  met  by  any  defense  arising  out  of  the  instrument  which  could  be 
pleddcd  apainst  the  nssipnor.  The  <|uestion  is  not  in  whose  name  ahall  K. 
brinp  suit   (a  minor  point),  hut  it  is  what  ripht  can  K.  as.sert 

•'•These  are  Professor  Ames'  words;  hut  if  by  "  Payable  to  bearer  "  he  meaiu 
originally  payable  to  bearer,  it  is  submitted  that  neither  Smith  v.  Vlarke  nor 
any  of  the  cases  which  follow  it  sav  any  tliinp  aliout  Huch  instruments.  They 
are  all  cases  uf  inatrumentd  originally  payable  to  order. 


29(\  NEGOTIATION.  [aUT.    IV. 

make  title  through  his  indorpenieut,  and  tliat  this  section  (40)  thus 
clianges  the  hiw  back  to  its  former  state. 

Judge  Brewster's  answer  is : 

"  Seetion  40  is  claimed  to  be  repugnant  to  section  9,  par.  5,  but 
this  is  not  so.  Seetion  9,  par.  5,  declares  a  note  to  be  payable  to 
bearer  when  its  last  indorsement  is  in  blank;  40  relates  to  a  note 
when  the  last  {ndorsetiieiit  is  special,  and  provides  that  it  may  then 
be  transferred  hy  delivery,'^  in  order  to  cover  cases  of  good  faith  where 
title  is  frequently  passed  in  that  way,  by  persons  ignorant  of  mer- 
cantile usage." 

It  is  submitted  that  that  is  no  answer,  and  for  this  reason.  If  a 
bill  inay  he  transferred  by  delivery,  it  is  payable  to  bearer.  Section  40, 
on  Judge  Brewster's  reading,  permits  a  bill  whose  last  indorsement 
is  special  to  be  payable  to  bearer,  yet  section  9,  par.  1-5  was  inserted 
to  permit  only  bills  originally  payable  to  bearer  or  whose  last  indorse- 
ment is  in  blank  to  be  payable  to  bearer.'' 

I  submit  that  in  one  way  and  one  way  only  can  these  two  sections 
be  liarmonized.  If  section  40  be  interpreted  as  applying  only  to 
instruments  originally  payable  to  bearer,  there  can  be  no  difficulty 
as  to  either  section.*  True,  it  reads  merely  "  When  an  instrument 
payable  to  bearer  is  indorsed  specially,"  etc.,  and  there  is  no  denying 

6  The  italics  are  the  reviewer's. 

7  Judge  Brewster  cites  the  following  passage  from  the  new  Norton  Horn 
Book  by  Afr.  TifTany,  p.  110,  to  prove  that  section  40  and  section  9,  par.  5,  are 
in  harmony:  "An  instrument  which  is  originally  payable  to  bearer,  or  which 
has  been  indorsed  in  blank,  though  afterwards  specially  indorsed,  is  still  pay- 
able to  bearer;  except  as  to  the  special  indorser,  who,  on  such  an  indorsement, 
after  such  an  indorsement,  is  only  liable  on  his  indorsement  to  such  parties  as 
make  title  through  it." 

It  is  submitted  that  the  above  tends  to  prove  just  the  reverse,  because  if 
by  section  40  an  instrument  originally  payable  to  order,  then  indorsed  in 
blank,  and  then  specially  indorsed,  is  still  payable  to  bearer,  section  9,  par.  5 
(which  intended  to  make  only  instruments  whose  last  indorsement  is  in  blank 
payable  to  bearer)    is  nullified. 

Mr.  Crawford,  the  draughtsman  of  the  Act,  actually  regards  section  40  as 
embodying  the  decision  of  Hmith  v.  Clark  (Crawford's  Annotated  Negotiable 
Instruments  Law,  p.  41).  Yet  admittedly  section  9,  par.  5,  was  intended  to 
overthrow  that  decision. 

8 (Supplementary  Note.  In  commenting  upon  the  above  suggestion,  Pro 
fessor  Ames  has  pointed  out  that  section  9-1  includes,  not  only  instruments 
originally  payable  to  bearer,  but  also  instruments  originally  payable  to  order 
and  indorsed  by  the  payee  expressly  "  Pay  to  bearer."  16  Harvard  Law  Uevievv, 
257.  This  seems  clearly  right,  and  it  would  seem  to  show  that  the  writer's 
suggestion  should  be  modified  to  this  extent,  that  section  40  should  be  con- 
strued as  applying  only  to  instruments  expressly  payable  to  bearer,  thu.i 
including  instruments  originally  so  drawn,  and  also  instruments  originally 
drawn  to  order  and  then  expressly  indorsed  by  the  holder  "  Pay  to  bearer." 
With  this  modification,  the  writer  is  still  of  opinion  that  the  suggested  con- 
struction of  section  40  would  satisfactorily  harmonize  that  section  with 
Bection  9-5.) 


IV-]  INDORSEMENT  :  METHODS  AND  EFFECT.  291 

that  if  it  meant  only  an  instrument  originally  payable  to  bearer  it 
should  have  said  so.  At  tlie  same  time,  the  words  used  are  com- 
monly understood  to  describe  an  instrument  originally  payable  to 
bearer,  and  there  is  the  additional  reason  that  unless  these  words  are 
so  interpreted  here,  the  section  is  diametrically  opposed  to  section  9, 
par.  5,  a  conclusion  plainly  to  be  avoided  if  possible.  Again,  section 
0,  par.  5,  can  be  construed  in  only  one  way,  while  section  40  may  be 
construed  either  as  being  opposed  to  or  as  being  in  harmony  with  it. 
Moreover,  such  an  interpretation  would  be  good  law.  At  the  open- 
ing of  the  discussion  of  these  sections,  some  reasons  were  submitted 
why  the  distinction  between  instruments  originally  payable  to  bearer 
and  those  originally  payable  to  order  and  indorsed  in  blank,  was 
both  logical  and  desirable.  However  this  may  be,  such  a  distinc- 
tion is  certainly  marie  in  section  9,  par.  5,  and  it  has  been  made  with- 
out complaint  for  twenty  years  in  the  English  act.  The  suggested 
interpretation  of  section  40  preserves  this  and  the  two  sections  would 
be  harmonious.  By  section  9,  par.  1,  an  instrument  originally  paya- 
ble to  bearer  continues  to  be  payable  to  bearer  even  though  specially 
indorsed.  But  if  it  is  specially  indorsed,  then  by  section  40  "  the 
person  indorsing  specially  is  liable  as  indorser  only  to  such  holders 
as  make  title  through  his  indorsement,"  and  this  has  always  been  the 
law.  By  section  9,  par.  5,  on  the  other  hand,  a  bill  originally  pay- 
able to  order  is  payable  to  bearer  only  when  the  only  or  last  indorse- 
ment is  in  blank.  Every  one  of  these  propositions  is  good  law  and 
accords  with  the  understanding  of  merchants. 

The  remaining  criticism  of  this  subsection  is  unimportant.  "  If 
it  is  to  he  taken  as  it  stands,"  says  Professor  Ames,  "a  note  pnvahle 
by  A.  to  the  order  of  B.,  and  bearing  the  anomalous  blank  indorse- 
ment of  r.,  would  be  payable  to  bearer.  This,  of  course,  would  he  an 
absurdity,  but  it  is  certainly  true  that  the  only  indorsement  is  an  in- 
dorsement in  blank." 

Professor  Ames  does  not  suggest  that  any  merchant,  any  lawyer, 
any  court  would  ever  give  the  section  such  a  construction.  Nor  does 
it  require  any  stretch  of  the  English  language  to  arrive  at  its  proper 
meaning.  An  anomalous  indorser  is  not  strictly  an  indorser  at  all. 
He  is  called  one  for  convenience  sake,  and  a  liability  closely  re- 
sembling that  of  an  indorser  is  fastened  upon  hirtu  But  a  section 
which  uses  the  word  "  indorsement"  with  reference  to  the  transfer  of 
an  instrument,  could  scarcely  be  regarded  as  having  any  reference 
whatever  to  an  anomalous  indorser.  The  words  used  in  section  9, 
par.  5,  of  the  American  act  have  been  found  entirely  satisfactory  in 
the  English  act  throughout  twenty  years'  eTpericnce,  nnd  I  here  can 
be  no  rensonalile  doubl  as  to  their  meaning  with  reference  to  an 
anomalous  blank  indorBcment. 


298  NEGOTIATION.  [aRT.    IV. 

?.  Indorsement  WiifiU'  Payaiu,!;  to  Two  or  More  Persons. 
§71  DWIGHT  V.   I'KASE. 

3  McLean,  94  (s.  c.  8  Feu.  Cas.  186).  —  1842. 
[U.  iS'.  Circuit  Court,  Dist.   Mich.] 

Opinion  of  tme  rorirr.  —  This  action  was  brought  upon  the  fol- 
lowing protnissorv  note: 

Detroit.  Jauudiy  1.  IS,"??.  Two  ypars  .nftor  date,  T  promisp  to  pay  to  tho 
order  of  Walter  Chester,  and  I'ease,  Chester  and  Co..  one  thousand  and  five 
hundred  dollars,  fur  value  received,  at  the  Farmers  and  Mechanics'  Bank  of 
Michigan,  with  interest. 

(Signed)  John  Chester. 
[Indorsed:]     Pease,  Chester  &  Co. 

[and  also]    D.  E.  Jones  (in  blank). 

The  declaration  contained  throe  counts,  to  the  tirst  of  which  there 
was  a  demurrer.  This  count  states  that  one  John  Chester,  on  the 
1st  of  January,  1837,  made  his  note  payable  to  order  of  Walter 
Chester,  and  Pease,  Chester  &  (.'o.,  and  that  Pease,  Chester  &  Co., 
under  their  partnership  name,  indorsed  and  delivered  the  said  note 
to  the  plaintiff.  John  Chester,  the  maker,  was  a  member  of  the  firm 
of  I'ease,  Cliestcr  &  Co.  Demand  of  the  note  when  due,  and  notice 
to  the  defendants,  was  proved. 

Walter  Chester,  one  of  tlie  promisees  in  the  note,  seems  not  to  have 
indorsed  it,  and  this  is  fatal  to  the  right  of  the  plaintiff.  The  interest 
of  the  })romisecs  is  joint  in  the  note,  and  not  being  in  partnership,  they 
must  each  transfer  the  note.  (Chitty  on  Bills,  123;  Tayl.  55;  Car- 
vick  V.  Vickcry,  Doug.  653;  Jones  v.  Radford,  1  Camp.  83;  21  Eng. 
C.  L.  Rep.  41.) 

Only  one-half  of  the  nolo  was  transferred  by  the  indorsement  of 
Pease,  Chester  &  Co.,  and  tliis  does  not  give  a  right  to  their  or  any 
subsequent  assignee  to  sue  on  the  note.  Pecourse  against  the  maker 
cannot  thus  be  divided  and  suits  multiplied.  The  plaintiff  seeks  by 
this  action  to  recover  Iho  full  amount  of  the  note  against  the  defend- 
ants, as  indorsers.  P)Ut  as  he  holds  but  one-half  of  the  note  under 
the  assignment,  the  indorsement,  at  most,  can  only  be  evidence  of 
that  amount. 

The  declaration  is  defective  in  not  averring  that  Walter  Chester, 
one  of  the  payees,  did  indorse  the  note.  Demurrer  sustained.  The 
plaintiff  dismissed  his  action.' 

1  In  Allen  v.  Corn  Exchange  Bank,  87  App.  Div.  ( N.  Y.)  335,  337,  it  was 
said  that  "  where  commercial  pajjcr  is  payable  to  two  or  more  persons,  who 
are  not  copartners,  it  miist  bo  indorsed  by  all  to  pive  pood  title  to  a  trans- 
feree. .  .  .  Tn  Wood  V.  Wood.  Ifi  N.  .T.  L.  428,  it  was  held  that  one  joint 
payee  of  a  promissor,y  note  cannot  indorse  it  either  in  his  own  name  alonp  QX 


iv.]  indorsement  :  methods  and  effect.  299 

3.  Indorsement  Where  Payable  to  Cashier,  Etc. 
§  72      JOHNSON  V.  BUFFALO  CENTER  STATE  BANK. 

134  Iowa,  731.—  1907. 

Action  on  certificate  of  deposit  issued  by  the  Clay  County  Bank  of 
Felton,  Minn.,  to  "  E.  E.  Secor,  Cashier,"  and  by  indorsement  of 
"  E.  E.  Secor,  Cashier,"  transferred  to  the  State  Bank  of  Dows,  and 
by  that  bank  to  phiintiff.  It  is  alleged  that  Secor,  to  whom  as  cashier 
the  certificate  of  deposit  was  issued,  and  by  whom  it  was  indorsed,  was 
the  cashier  of  tlie  defendant  bank,  and,  acting  in  that  capacity,  trans- 
ferred the  instrument  to  the  State  Bank  of  Dows.  In  the  answer  of 
defendant  it  is  admitted  that  Secor  was  its  cashier  at  the  time  of  the 
transaction  in  question;  but  it  is  alleged  that  the  Clay  County  Bank 
was  a  copartnership  of  which  Secor  was  a  partner,  and  that  the  cer- 
tificate was  made  use  of  by  him  for  his  own  personal  benefit,  and  not 
for  the  use  or  benefit  of  the  defendant  bank,  which  received  no  con- 
sideration therefor,  and  that  Secor  acted  without  the  knowledge  or 
consent  of  any  officer  or  agent  of  the  defendant  bank  and  without  its 
authority.  The  court  directed  a  verdict  for  the  plaintiff,  and  from 
the  judgment  on  that  verdict  defendant  appeals. 

MfCi.AFN,  J.  'I'hc  first  contention  for  the  appellant  is  that  the 
question  whether  plaintiff  was  a  holder  of  the  certificate  of  deposit  in 
due  course  —  that  is,  a  purchaser  for  value  before  maturity  without 
notice  of  any  defenses  —  should  have  been  submitted  to  the  jury. 
♦  *  *  We  think  that,  had  the  question  been  submitted  to  a  jury, 
there  could  have  been  no  other  finding  than  that  plaintiff  was  a  bona 
fide  holder  without  notice  before  maturity  on  good  consideration,  and 
therefore  in  this  respect  there  was  no  error  in  directing  a  verdict. 

The  next  contention  is  in  snbstan<'0  and  effect  that  Secor  was,  in 
fact,  negotiating  the  certificate  of  deposit  in  his  own  interest,  and  not 

in  hi«<  own  name  and  that  of  his  co-paypp.  Thoy  aro  not  pon'sidorod  partnprs 
eithpr  in  the  commprcial  or  legal  sense  of  <l)o  term."  Soe  this  rase  for  other 
authorities. 

In  llnyilon  v.  Mcohtli,  18  NVv.  200,  302,  the  eonrt  said:  "We  hav.-  con 
siderrd  the  qnf'«tions  l>efore  fii^eussed.  upon  tlie  theory  tiiat  a  note  like  the 
one  in  suit,  indorsed  hy  one  only  nf  two  joint  payees,  ix  suhjeet  to  any  equities 
existing  in  favor  of  the  maker,  thr  same  as  though  it  had  not  heen  indorsed 
by  eittipr;  and  snch,  we  think,  is  th<'  law.  Siirli  a  note  is  payable  to  both,  or 
to  their  joint  order.  Hy  fhf  law  nierehant  it  cannot  he  transferred  except  hy 
the  joint  indorsement  of  all  the  pnyecs.  Ityhinrr  v.  Frirkrrt,  02  III.  311.  and 
authorities  there  cited.  If  a  note  unindorsed  is  not  transferred  in  good  faith, 
then  one  indorse<l  by  a  part  only  is  in  the  same  situation.  Such  a  note  id 
■urely  only  transferred   in   |)art." 

See  alir)  Knufmnvn  v.  Nftilr  Snv.  linvk.  \Tt\  Mich.  ftU.  reported  in  IS  T/.  N.  R. 
630,  with  note  entitled  "  Indorsement  by  one  of  two  joint  payfH's  or  indorseri 
of  a  hill  or  note."  —  C. 


300  NixioiiAiioN.  \\\n.   IV 

for  defendant  bank,  and  i(  is  insisted  that,  as  the  name  of  the  defend- 
ant Itank  is  not  insrrted  iu  the  instrument  as  payee,  nor  phiced  upon 
the  back  of  it  as  iudorser,  nothing  was  imported  iu  the  transaction 
involving  liability  on  the  part  of  defendant  bank.  But  it  is  conceded 
in  the  record  that  Secor  a(  ilic  tiiiu'  the  certificate  was  issued  payable 
to  him  as  cashier,  and  al  ihr  liiiic  it  was  indoi'sctl  by  him  as  cashier. 
was  in  fact  the  casliicr  and  managing  ollicer  of  the  defendant  l)ank, 
and  that  the  certillcatt-  was  transferred  apparently  as  a  part  ol  the 
business  of  the  bank,  in  section  42-  of  the  Negotiable  Instruments 
Act  (39th  Gen.  Asscm..  p.  85,  c.  130;  Code  Snpp.  1902,  §  :i0G0a42), 
it  is  provided  :  "  Where  an  instrument  is  drawn  or  indorsed  to  a  per- 
son as  '  cashier  '  *  *  *  of  a  l)ank,  *  *  *  it  is  deemed />ri/»rt 
farir  to  be  payable  to  tlie  bank  *  *  *  of  which  be  is  sucli  officer, 
and  may  be  negotiated  by  either  the  indorsement  of  the  bank,  *  *  * 
or  the  indorsenuMit  of  tiie  oHicer."  Under  this  provision  it  was  com- 
petent for  the  plaintifT  to  show  that  Secor  was  the  cashier  of  tlio 
defendant  l)ank,  and  was  acting  in  that  general  capacity  in  transfer- 
ring the  instrument,  and  as  against  plaintiff,  a  hnna  fide  holder  with- 
out notice,  it  was  not  competent  for  the  defendant  bank  to  show  that 
as  a  matter  of  fact  he  was  making  use  of  his  oHicial  title  and  authority 
in  his  own  individual  interest.  Even  were  this  not  so,  it  clearly 
appears  that  the  State  Bank  of  Dows  paid  for  the  certificate  of  deposit 
by  a  Chicago  draft  payable  "  to  the  order  of  E.  E.  Secor,  Cashier,''  and 
that  the  jjroceeds  of  tliis  draft  became  a  part  of  the  funds  of  the  bank. 
It  seems  to  us  that,  as  against  the  plaintiff,  no  further  inquiry  could 
be  permitted.  We  must  look  at  the  whole  transaction  with  reference 
to  the  position  of  plaintiff,  an  innocent  holder  for  value.  He  was  not 
charged  with  notice  of  the  dealings  between  "Secor,  Cashier,"  and 
the  defendant  bank  which  he  represented,  and  in  whose  interest  he 
appeared  to  act.  T'''nder  the  section  of  tlie  Negotiable  Instruments 
Act  just  quoted  the  relations  of  the  parties  wore  not  different  from 
what  thpv  would  have  been  had  tlip  ccrtificnte  of  deposit  been  issued 
to  the  defendant  bank  and  indorsed  in  its  name  by  Secor,  acting  as 
its  cashier.     *     *     * 

The  judgment  is  therefore  affirmed.'' 


2  N.  Y..  §  72.  —  C. 

3  "  The  usage  is  universal  for  presidents  and  casliiers  of  incorporated  com- 
panies, acting  as  tlie  executive  officers  and  agents  (jf  such  companies,  to  nial<e. 
in  their  hehalf.  indorsements  and  transfers  of  negoliahle  j)a|)er,  by  simply 
indorsing  their  names,  with  the  additions  of  their  titles  of  oflice.  T  cannot 
doubt  that  such  an  indorsement  is  sufficient  to  cliarge  the  corporation  under 
whose  autliority  the  indorsement  is  made,  and  to  transfer  tlie  note  to  the 
indorsee,  so  that  the  latter  can  maintain  an  action  thereon  in  his  own  name." 
Hall,  J.,  in  /?/afr  Rank  v.  Fo.t.  .T  Blatch.    (TT.  S.)    431.  — TT. 

fTn  First  \n1iovnl  Bnnk  v.  MrCullonqh.  .50  Or.  .508.  .'512.  the  court,  after 
citing  certain  decisions,  says :   "  The  rule  to  be  extracted  from  these  decision 


IV.]  INDORSEMENT  :  METHODS  AND  EFFECT.  301 

4.    IxnORSEMENT   WhERE    NamE   MISSPELLED,   EtC. 

§  73  BOLLES  v.  STEARNS. 

11  Gushing  (Mass.)  320.  —  1853. 

From  the  auditor's  report,  it  appeared  that  Stearns  was  the  Iiolder 
of  a  note  executed  by  Bolles  payable  to  "John  P.  Reed,  or  order," 
and  indorsed  "  Joseph  P.  Reed."  There  was,  when  the  note  was 
given,  a  person  living  in  the  same  town  whose  name  was  "John  P. 
Reed,"  but  it  was  proved  that  the  note  was  in  fact  given  by  Bolles 
to  Joseph  P.  Reed  for  money  lent  him  by  the  latter,  and  that  it  was 
indorsed  by  Joseph  P.  Reed  to  Stearns. 

Metcalf,  j.  *  *  *  The  court  are  also  of  opinion  that  the 
note  given  by  the  plaintiff,  payable  to  John  P.  Reed,  or  order,  and 
indorsed  to  the  defendant  by  Joseph  P.  Reed,  cannot  be  allowed  to  the 
defendant  by  way  of  set-off.  That  note,  though  given  for  money  lent 
to  the  plaintiff  by  Joseph  P.  Reed,  was  made  payable,  not  to  him,  but 
to  John  P.  Reed,  a  person  in  esse.  Now  it  is  certain  that  the  legal 
interest  in  that  note  was  not  transferred  to  the  defendant  by  Joseph 
P.  Reed's  indorsing  his  name  on  it.  He  was  not  the  payee  nor  the 
legal  representative  of  the  payee.  And  a  transfer  by  indorsement 
can  be  made  in  the  first  instance  only  by  the  payee,  or  by  some  one 
claiming  in  his  right,  as  his  executor,  administrator,  or  assignee  in 
bankruptcy  or  insolvency.  (Kyd  on  Bills  [1st  Amer.  ed.],  106,  107.) 
If  there  had  been  no  such  person  as  John  P.  Reed,  perhaps  the  note 
might  have  been  regarded  as  payable  to  bearer,  and  might  have  been 
passed  to  the  defendant  by  delivery,  as  if  it  had  in  terms  been  made 
payable  to  bearer.  Of  this,  however,  we  give  no  opinion.  But  as  the 
note  was  made  payable  not  to  a  fictitious  person,  but  to  a  person  in 
being,  the  indorsement  of  a  third  person  transferred  no  legal  title  to" 
it. 

If  the  indorsement  and  delivery  of  this  note  to  the  defendant  by 
Joseph  P.  Heed,  could  bo  regarded  as  an  equitable  assignincnt  of  it, 
still  the  defendant  would  not  be  entillcd  In  set  it  off  against  the  ])lain- 
tifF's  claim  on  him,  because  ii  is  nol  shown  tli.it  notice  of  such  assign- 


has  been  embodied  in  our  Rtatute,  known  as  the  '  Uniform  Nepotiable  Instru- 
ment T.aw  '  as  follows:  f(|iiotcs  N.  Y..  §  72].  The  cliiimc  just  <inn((.d,  and  the 
decisions  advcrffrl  fo.  are  iindonhtedly  based  on  the  theory  that  ttie  employ- 
ment of  the  qiialjfyinff  word  'cashier'  or  other  desipnation  «>f  a  fiscal  oHice, 
appended  to  the  name  of  a  payee  or  indorsee  of  conuiiercial  paper,  creates  an 
ambiguity  as  to  the  real  party  intended,  to  explain  which  [laroi  evidence  is 
admissilde  to  show  who  i-*  the  principal  for  whose  benefit  stich  apcnt  received 
or  accepted   tlie  promise  tf>  pay  a   stipulated   sum  of  money." 

For  another  cate  decided  under  the  Negotiable  Instruments  Law,  see  (hiffin 
V.  Erskine,   l.Tl    If)wa,  444.  —  C] 


302  NE«OTIATION.  [ART.    IV 

nuMit  was  given  to  (ho  plaintilT  before  this  action  was  commenced. 
(Kev.  sts.,  c.  nc,  §  r^.) 

[8et-ofT  on  the  note  iiol  allowed. J 


5.  Presumption  as  to  Time  of  Indorsement. 

g  75  R.VNGi-i;  r.  Cary,  1  Metealf  (Mass.)  369.  —  1840. 

Dewey,  J.  —  The  instructions  of  the  court  of  common  pleas,  to 
which  exceptions  were  taken,  embraced  substantially  the  following 
propositions:  1.  That  tlie  burden  of  proof  was  on  the  defendants 
to  show  that  the  note  was  transferred  after  it  was  due  and  wlien  dis- 
honored, if  they  would  avail  themselves  of  a  defense  only  open  to 
them  as  upon  a  dishonored  note.  *  *  *  Upon  the  first  y>oint, 
the  law  is  very  fully  settled  according  to  the  rule  stated  by  the  jnduc 
at  the  trial.  A  negotiable  note  being  olTered  in  evidence,  duly  in- 
dorsed, the  legal  presumption  is  t^^hat  such  indorsement  was  Tiiade  at 
the  date  of  the  note,  or  at  least  antecedently  to  its  becoming  due; 
and  if  the  defendant  would  avail  himself  of  any  defense  that  would 
be  open  to  him  only  in  case  the  note  was  negotiated  after  it  was  dis- 
honored, it  is  incumbent  on  liim  to  show  that  the  indorsement  was  in 
fact  made  after  the  note  was  overdue. 


6.  Presumption  as  to  Place  of  Indorsement. 

§76  CHEMICAL  NATIONAL  BANK  OF  NEW 

YOEK  V.  KELLOGG. 
183  New  York,  92.  —  1905. 

Action  on  a  note  dated  "  New  York,  June  7th,  1808,"  and  payable 
at  "  No.  4  Warren  Street,  New  York." 

The  defendant  is  an  accommodation  indorser,  who  indorsed  the 
note  at  her  residence  in  Oak  Tree,  New  Jersey,  at  the  request  of  the 
maker,  her  husband,  and  there  delivered  the  same  to  him,  solely  for 
his  benefit.  The  plaintiff,  a  banking  corporation  in  the  city  of  New 
York,  discounted  the  note  in  the  ordinary  course  of  business,  without 
notice  that  the  indorser  was  a  non-resident  or  that  the  indorsement 
was  made  in  another  state,  and  used  the  proceeds  to  take  up  a  prior 
note  held  by  it.  The  defendant  "  did  not  authorize  said  note  to  be 
negotiated  in  New  York  State,  and  had  no  knowledge  that  it  was  to 
be  used  in  that  state."  By  the  laws  of  the  state  of  New  Jersey  a 
married  woman  is  not  liable  as  an  accommodation  indorser,  guarantor 
or  surety  unless  it  appears  that  she  or  her  separate  estate  has  derived 
some  benefit  from  the  contract. 

Upon  these  facts,  which  were  found  or  stipulated,  the  trial  court 
held  the  defendant  liable  on  the  ground  that  her  indorsement  was  a 


IV.]  INDORSEMENT:  .ULi  HODS  A  XI)  EFFECT.  303 

New  Yoik  lOiitiiKt.     The  Appellate  Division  uuaaimously  affirmed 
and  the  defendant  came  here. 

Vann,  J.  Each  indorsement  of  a  promissory  note  is  a  separate 
contract,  standing  apart  from  that  made  by  the  maker  or  any  other 
indorser.  (Spies  v  National  Citij  Bank,  174  N.  Y.  222,  225.)  The 
validity  of  a  contract  of  indorsement  is  ordinarily  determined  by  the 
law  of  the  place  where  the  indorsement  is  made.  (Union  National 
Bank  v.  Chapman,  169  N.  Y    5.38,  .54-3.) 

As  the  note  in  question  was  indorsed  by  the  defendant  in  the  state 
of  New  Jersey,  where  she  resided,  under  ordinary  circumstances  she 
would  not  be  liable  thereon,  because  the  laws  of  that  state  do  not  per- 
mit a  married  woman  to  become  a  simple  accommodation  indorser. 
The  laws  of  the  state  of  New  York,  however,  authorize  a  married 
woman  to  contract,  even  with  her  husband,  the  same  as  if  she  were 
unmarried,  and  it  is  insisted  that  the  defendant  is  estopped  from 
defying  that  her  indorsement  is  a  New  York  contract,  inasmuch  as 
the  plaintiff,  in  good  faith,  purchased  the  note  for  value,  before 
maturity,  without  notice  of  anything  to  put  it  on  inquiry  and  in  reli- 
ance upon  the  fact  that  it  was  dated  and  made  payable  in  the  state  of 
New  York,  with  nothing  on  the  face  of  either  the  note  or  the  indorse- 
ment to  suggest  that  the  contract  was  made  in  the  state  of  New  Jer- 
sey We  think  this  position  is  sound.  Whoever  conceals  facts  required 
by  good  faith  and  fair  dealing  to  be  disclosed,  acts  inequitably  and  will 
not  be  permitted  to  assert  those  facts  to  the  injury  of  one  misled  by 
such  conduct.  The  defendant  could  not  make  lier  coverture  a  trap  to 
catch  innocent  persons.  She  could  not  deliberately  give  the  appear- 
ance of  validity  to  her  contract  and  then  as  against  a  bona  fide  holder 
plead  that  it  was  invalid.  She  knew  that  the  note  was  dated  and 
payable  in  New  York,  and  that  the  presumption  from  those  facts  was 
that  it  was  indorsed  there.  She  also  knew  that  if  she  delivered  the 
note  in  this  condition  to  her  husband  to  enable  him  to  negotiate  it, 
any  one  who  acted  on  such  presumption,  as  he  liiwfnily  might  in  the 
absence  of  notice,  would  be  injured  if  she  should  j)len(l  her  coverture 
and  that  she  actually  indorsed  it  in  New  Jersey.  T(  was,  therefore, 
her  duty,  if  she  wished  to  act  honestly  toward  others,  to  attach  some 
notice  to  her  indorsement,  or  give  notice  in  some  other  way,  so  that 
innocent  third  parties  might  not  be  harmcfl  hy  relying  nj'ou  npiK'ar- 
ances  which  she  had  aided  in  creating.  Tf  she  had  written  after  her 
name,  "Oak  Tree,  New  Jersey,"  her  place  of  residence,  the  plaintiff 
would  have  been  put  upon  inquirv  as  to  the  validity  of  such  a  contract 
made  in  that  state.  With  no  att«  mpt  to  give  notice,  by  her  indorse- 
ment in  blank  she  gave  currency  to  the  note  as  one  made  and  indorsed 
in  New  York.  Pleading  lier  indorsement  as  a  New  Jersey  contract 
under  these  circumstances  would  be  an  attempt  to  take  advantage  of 
her  own  wrong,  which  the  law  will  not  permit. 

The  business  of  the  country  is  done  so  largely  by  means  of  com- 


;>04  NEGOTIATION.  [ART.    IV. 

iiHMiial  paper  (hat  thi'  inlfii'sts  of  loiiuiierce  requiro  that  a  promissory 
note,  fair  on  its  fai'o,  sliould  In-  as  nogotiablo  as  a  govorniiient  bond. 
Kvorv  restrii'tion  ui)on  tlic  ciicuhiiioii  of  iiogotiahlc  j)ap('r  is  an  injury 
to  the  state,  for  it  tends  to  derani^u^  trade  and  hinder  the  transaction 
of  business.  Coniniercial  necessity  ir(|iiin's  that  only  slight  evidence 
should  l)e  insisted  upon  to  establish  an  vsluppcl  in  pais  as  to  the  valid- 
ity of  coniinercial  jiaprr.  The  only  practicable  rule  is  to  make  the 
face  of  the  pa])er  itself,  when  free  from  susjiicion,  sufficient  evidence, 
in  the  ahsem-e  of  notice.  a<rainst  all  who  aided  to  put  it  into  circula- 
tion in  that  condition,  unless  the  note  is  void  by  the  positive  command 
nf  a  statute,  such  as  the  nvi  against  usury.  No  other  rule  would  work 
well,  for  it  would  be  intolerable  if  every  bank  had  to  learn  the  true 
history  of  each  piece  of  paper  presented  for  discount  before  it  could 
act  in  safety.  It  is  better  that  there  should  be  an  occasional  instance 
of  hardship  than  to  have  doubt  and  distrusi  hamper  a  common  method 
of  making  commercial  exchanges. 

While  it  is  unnecessary  that  the  defendant  should  describe  herself 
as  a  guarantor  by  adding  the  word  "surety"  to  her  sigiuiturc,  for 
possession  by  her  husband,  who  was  prior  in  order  of  liability  to  her- 
self, was  notice  that  she  did  not  indorse  in  the  ordinary  course  of 
business,  still  if  she  regarded  lier  iiulorsement  as  a  New  Jersey  con- 
tract she  should  liave  given  notice  of  that  fact  in  some  way  so  that  a 
purchaser  in  good  faith  might  know  that  it  was  not  what  it  appeared 
to  be,  a  New  York  contract.  (Smith  v.  Wcstoyi,  159  N.  Y.  104;  Banl- 
of  Monongahela  VnVeij  v.  Wesinn,  159  N.  Y.  201.)  Even  in  the  state 
of  New  Jersey,  where  the  common-law  disabilities  of  married  women 
have  not  been  wholly  removed,  her  indorsement  would  be  enforced  as 
a  New  York  contract.     {Thompson  v.  Ta/i/lor,  66  N.  J.  L.  253.) 

Independently  of  the  statute  which  will  be  cited  presently,  the  argu- 
ment in  favor  of  an  equitable  estoppel  rests  mainly  on  the  presumption 
that  a  note  dated  and  payabPe  in  New  York  was  made  and  indorsed 
in  that  state.  While  tiiis  question  has  seldom  been  before  the  courts, 
Mr.  Daniel  in  his  useful  work  on  Negotiable  Instruments  says  it  is  the 
law  and  thj  authorities  support  the  assertion.  (Daniel  on  Neg.  Inst. 
[5th  ed.]  §  728;  Maxwell  v.  Vansani,  -16  111.  58;  Towne  v.  Rice,  122 
Mass.  67;  Bedford  v.  Bangs,  15  App.  Ct.  TJep.  76;  Leiaiig  v.  Ralston, 
23  Penn.  St.  137;  Siiaith  v.  Mivgaij,  1  M.  &  S.  87;  Edwards  on  Bills, 
etc.,  §  378;  Tiedeman  on  Bills  &  Notes,  §  91.)  Even  if  the  question 
were  entirely  new,  sound  reasoning  would  lead  to  that  conclusion. 
While  the  contract  made  by  an  indor.ser  is  independent  of  that  made 
bv  the  maker  in  the  sense  that  it  is  of  a  different  nature,  and  can  be 
separately  enforced,  still  it  is  dependent  on  the  promise  of  the  maker, 
because  it  is  an  agreement  to, perform  his  promise,  upon  certain  con- 
ditions, if  he  does  not.  Therefore,  the  placo  where  the  maker  prom- 
ised,  as  stated  in  the  note  itself,  must  with  all  the  other  provisions, 
thereof  be  read  into  the  promise  of  the  indorser,  and  it  thus  becomes 


IV.]  INDORSEMENT  :  METHODS  AND  EFFECT.  305 

by  fair  presumption,  in  the  absence  of  notice  to  the  contrary,  the  place 
where  the  indorser  promised  also.  The  purchaser  has  no  other  guide 
as  to  a  fact  which  may  involve  the  validity  of  the  contract,  and  hence 
it  is  a  commercial  necessity  that  hoth  contracts,  so  closely  connected 
that  the  second  cannot  exist  without  the  first,  should  be  presumed  to 
have  been  made  at  the  same  place,  unless  the  one  with  power  so  to  do 
rebuts  the  presumption  by  timely  notice. 

The  leai'ued  counsel  for  the  defendant  seems  to  recognize  the 
existence  of  tliis  piesumption,  as  he  says  in  his  points  that,  "  If  we 
examine  the  note  alono,  then  the  negative  inference  might  possibly 
arise  that  the  defendant  intended  the  note  should  be  governed  by  the 
laws  of  another  state."  lie  insists,  however,  that  as  the  phiintilf  stipu- 
lated the  facts  at  the  trial,  it  knew  the  defendant  did  not  so  intend. 
The  rights  of  the  parties  do  not  depend  on  what  the  plaintiff  knew 
at  the  time  of  the  trial,  but  on  what  it  knew  when  it  discounted  the 
note,  and  at  that  time,  owing  to  the  absence  of  notice,  which  was  the 
defendant's  fault,  it  had  no  infornuition  but  what  the  note  gave.  The 
defendant  knew  that  her  husband  eoukl  use  the  note  in  any  state,  and 
the  place  of  date  and  payment  indicnted  the  state  where  he  expected 
to  use  it.  Unless  she  intended  that  it  should  be  used  in  a  state  where 
her  indorsement  woukl  bind  her,  she  must  iiave  intended  to  defraud 
and  hence  is  estopped. 

But,  to  clinch  the  argument,  we  have  only  to  refer  to  the  Negotiable 
Instruments  Law,  which  provides  that :  "  Except  where  the  contrary 
appears,  every  indorsement  is  presuinod  priiiia  faric  to  hnvo  lieon 
made  at  the  place  where  the  instrument  is  dated."  (L.  1807,  ch.  012, 
§  76.)  This  statute  was  prepared  for  uniform  action  in  all  the  states, 
and  it  has  already  been  adopted  in  inany.  Tt  is  regarded  as  simply 
declaratory  of  the  common  law  upon  the  subject  under  consideration. 
(Eaton  &  r.ilbcrt  on  rommercial  Paper,  §  HH.)  Therefore,  wlien  the 
note  was  presented  for  discount  in  New  York,  the  phiintifT  had  the 
right  under  the  statute  to  presume  that  it  was  indorsed  in  I  he  state 
where  it  was  dated,  because  nothing  appeared  to  the  conl  inrv.  The 
defendant,  by  her  indorsement,  aided  in  tlie  negol  inliou  of  ,i  n(,(,.  c.ir- 
rying  with  it  that  presumption,  liotb  at  common  law  and  according  to 
th«'  statute,  anti  after  the  plaint  ill'  had  acted  on  the  )iresmiiption  she 
cannot  be  heard  when  she  attempts  to  say  that  she  imloiscd  in  a  state 
where  her  indorsement  is  not  binding,  and  that  she  did  n(»f  intend  to 
be  hoimd  by  her  promise  when  she  made  it. 

The  judgment  should  be  affirnied,  with  costs. 

Ct-lli:v,  C!h.  J.,  Oiiav,  Haktlktt,  Hakuit  and  \Vi:uni;k,  J.I.,  con- 
cur; O'PiUiKN,  J.,  absent. 

Judgment  afDrmed.* 


*  Thi"*  r.Tif  i^  rppnrtod  witli  notcx  in  2  \..  \.  S.  200.  niid   in  .T   A.  .<;•   V.     \nn 
Caa.  IFiH. 

On  the  (pipstion  ef  tln>  rdnflirt  of  laws  an  applied  fo  flic  lialiiiity  ef  partiei 
NKOOT.   INSTULMBNTB  —  20 


;5Ut)  NEUOllAl'lDN,  [AKT.    IV. 

7.  Continuation  ok  Nkooiimu-m  Character. 
§77  LEAVITT  v.  PUTNAM. 

[ Report (d  herein  at  p.  272.] 


8.  Striking  Ol't  Indorsement. 
§78  JERMAN  v.  EI)\VAIU)S. 

29  Appk.u,  Casks   (Dist.  of  t'oL. )   535. —  1907. 

Action  on  note  against  maker,  and  atrainst  payee  Jerrnan  who  had 
indorsed  in  blank.  Following  the  blank  indorsement  were  the  words: 
"To  acc't  of  Benjamin  V.  Edwards,''  and  on  the  face  of  the  note 
appeared  the  stamp  of  tiie  Washington  Savings  Bank.  Whether  the 
words  just  recited  were  written  by  Edwards,  or  were  indorsed  by  the 
savings  bank  as  an  indication  of  the  credit  to  be  entered  by  it  in  case 
of  its  collection  of  the  note,  did  not  appear.  Plaintiff  produced 
Edwards  as  a  witness,  who  proved  the  signatures  of  the  maker  and 
iudorser.  The  defendants  objected  to  the  note  on  the  ground  of 
variance.  Plaintiff  then,  without  any  ruling  l)y  the  court,  struck  out 
the  words  "  To  acc't  of  Benjamin  F.  Edwards  "  in  the  presence  of  the 
court  and  again  offered  the  note.  Objection  was  again  made  on  the 
ground  that  tliis  was  a  restrictive  indorsement,  that  it  was  stricken 
out  without  right,  and  that  the  plaintiff  was  not  the  bona  fide  holder 
of  the  note  as  she  was  not  the  indorsee  of  the  same,  and  was  not 
entitled  to  maintain  an  action  thereon.  Plaintiff  claimed  the  right  to 
strike  out  the  indorsement  under  section  1352  of  the  Code.-"^  The 
court  overruled  the  objection,  and  permitted  the  note  to  be  read  to  the 
jury.  Defendants  offering  no  evidence,  the  court  instructed  the  jury 
to  return  a  verdict  for  the  plaintiff. 

Mr.  Chief  Justice  Sitepard  delivered  the  opinion  of  the  court: 
We  think  there  was  no  error  in  the  action  of  the  court.    Assuming, 
as  contended  by  the  appellants,  that  the  note  had  been  actually  in- 
dorsed by  Benjamin  F.  Edwards  to  the  savings  bank  for  collection  for 
his  account,  the  bank  failed  to  collect  it,  and  returned  it  presumably 


to  nefrotiable  instruments,  see  the  following  cases:  Union  Nat.  Bank  v.  Chap- 
man, 1G9  N.  V.  5:}8,  57  L.  R.  A.  513  (note),  88  Am.  St.  Rep.  614  (note); 
Rpir's  V.  Nat.  Cit.  Rank,  174  N.  Y.  222,  61  L.  R.  A.  19.3  (with  exhaustive  note)  ; 
Amsinck  v.  Rogers,  189  N.  Y.  252,  12  L.  N.  S.  75  (note),  121  Am.  St.  Rep. 
858  (note),  12  A.  &  E.  Ann.  (as.  450  (note);  i^ykes  v.  Cit.  Nat.  Bank,  78 
Kan.  688,  19  L.  N.  S.  005   (note)  ;   Brown  v.  Gates,  120  Wis.  349. 

See  ali^o  the  followinjr  notes  fliscussing  some  of  the  above  cases:  2  Col. 
Law  Rev.  253,  257;  8  id.  134;  1  Mich.  Law  Rev.  508;  2  id.  627;  6  id.  338.  —  C. 

5  N.  Y.,  §  78.  —  C. 


v.]  TRANSFER  WITHOUT  INDORSEMENT.  307 

to  him.  Plaiutiirs  title  as  holder  did  not  pass  under  that  indorse- 
ment, but  through  the  delivery  to  her  by  Benjamin  F.  Edwards,  who 
appeared  as  a  witness  on  her  behalf.  She  took  title  by  delivery  under 
the  blank  indorsement  of  the  payee,  Jerman,  the  effect  of  which  was 
to  make  tlie  note  payable  to  bearer,  and  pass  by  delivery.*  Code, 
§  1338"  (31  Stat,  at  L.,  eh.  854).  Whether  the  further  indorsement, 
if  in  fact  made  by  Benjamin  F.  Edwards,  was  a  restrictive  one,  as 
defined  in  section  1.'' 41'  is  a  question  of  no  materiality,  as  the  plaintiff 
did  not  claim  the  title  th'Mvunder,  and  there  was  no  defense  to  the 
note  as  ag;iin?t  eit!:er  Benjamin  F.  Edwards,  the  savings  bank,  or  the 
jjlaintitf.  This  indorsement  not  being  necessary  to  the  title  of  the 
])iaintiff.  she  had  the  right  to  strike  it  out.  Code,  §  1352.*  This  pro- 
vision of  the  Code  is  but  declaratory  of  the  law  as  it  was  recognized 
before  the  adoption  of  the  Negotiable  Instruments  Act.  See  Vanars- 
dale  V.  Ilax,  107  Fed.  878,  880,  and  cases  cited. 

It  follows  that  the  judgment  must  be  affirmed,  with  costs.     It  is  so 
ordered. 

Aflfirmed.' 


V.  Transfer  without  indorsement. 

§79  OSGOOD  V.  ARTT. 

17  Federal  Reporter,  575.  —  1883. 
[From  Circuit  Court,  N.  D.  Illinois.] 

Ahtt  gave  the  K.  &  M.  it.  Co.  his  negotiable  note  for  $2,500  secured 
liv  mortgage.  'J'he  K.  &  M.  R.  Co.  gave  Osgood  a  bond  for  $2,500 
and  in  it  "  assigned  and  transferred  "  Artt's  note  and  mortgage  as 
se.urity,  and  sjiecificd  tliat  "  said  note  and  mortgage  are  hereto  ap- 
[onded."  The  l)ond.'n(it('  and  mortgage  were  attached  firmly  together 
V.  illi  eyelets  in  the  order  named.  Each  had  the  number  liXIl  written 
« '1  it.  Osgood  at  this  time  had  no  notice  of  any  defense  to  Artt's  note. 
Subsequently  Osgood  learned  of  the  defense  (failure  of  consideration 

•  Tho  note  was  originally  jiayablr,  not  to  hearer,  hut  to  the  order  of 
Jermnn.  —  C 

«N.  Y..  §fi4.  —  C. 

TN.  Y.,§67.  Reference  should  u|)parently  he  to  §  1340,  which  in  N.  Y.  iu 
§  flO.  —  C. 

8N.  Y..§78.  —  r. 

»  "  The  note  had  been  indorsed  hy  the  plaintiff  before  maturity  to  a  hank, 
and  defiosited  with  it  for  collection.  It  was  proteHted.  and  then  returned  to 
the  plaintiff.  When  jirodiiced  at  (he  trial,  it  bore  this  indorsement  to  the 
bank,  uneanrjjed.  The  defenflant  contends  that  upon  these  facts  it  appears 
that  the  liank  has  the  lepnl  title,  and  was  the  only  proper  party  to  sue.  Tiie 
bank  received  the  title  for  ttie  sole  benefit  of  the  plaintiir.     When  it  returned 


308  NEGOTIATION.  [akT.    IV, 

auil  fraud),  autl  thereafter  tiie  II.  &  M.  li.  Co.  iudorsed  the  note  by 
writiug  its  name  upou  the  back. 

Uaklan,  J.,  (after  statiug  the  facts).  —  These  facts  have  been 
especially  found  by  a  jury,  and  the  sole  question  for  determination  is 
whether,  upon  this  finding,  the  plaiutilfs  are  entitled  to  judgment.  The 
only  issue  of  fact  made  on  the  third  plea  is  whether  Osgood,  prior  to 
the  indorsement  of  the  note,  had  notice  of  the  alleged  fraud  and  failure 
of  consideration. 

1.  It  is  a  settled  doctriiK"  of  the  law  merchant  that  the  bona  fide 
purchaser  for  value  of  negotiable  paper,  payable  to  order,  if  it  l)e  in- 
dorsed by  the  payee,  takes  the  legal  title  unaffected  by  any  equities 
which  the  payer  may  have  as  against  the  payee. 

2.  But  it  is  equally  well  settled  that  the  purchaser,  if  the  paper  be 
delivered  to  him  without  indorsement,  takes,  by  the  law  merchant, 
only  the  rights  which  the  payee  has,  and  therefore  takes  subject  to  any 
defense  the  payer  may  rightfully  assert  as  against  the  payee.  The 
purchaser  in  such  case  becomes  only  the  efjuitable  ow^ner  of  the  claim 
or  debt  evidenced  by  the  negotiable  security,  and,  in  tlie  absence  of 
defense  by  the  payer,  may  demand  and  receive  the  amount  due,  and  if 
not  paid,  sue  for  its  recovery,  in  the  name  of  the  payee,  or  in  his  own 
name,  when  so  authorized  by  the  local  law. 

3.  As  a  general  rule  the  legal  title  to  negotiable  paper,  payable  to 
order,  passes,  according  to  the  law  merchant,  only  by  the  payee's  in- 
dorsement on  the  security  itself.  The  only  established  exception  to 
this  rule  is  where  the  indorsement  is  made  on  a  piece  of  paper,  so 
attached  to  the  original  instrument  as.  in  eifect,  to  become  part  thereof, 
or  be  incorporated  into  it.  This  addition  is  called,  in  the  adjudged 
cases  and  elementary  treatises,  an  allonge.  Tliat  device  had  its  origin 
in  cases  where  the  back  of  the  instrument  had  been  covered  with  in- 
dorsements, or  writing,  leaving  no  room  for  further  indorsements 
thereon.  But,  perhaps,  an  indorsement  upon  a  piece  of  paper,  attaclied 
in  the  manner  indicated,  would  now  be  deemed  sufficient  to  pass  the 
legal  title,  although  there  may  have  been,  in  fact,  room  for  it  on  the 
original  instrument. 

4.  But  neither  the  general  doctrines  of  commercial  law,  nor  any 
established  exception  thereto,  make  words  of  mere  assignment  and 

the  note  protested,  the  plaintiff  became  an  indorsee  in  possession,  and  invested 
with  the  rights  belonging  to  all  holders  of  commercial  paper.  Gon.  St.  1902, 
§  4170  fN.  Y..  §  21.  One  of  the«e  was  to  cancel  the  indorsement  which  it  had 
made.  Gen.  St.  1902,  §  4218  [N.  Y.,  §  78].  Whether  it  exercised  this  right  or 
not  was  immaterial.  Its  mere  possession  of  tlie  note  was  sufficient  evidence 
of  ownership  to  support  the  suit.  Gen.  St.  1902,  §  4221  [N.  Y.,  §  90];  Dugan 
V.  United  fftatct,  3  Wheat.  172."  Baldwin,  .J.,  in  'Kevc  Eaven  Mfr/.  Co.  v.  New 
Haven  Pulp  and  Board  Co.,  76  Conn.  12.5.  131. 

See  also  Berney  v.  Steiner  Bros.,  108  Ala.  Ill,  and  Middleton  v.  Griffith, 
57  N.  J.  L.  442.  —  C. 


v.]  TfiANSFEK  WITHOLT  IXDOHSEMENT.  309 

transfer  of  such  paper  —  contained  in  a  separate  instrument,  executed 
for  a  wholly  different  and  distinct  purpose  —  equivalent  to  an  indorse- 
ment within  tlie  rule,  which  admits  the  payer  to  urge,  as  against  the 
holder  of  an  unindorsed  negotiable  security,  payable  to  order,  any 
valid  defense  which  he  has  against  the  original  payee. 

5.  The  transfer  of  the  note  in  suit,  by  words  of  assignment  in  the 
body  of  the  railroad  company's  bond,  did  not,  in  the  judgment  of  the 
court,  amount  to  an  indorsement  of  the  note,  although  the  bond,  note, 
and  mortgage  were  originally  fastened  together  by  eyelets.  The  facts 
set  out  in  the  third  plea,  and  sustained  by  the  special  finding,  consti- 
tute, therefore,  a  complete  defense  to  the  action,  unless,  as  contended 
by  plaintiffs,  the  subsequent  endorsement,  in  form,  bv  the  railroad 
company,  after  Osgood  was  informed  of  Artt's  defense,  has  relation 
back  to  the  time  when  the  former,  without  notice  of  such  defense,  pur- 
chased the  note  for  value  then  paid.*  If,  at  the  time  of  Osgood's 
purchase,  it  had  been  agreed  that  the  company  should  indorse  the  note, 
but  the  indorsement  was  omitted  by  accident  or  mistake  or  fraud  upon 
the  part  of  the  company,  a  different  question  would  have  been  pre- 
sented. In  such  case,  the  company  might,  perhaps,  have  been  com- 
pelled to  make  an  indorsement  which  would  have  been  deemed  effectual 
as  of  the  time  when,  according  to  tlie  intention  of  the  parties,  it  should 
have  been  made.  But  no  such  case  is  presented  by  the  special  finding. 
It  is  entirely  consistent  with  the  facts  found  that  the  indorsement  by 
the  company  was  an  afterthought,  induced  by  notice  of  Artt's  defense, 
and  was  not  within  the  contemplation  or  contract  of  the  parties  when 
Osgood  purchased  the  bond.  Moreover,  and  as  a  circumstance  signifi- 
cant of  an  intention  to  restrict,  in  some  degree,  .the  assignability  of  the 
note  and  mortgage,  it  is  expressly  stipulated,  in  the  company's  bond, 
that  they  are  transferable  in  connection  with  the  bond,  and  not  other- 
wise. 

I  am  of  opinion  that  the  facts  which  camo  to  Osgood's  knowledge 
prior  to  the  inflorsement,  and  which,  in  substance,  constitute  the  de- 
fense set  out  in  the  third  plea,  furnished  notice  that  the  companv  liad, 
by  reason  of  fraud  and  failure  of  consideration,  lost  its  right  to  (Icitiand 
payment  of  the  note  froin  .Artt.  By  the  indorsomont,  after  such  notice, 
Osg«»(»d  could  not  ac(|uire  any  greater  rights  than  the  company  pos- 
sessed. He  did  not  become  the  holder  of  the  note  by  indorsement,  as 
required  by  the  law  merchant,  until  after  he  had  notice  that  the  com- 
pany could  not  rightfully  pass  the  legal  title,  so  as  to  defeat  Artt's 
defense. 

While  the  adjudged  cases  are  n(»t  in  harmony  upon  somk;  of  these 
propositions,  the  conclusions  indicated  are,  in  the  opinion  of  the  court, 
consistent  with  sound  rea.son,  and  are  sustained  by  the  great  weight  of 

1  Ah  to  thi't  ronfpntion.  «o"  W'ntkirtM  v.  Mnulr,  2  -Inc.  A-  W.  241.  nnfl  nnfjfjnrly 
f.  daither,  55  N.  C.  80.  —  C. 


f^lO  NEGOTIATION.  [art.    IV. 

authority.  (Chiof  Ju.sticr  MarsliuU  in  Uopkirk  v.  Page,  8  Brook,  41; 
Sturgi's  Sons  v.  Met.  Nat.  Bank,  49  111.  231 ;  Melendy  v.  Keen,  89  111. 
404;  IlasktU  v.  Brown,  ()5  111.  37;  Lancaster  Nat.  Bank  v.  Taylor, 
100  Mass.  s!4  ;  Bacon  v.  ('«//<'«,  12  Sinedos  c^'  M.  522;  Grand  Gulf 
Bank  v.  Wood,  Id.  482;  Clark  v.  IV/m/^/At;-,  50  N.  H.  474;  Haskell  v. 
Mitchell,  53  Me.  468;  Franklin  v.  Twogood,  18  Iowa,  515;  French  v. 
Turner,  15  Ind.  59;  Fo/^ycr  v.  C/mse,  18  Pick.  63;  W/trs^/er  v.  Forster, 
14  C.  B.  246  (108  E.  O.L.  248)  ;  T/orro/j  v.  Fisher,  10  C.  B.  [N.  S.] 
196;  Gibson  v.  .l/(/(r/,  1  H.  Bl.  s.  p.  606;  Story,  Notes.  §  120;  Story, 
Bills,  §  201 ;  Chitty,  Bills  [12tli  Amer.  from  9t"h  Lond.],  252;  2  Pars., 
Notes  and  Bills,  1,  17,  18;  1  Daniel,  Neg.  Inst.  (3d  ed.],  §§  664a, 
689a,  690,  741,  and  748a.)  The  facts  specially  found  do  not  authorize 
a  judgment  for  the  plaintiff.^ 


VI.  Retransfer  to  prior  party. 

§  80  ADRIAN  V.  McCASKILL. 

103  North  Carolina,  182. —  1889. 

Action  against  defendants,  McCaskill  &  McLean,  as  indorsers  on 
a  promissory  note  executed  and  delivered  January  10,  1884,  payable 
to  W.  C.  Patterson  or  order.     Plaintiffs  purchased  the  note  for  value 


2  In  Lyon,  Potter  d  Co.  v.  First  Nat.  Bank,  85  Fed.  120,  124,  the  court 
said:  "A  mere  assignee  of  a  promissory  note,  like  an  assignee  of  any  other 
chose  in  action,  takes  his  title  subject  to  all  the  equities  and  defenses  which 
exist  between  tlie  assignor  and  the  other  parties  to  the  instrument.  An 
indorsee  for  value,  without  notice,  before  maturity,  takes  the  title  to  a  pro- 
missorv  note,  according  to  the  custom  of  merchants  and  the  now  established 
law  of  the  land,  free  from  all  those  equities  and  defenses.  The  discount  and 
delivery  of  this  note  without  its  indorsement  effected  a  mere  assignment  of 
the  note,  and  under  that  assignment  the  bank  took  and  held  it  subject  to  the 
original  equities  between  the  parties.  Neither  the  delivery  before  nor  the 
indorsement  after  maturity  could  exempt  the  bank  from  the  defenses  of  the 
original  makers  or  indorsers,  because  the  bank  was  a  mere  assignee  before 
maturity,  and  the  inriorsement  after  maturity  transferred  the  legal  title  sub- 
ject to  all  the  defenses  of  which  the  overdue  character  of  the  paper  gave 
notice.  The  fact  that  the  indorsement  was  omitted  by  mistake  co\)hi  not 
deprive  the  bank  of  notice  of  the  character  of  the  paper,  and  carry  the  effect 
of  the  subsequent  indorsement  back  to  the  date  of  the  delivery,  because  the 
omission  its-lf  —  the  mistake  itself  —  was  notice,  and  the  knowledge  which 
that  notice  imputed  could  not  be  subsequently  extracted  from  the  mind  of  the 
cashier  of  the  bank  as  of  the  date  of  the  discount,  fianic  v.  Taylor,  100  Mass. 
18,  22,  2.3:  Younker  v.  Martin,  18  Towa,  143,  145;  Franklin  v.  Tvogood,  id. 
515;  drimm  v.  Marner.  45  Iowa,  106;  Haskell  v.  Mitchell,  53  Me.  408." 

S<e  also  First  \at.  Bk.  v.  McC\dlou<)h,  50  Or.  508,  reported  in  17  L.  N.  S. 
1105,  with  note  entitled  "Right  of  transferee,  without  indorsement,  of  bill  or 
note  payable  or  indorsed  to  order  of  transferrer,  to  protection  as  a  bona  fide 
purchaser."  —  C. 


VI.]  BETHAKSFKK  TO  PBIOK  PARTY.  3ll 

from  Patterson  in  January,  1885,  after  its  maturity,  without  any 
actual  notice  of  the  defenses  set  up  in  the  answer  of  the  defendants. 

In  February,  ISS-i,  Patterson  indorsed  the  note  in  blank  and 
delivered  it  to  the  defendants  to  secure  them  for  such  sums  of  money 
as  he  might  owe  them  at  the  end  of  1884.  Later,  on  February  23, 
1884,  defendants  indorsed  the  note  in  blank,  and  with  the  knowledge 
and  consent  of  Patterson,  delivered  it  to  Williams  &  Company,  to  be 
held  by  thi;;  company  as  security  for  money  loaned  to  the  defendants  in 
1884,  said  indorsement  being  solely  to  secure  the  company  as  above 
stated.  In  October,  1884,  defendants  paid  Williams  &  Company  the 
money  borrowed  of  the  latter,  and  the  company  returned  the  note  to 
the  defendants.  The  defendants  held  the  note  until  December  5, 
1884,  when  they  returned  it  to  Patterson,  being  satisfied  to  trust  him 
for  the  balance  then  due  them  without  said  security ;  but  by  accident, 
oversight  and  mistake  they  failed  to  erase  their  names  as  indorsers. 
At  the  time  the  note  was  returned  to  Patterson,  be  knew  that  the 
defendants  were  not  liable  as  indorsers  on  the  note,  and  they  believe 
that  he  knew  they  failed  to  erase  their  names  through  accident,  over- 
sight and  mistake.  Patterson  also  knew  that  the  names  of  the  defend- 
ants, as  indorsers,  were  not  there  for  his  accommodation  and  that  he 
had  no  legal  or  moral  right  to  use  their  names  as  such ;  and  he  knew 
that  he  had  no  right  to  deliver  the  note  to  the  plaintiffs  with  the 
indorsement  of  the  defendants  on  the  same. 

The  plaintiffs  objected  to  the  introduction  in  evidence  of  the  above 
facts,  and  insisted  that,  as  it  was  admitted  that  they  had  no  actual 
notice  of  them,  the  evidence  of  said  facts  was  not  competent  or 
admissible  against  them.  The  trial  judge  held  that  the  evidence  was 
competent,  and  thereupon  gave  judgment  for  the  defendants.  From 
this  judgment  the  plaintiffs  ap[)paled. 

Davis,  J.  The  note  is  dated  January  10,  1884,  and  is  payable  to 
"  W.  C.  Patterson  or  order,"  on  the  1st  day  of  November.  It  is 
indorsed  by  the  payee  and  by  the  defendants,  the  name  of  the  payee 
appearintr  as  first  in  order.  On  the  2r)th  day  of  January,  1885,  more 
than  twelve  months  after  its  djite,  and  long  after  its  maturity,  the 
plaintill's  Ix-caiiii'  tlic  purcliasers  from  llie  jiaycc,  with  the  indorsement 
as  set  fortl). 

Wore  the  facts,  admitted  to  be  true,  admissible  to  explain  the  char- 
acter and  nature  of  the  indorsement  of  the  defendants? 

Tlie  piainlifTs  say  thai,  as  they  had  no  actual  notice  of  "  anv  such 
equities  of  defense,"  and  were  [jurchasers  for  value,  the  evidence  was 
not  competent  as  against  them. 

By  statute,  promissory  notes,  wliether  with  or  witliout  seal,  are 
made  assignable.  "  in  like  manner  as  inland  bills  of  exchange  are  by 
custom  of  merchants  in  Fngland."  'I'hev  are.  in  the  language  of  the 
mercantile  law.  "negotiable"  and  may  be  transfr^rred  and  negotiated, 
free  from  any  equities  which  exist  between  the  original  parties  to 


318  NKOOTIATION.  [aUP.    IV. 

liieiii.  "  Each  iiidorser,  iucliRling  Ihe  payee,  down  the  hue,  Jias  and 
passes  the  legal  title,  and  his  indorsement  in  legal  import  is  a  contract 
with  his  indorsee,  and  all  subseciueiil  hohlers  by  indorsement,  that  the 
maker  will  pay  the  note,  or  '"  *  '"  he  will."  Hill  v.  k^ShicULs,  SI 
X.  C  250,  and  the  cases  there  cited,  and  innumerable  decisions,  I'hig- 
lish  and  American,  cited  in  Parsons,  Daniel,  Kandolph  and  other 
elementary  writers  upon  the  subject,  indicate  the  solicitude  of  courts 
to  protect  buna  fiJc  purchasers  and  innocent  holders  of  negotiabK' 
paper,  so  essential  to  coiinuerce  and  trade;  and  the  construction  phucl 
upon  section  177  of  the  Code  {C.  C  P.,  §  55,  in  Harris  v.  liunrcU, 
(55  N.  0.  584,  and  Martin  v.  Richardson,  68  N.  C.  225,  has  l)een 
limited  to  the  makers  of  promissory  notes,  etc.,  and  held  not  to  app'y 
as  between  indorsers. 

Conceding  the  importance  of  protecting  bona  fide  holders  of  com- 
mercial paper  "  in  its  unchecked  circulation,"  what  are  the  liabilities 
of  the  defendants  in  the  present  case?  That  the  holder  of  a  negotiable 
note  is  presumed  to  be  the  owner  admits  of  no  question,  and  tliat,  after 
such  a  note  is  put  in  circulation,  indorsers  are  lial)le  in  the  order  of 
succession,  is  equally  clear,  if  the  indorsement  be  not  limited  or  quali- 
fied. No  prior  indorser  can  look  to  any  subsequent  indorser,  "  One 
who  obtains  possession  of  a  bill  or  note,  after  indorsing  it,  is  restored 
to  his  original  position,  and  cannot,  of  course,  hold  intermediate 
parties,  who  could  look  to  him  again."  2  Kan.  Com.  Pa.  S.  719.  It 
must  be  equally  clear  that  one  wdio  derives  possession  from  him,  with 
notice  of  tins  fact,  cannot  hold  such  intermediate  indorsers  liable,  and, 
when  such  indorsements  are  in  blank,  parol  testimony  is  admissible  to 
show  the  relation  in  which  they  stand.     Ibid.,  §§  778,  8-11  and  883. 

When  the  note  was  returned  to  Patterson,  he  became  again  the 
owner,  and,  as  between  him  and  any  subsequent  indorsers,  the  relation 
of  indorser  and  indorsee  ceased.  The  plaintiffs  were  not  the  indorsers 
of  the  defendants.  Tt  is  clear  that  Patterson  could  not,  by  reason 
of  the  blank  indorsement  of  McCaskill  &  McTican,  hold  them  liable 
for  the  note,  for  he  stood  in  the  relation  to  them  of  a  prior  indorser. 
The  plaintiffs  derived  their  title  directly  from  Patterson,  the  original 
pavee,  who  had  re-acquired  the  title,  and  not  as  successive  indorsers, 
deriving  title  through  the  indorsement  of  the  defendant;  and  this 
distinguished  this  case  from  Hill  v.  Shields,  supra;  Parker  v.  Siall- 
ings,  Phil.  590,  and  similar  cases. 

The  plaintiffs  were  affected  wdth,  and  bound  by,  notice  of  what 
appeared  upon  the  note  itself,  and  they  took  the  note  from  the  original 
payee,  bearing  upon  its  face  the  fact  that  he  was  the  first  indorser,  and 
that  the  defendants  were  his  indorsees. 

An  indorsement  in  blank  by  the  payee  is  presumed  to  have  been 
intended  as  a  transfer,  and,  though  this  may  be  rebutted  by  parol 
proof  (Davis  v.  Morgan,  64  N.  C.  570),  the  admitted  facts  in  this  case 


VI.]  BETRANSFER  TO  PRIOR  PARTY.  3lS 

show  that  the  indorsement  by  the  payee  was  in  accord  with  the  pre- 
sumption —  a  transfer  to  MeCaskill  &  McLean. 

But  it  is  insisted  that,  as  between  the  indorsers  in  blank,  the  holder 
may  fill  the  blank  by  making  it  payable  to  himself,  or  to  any  one  he 
may  choose.  This  is  so  where  he  obtains  the  note,  not  from  the  payee, 
or  a  prior  indorser,  but  holds  it  as  a  bona  fide  purchaser,  without  any 
knowledge  or  notice  of  the  relation  sustained  by  prior  indorsers  to  the 
note.  In  the  present  case,  if  the  plaintiffs,  purchasing  the  note,  not 
fiom  the  defendants,  but  from  the  j)rior  indorsing  payee,  had  filled 
the  blank  indorsement  of  MeCaskill  &  McLean  to  themselves,  it  would 
not  have  been  in  accordance  with  what  they  knew  the  fact  to  be,  and 
would  have  been  a  gross  wrong,  if  not  fraud,  upon  the  defendants. 

The  plaintiil's  further  rely  upon  the  well-settled  rule  '*  that  when- 
ever one  of  two  innocent  persons  must  suiTer  loss  by  the  acts  of  the 
third,  he  who,  by  his  negligent  conduct,  made  it  possible  for  loss  to 
occur,  must  bear  the  loss,  for  it  is  against  reason  that  an  innocent 
party  should  suffer  for  the  negligent  conduct  of  another,"  and  that  the 
defendants,  by  neglecting  to  erase  their  indorsement,  ''  induced  the 
plaintiffs  to  rely  on  the  legal  import  of  the  indorsement,  and  ought 
not  to  be  allowed,  against  the  plaintiffs,  purchasers  for  value  and  with- 
out notice,  to  make  proof  of  the  alleged  facts." 

Though  the  plaintiffs  had  no  "actual  notice,"  we  have  alreadv  seen 
that  they  were  charged,  in  law,  with  notice  of  facts  apparent  upon  tlie 
face  of  the  paper  which  they  purchased  from  Patterson. 

But  the  defendants  may  have  been  indorsers  for  accommodation,  or 
as  sureties  or  guarantors.  True;  and  the  indorsement  of  a  note  bv  a 
third  person,  made  at  the  time  of  its  execution,  binds  him,  according 
to  the  intention  of  the  parties,  either  as  joint  principal  or  as  surety. 
Raker  v.  Robinson,  63  N.  C.  19L 

If  the  plaintiffs  looked  to  the  defendants  as  accommodation  in- 
dorsers, or  as  guarantors,  then,  as  they  purchased  the  note  from 
the  payee  after  maturity,  they  were  not  "  bona  fide  holders  before 
maturity,"  but  had  notice,  as  appeared  upon  the  face  of  the  paper,  of 
its  dishonor.  Rev.  Com.  Paper,  §  672;  Rank  v.  Lutterloh,  95  N.  C. 
495;  C  had  dor  h  v.  Van  n  ess,  35  N.'j.  517. 

So,  whether  by  the  one  way  or  the  other,  (he  j)laintiffs  caiun)!  ImM 
the  defendants  liable.     No  error. 

Affirmed.' 


«  SiH"  pout.  Art.  TX.  Div.  T.  1.  Soo  §  202.  pnsf.  Tf  an  indorser  roissno  tlip 
paper  aftrr  mntiirity  witlioiit  strikinp  out  hi.s  indorsomoiit  lip  remains  liable 
and  in  estf)pprd  to  retpiire  a  new  presentment  and  demand.  II  i7/i(/i/i.v  v. 
MntlhriiM,  .3  Cow.   (N.  Y.)   2.52;  St.  John  v.  Ifohrrt.s.  .11   N.  Y.  441.  — IT. 

\Sw  also  Curti.i  v.  Nprnr/ur,  H]  Cnl.  2.10.  ntitr,  p.  144,  and  Brooks,  Oliphant 
d  Co.  V.  VanncBt,  58  N.  J.  L.  162,  ante,  p.  276.  —  C] 


ARTICLE  V. 

Ivir, UTS  OK   Holder. 

I.  To  sue  and  to  receive  payment. 

§  90  HAYS  V.  HATHORN. 

74  New  York,  486.  —  1878. 

Action  on  a  promissory  note  alleged  to  have  been  made  by  defend- 
ants (Hathorn  &  Southgate),  payable  to  the  order  of  one  of  them 
(Frank  H.  Hathorn),  and  by  him  indorsed  in  blank  and  transferred 
to  plaintitf.     Judgment  for  plaintiff. 

Hand,  J.  —  In  their  answer,  the  defendants  denied  that  the  note 
on  which  the  action  was  brought  was  ever  transferred  to  the  ])lnintiff 
or  that  he  was  the  legal  owner  or  holder  thereof.  They  further  denied 
that  the  plaintiff  was  the  real  party  in  interest ;  alleged  that  the  Sara- 
toga County  Bank  was  the  real  party  in  interest  and  the  owner  and 
holder  and  should  be  the  plaintiff,  and  that  the  note  was  duly  trans- 
ferred to  it  instead  of  to  the  plaintiff.^ 

Upon  the  trial,  the  plaintiff  having  produced  the  note  which  was 
payable  to  the  order  of  F.  H.  Hathorn  and  indorsed  in  blank  by  liiin, 
rested.  The  defendants  then  offered  to  prove  that  the  note  "  was  not 
the  property  of  the  plaintiff,  that  the  same  was  never  transferred  to 
him,  that  he  was  not  the  real  party  in  interest,  that  the  note  was  the 
property  of  the  Savings  Bank  who  is  the  real  party  in  interest."  The 
evidence  was  objected  to  by  the  plaintiff  as  immaterial  and  was  ex- 
cluded. This  ruling  I  think  was  erroneous  and  renders  necessary  a 
reversal  of  the  judgment. 

Under  the  answer  and  this  offer,  the  defendants  unquestionably 
proposed  to  show  substantially  that  the  plaintiff  had  no  title  legal  or 
equitable  to  the  note,  and  no  right  as  owner  to  its  possession.  This 
might  have  been  done  by  proving  that  he  was  the  mere  finder  or  the 
unlawful  possessor,  or  that  the  right  to  its  possession  and  ownership 
was  in  the  bank  to  whom  they  were  liable  thereon,  or  in  some  other 
way.    This  they  had  a  right  to  show. 

it  may  be  that,  had  their  offer  been  admitted,  they  would  have  pro- 


'  "  Everv  action  must  hp  prosociited  in  the  namo  of  thp  real  party  in  inter- 
est."   N.  Y.  Code  Civ.  Proc,  §  440.  —  IT. 

[See  Am.  Soda  Fountain  Co.  v.  Hopue,  17  N.  Dak.  375,  reported  in  17  L. 
N.  S.  1113,  with  note  entitled  "Holder  of  unindorsed  note  as  real  party  in 
interest  within  meaning  of  statutes  defining  the  parties  by  whom  the  action 
must  be  brought,"  confinuing  note  on  the  same  subject  in  B4  L.  R.  A.  581.  —  C] 

[3141 


I.]  TO  SUE  AND  RECEIVE  PAYMENT.  315 

duced  in  fact  no  evidence  to  sustain  it  or  prevent  a  recovery,  but  in 
considering  the  validity  of  their  exception  to  the  exclusion,  we  must 
apsume  that  the  evidence  would  have  fully  covered  the  propositions 
contained  in  the  offer.  And,  as  remarked  in  the  dissenting  opinion 
in  the  court  below,  "unless  the  defendants  are  to  be  precluded  alto- 
gethei  from  giving  any  evidence  of  a  matter  confessedly  issuable,  I 
do  not  see  how  this  offer  could  be  rejected." 

The  cases  relied  upon  as  justifying  the  exclusion  of  the  evidence 
do  not  go  that  length.  In  Cummings  v.  Morris  (25  N.  Y.  625),  it 
was  held  that  the  maker  of  a  note  could  not  defeat  the  plaintiff,  not 
a  payee,  by  proof  that  the  consideration  of  the  transfer  to  him  was 
contingent  upon  his  collecting  the  note.  Such  plaintiff  was  declared 
to  be  the  real  party  in  interest  on  the  express  ground  that  the  transfer 
was  complete  and  irrevocably  vested  in  him  tlie  title  to  the  note. 

In  City  Bank  v.  Perkins  (29  N.  Y.  554),  there  was  no  question  of 
exclusion  of  evidence,  but  all  the  circumstances  being  proved,  it  was 
held  that  where  the  cashier  of  a  bank  holding  commercial  paper, 
pledged  it  "  duly  indorsed  "  to  the  plaintiff  as  security  for  a  loan  by 
the  plaintiff  tf)  his  bank,  and  it  had  been  actually  transmitted  under 
his  direction  to  the  plaintiff  so  indorsed,  it  was  no  defense  to  one 
admitting  his  liability  upon  such  paper  to  show  lack  of  authority  in 
the  cashier  alone  to  contract  a  loan  for  the  bank;  or  the  fraudulent 
diversion  by  him  of  the  funds  received  from  the  plaintiff  on  such 
loan.  Some  remarks  in  the  opinion  in  that  case,  not  necessary  to  the 
decision,  are  perhaps  ton  broad  to  bo  entirely  approved,  but  it  is 
fully  conceded  in  it  that  proof  that  the  plaintiff  had  no  right  what- 
ever to  the  possession  but  was  a  mere  finder  or  had  obtained  it  by 
some  "  positive  breach  of  law  "  would  be  a  defense. 

Brown  V.  Ppti field  (36  N.  Y.  473),  holds  merely  that  proof,  by  the 
party  liable  on  a  bill,  of  gross  inadequacy  of  the  consideration  for 
the  transfer  of  such  bill  to  the  plaintiff  does  not  impeach  the  validity 
of  such  transfer  as  to  the  party  so  liable. 

In  Allen  v.  Brown  (44  N.  Y.  22fi),  it  was  decided  that,  as  against 
the  plaintiff  holding  legal  title  to  the  claim  by  written  assignment 
valid  upon  its  face,  the  debtor  cannot  raise  the  question  as  to  the 
consideration  for  such  assignment  or  the  equities  between  the  assignor 
and  assignoe. 

In  Eaton  v.  Alrjrr  (17  \.  Y.  31.-)),  the  note  Iiciiig  paynlile  lo  bearer 
and  produced  bv  the  plaintiff  upon  the  trial,  it  was  proved  that  the 
payee  had  delivered  it  to  the  plaintiff  npon  his  undertaking  to  collect 
it  at  his  own  expense  and  pav  to  piirh  payee  upon  its  collection  a 
certain  sum  of  money.  Tliis  was  lu'ld  to  show  sufficiently  that  tlie 
plaintiff,  and  not  the  pavee,  was  the  real  party  in  interest  under  the 
Code. 

Sheridan  v.  The  Mminr  (68  N.  Y.  30),  reiterates  the  doctrine  that, 
as  against  the  debtor,  the  plaintiff  holding  a  written  assignment  of 


316  lilOlITS  OK   HOLDER.  [AHT.    V. 

tlio  claim  to  liiiiisolf"  valid  on  its  t'aci',  ohtained  the  legal  title  and 
was  tlie  real  party  in  interest  iiotwitlistanding  tlie  fact  that  tlic  assign- 
ment was  without  consideration  and  merely  eolorahle  as  between  him 
and  the  original  claimant.  Such  assignment  is  expressly  declared 
to  juoteot  the  debtor  jiayiug  the  assignee  against  a  subsequent  suit 
by  the  assignor. 

In  Gage  v.  Kendall  (15  Wend.  640),  the  fact  that  the  prosecution 
of  the  note  was  by  its  owner  and  holder  in  the  name  of  the  plaintiff,  a 
stranger  to  it,  witliout  his  consent  or  knowledge,  was  sought  to  be 
set  up  as  a  defense,  but  it  was  ruled  out  on  the  ground  that  the 
nominal  plaintiff  need  have  no  title  to  or  interest  in  the  paper  sued 
upon.  We  apprehend  the  Code  has  changed  this  and  that  such  facts 
would  now  be  fatal  to  an  action.  Such  a  plaintiff  could  not  in  any 
view  be  the  real  party  in  interest.  Indeed,  he  would  not  even  have 
manual  possession  of  the  paper. 

From  this  glance  at  the  cases,  it  appears  that  it  is  ordinarily  no 
defense  to  the  party  sued  upon  commercial  paper,  to  show  that  the 
transfer  under  which  the  plaintiff  holds  it  is  without  consideration 
or  suljject  to  equities  between  him  and  his  assignor,  or  colorable  and 
merely  for  the  purpose  of  collection,  or  to  secure  a  debt  contracted 
by  an  agent  without  sufficient  authority.  It  is  sufficient  to  make  the 
plaintiff  the  real  party  in  interest,  if  he  have  the  legal  title  either  by 
written  transfer  or  delivery,  whatever  may  be  the  equities  between 
him  and  his  assignor.-  But  to  be  entitled  to  sue,  he  must  now  have 
the  right  of  possession  and  ordinarily  be  the  legal  owner.  Such 
ownership  may  be  as  equitable  trustee,  it  may  have  been  acquired 
without  adequate  consideration,  but  must  be  sufficient  to  protect  the 
defendant  upon  a  recovery  against  him  from  a  subsequent  action  by 
the  assignor. 

As  we  understand  the  scope  of  the  offer  in  the  present  case,  it 
went  to  entirely  disprove  any  ownership  or  interest  whatever  or  even 
right  to  possession  as  owner  in  the  plaintiff.  It  should  theiefore 
have  been  admitted.  It  may  be  true  that  the  plaintiff,  if  tliis  note 
had  been  delivered  to  him  with  the  intent  to  transfer  title,  might 
have  lawfully  overwritten  the  blank  indorsement  with  a  transfer  to 
himself;  it  is  also  true  that  the  production  of  the  paper  by  him  was 
prima  facie  evidence  that  it  had  lieen  delivered  to  him  by  the  payee 
and  that  he  had  title  to  it,  but  tlie  defendants'  offer  was  precisely  to 


2  A  transfer  merely  to  enable  the  transferee  to  sue  upon  the  instrument  is 
valifi.  Laxc  v.  Parnell.  7  ('.  B.  N.  S.  282;  Wheeler  v.  Johnson,  07  Mass.  39; 
noyd  V.  Corhift.  .37  Mich.  52;  Benttir  v.  Tjrft,  28  Mo.  506;  Bank  v.  Senior,  11 
R.  T.  37fi;  Walker  v.  Wait.  .50  Vt.  008.  Tf  aoting  by  authority  of  the  bene- 
ficiary, such  transferee  is  the  real  party  in  interest.  The  authority  may  be 
revoked.  Comstock  v,  floag,  5  Wend.  (N.  Y.)  600;  Best  v.  Nokomis  Bank, 
76  111.  608.  — H. 


I-]  TO  SUE  AND  RECEIVE  PAYMENT.  317 

rebut  this  very  presumption,  and  for  aught  that  we  can  know  the  evi- 
dence under  it  would  have  done  so. 

The  judgment  must  be  reversed,  and  a  new  trial  ordered,  costs  to 
abide  the  event. 

All  concur,  except  Millhi;  and  Eakl,  J  J.,  absent. 

Judgment  reversed. 


§  90  GREENE  v.  McAULEY. 

70  Kansas,  601.  — 1905. 

Mason,  J.     *     *     * 

In  jurisdictions  where,  as  in  Kansas  (Mauley  v.  Park,  68  Kan.  400;' 
Graham  v.  Troth,  69  Kan.  861),  the  holder  of  the  naked  legal  title  to 
a  promissory  note  may  sue  upon  it,  even  although  he  may  be  under 
()l*!igation  to  account  to  some  third  person  for  the  entire  proceeds,  it 
is  often  said  that  in  sucli  an  action  the  defendant  cannot  challon<ie 
tlie  plaintiffs  right  to  maintain  it,  except  by  a  sbowing  of  bad  faith 
in  the  transaction  (Dijrr  v.  Schrrll  1.35  Cal.  r)97,  and  cases  citod  ; 
Citi/  Bank  of  New  Harm  v.  Perkina,  29  N.  <Y.  554).  But  in  the 
dofisions  there  is  a  somewliat  singnlar  lack  of  explanation  or  illustra- 
tion as  to  just  what  might  be  considered  bad  faith,  in  this  connection. 
Doubtless  the  phrase  is  sometimes  used  with  reference  to  a  merely 
colorable  transfer  of  title  by  the  real  owner  to  a  stranger,  had  for  the 
purpose  of  embarrassing  the  maker  of  the  note  in  his  defense.  Marvin 
V.  FJlis,  (C.  C.)  9  Fed.  367.  But  this  example  hardly  meets  the 
re(|uirements  of  the  situation,  for  it  is  also  said  that  upon  a  showing 
that  the  plaintiit'  is  only  a  nominal  jiarty.  acting  for  the  benefit  of  the 
real  owner  of  the  note  sued  upon,  the  defendant  may  avail  himself 
of  any  defense  that  he  could  have  interposed  if  he  had  been  sued  by 
the  latter,  and  that  his  rights  arc  ])rotected,  iidt  by  allowing  him  to 
question  the  plaintiff's  capacity  to  sue,  or  by  recpiiring  the  person 
finally  interested  to  be  made  a  party,  but  bv  permitting  him  to  make 
his  defense  on  the  merits  against  the  formal  jdainlifT.  Colilr  v.  Cnll, 
20  Iowa,  481  ;  Salem  v.  School  Pi^lriil.  (('.  C.)  125  F(>d.  235;  Village 
of  Kent  v.  Pana,  100  Fed.  56;  Dirl-ivunn  v.  Bull.  72  111.  App.  75. 

One  instance  of  a  transfer  in  bad  faith  is  pmsenlcd  in  Shrhlon  v. 
Prarsfifr,  52  Kan.  579,  where  its  purpose  was  tr)  defeat  the  taxation 
of  the  note  involved.  Another  is  suggestcl  in  Shrriflan  v.  Mayor.  68 
N.  Y.  30,  where  it  is  said:    "  Ir  is  not  a  case  of  mala  fide  possession 

a  This  rfisp  is  roportofl  in  1  .A.  *  K.  Ann.  fas.  832.  with  note  ontiMod  "  Hipht 
of  action  llicrcon  of  nominal  hr)I(l<T  of  firoiniHsory  note." 

Spf  also  thi-  <'xhaiiHtivf  note  to  Shwnrl  v.  I'rirr,  fi.l  Kan.  HU  (overnilnl  liy 
Mnnlry  v.  Park,  supra),  in  04  I>.  It.  A.  ."iSl.  rntiflofl  "Who  i«  tho  roal  party 
in  intfrest  within  \\w  niraning  of  HtatntoH  dofining  the  parties  by  whom  an 
art  ion  must  be  brought."  —  C. 


318  RIGHTS  OF   HOI. DKK.  |.\1;|-.    V 

which  the  defendant  can  avail  itsolf  of,  as  if  a  thief  should  bring  an 
action  upon  a  promissory  note  wiiicii  he  had  stolen,"  In  Daniel  on 
2segotiable  Instruments  (vol.  2,  §  1191),  it  is  said  :  "  If  it  were  show  n 
that  the  plaintifT,  upon  suing  upon  a  note  payable  to  bearer  or  indorsed 
in  blank,  has  no  interest  in  it,  and,  in  addition,  that  be  is  suing  against 
tlio  will  of  ihc  party  beneficially  interested,  be  could  not  recover,  as 
his  conduct  would  be  in  bad  faith."  In  support  of  this  statement  the 
author  cites  Tnwne  v.  ]Yason,  128  Mass.  517,  the  syllabus  to  which 
reads:  "  It  is  a  good  defense  to  a  promissory  note  tbat  the  plaintiff, 
although  in  the  possession  of  the  note,  has  no  interest  in  it,  and  is 
prosecuting  the  action,  not  for  the  benefit  of  the  person  beneficially 
interested,  but  against  his  objection." 

But  in  that  case  the  defense  made  was  that  the  plaintiff  had  wrong- 
fully, and  without  the  consent  of  the  owner,  obtained  possession  of 
the  note  sued  on,  which  was  indorsed  in  blank:  tliat  he  had  no  title 
to  it.  and  never  had  had  any;  and  that  he  was  not  authorized  to  sue 
in  behalf  of  the  owner —  in  effect,  that  he  had  stolen  the  note.  And 
the  ground  of  the  decision  was  that  under  the  facts  stated  the  plaintilV 
had  no  authority  to  receive  payment  of  the  note,  and  a  payment  to  him 
would  not  have  released  the  maker.  And  this  suggests  what  we  con- 
ceive to  be  the  true  rule,  of  general  if  not  of  universal  application  — 
that,  so  far  as  affects  the  question  of  the  right  of  the  plaintiff  to 
maintain  the  action,  the  only  inquiry  open  to  the  defendant  is  whether 
the  plaintiff  had  such  title  to  the  note  that  a  payment  made  to  him 
would  be  a  complete  protection  to  defendant  from  any  further  lia- 
bility. Sturgis  V.  Baker,  43  Or.  23G;  Brown  v.  Powers,  53  App.  Div. 
(N.  Y.)  251;  Hays  v.  Hafhorn.,  74  N^.  Y.  48n.  Any  investigation 
which  goes  further  than  this  merely  involves  questions  between  the 
plaintiff  and  other  claimants  of  the  note  or  its  proceeds,  and  with 
these  the  defendant  has  no  concern.  Tt  was  said  in  Citi/  Bank  of  New 
Haven  v.  Prrhv.9,  29  N.  Y.  554:  "The  defendant  claims  no  title  to 
the  paper,  and  does  not  pretend  to  have  any  interest  in  it.  except  as  a 
promisor,  liable  to  pav  to  any  proper  holder.  There  is  no  party  before 
the  court  who  has  any  legitimate  interest  in  (|uestioning  the  plaintiffs' 
title,  or  who  has,  as  it  seems  to  me,  under  the  circumstances  of  this 
case,  any  right  to  be  heard  on  that  question.  The  defendant  stands 
here,  therefore,  as  a  mere  volunteer,  in  behalf  of  others  not  before  the 
court,  and  who  make  no  claim  on  their  own  account.  *  *  *  ji 
will  be  time  enough  to  determine  whether  any  other  person  has  a  bet- 
ter title,  when  such  person  shall  come  before  the  court  to  claim  t'.U' 
bills  in  question,  or  their  proceeds,  from  the  plaintiffs."* 

*  "  Tt  is  tbp  spttled  Inw  of  this  cnmmonwfnlth  that  a  holrlor  nf  a  nP?otiablc 
promissory  not**  payahlf  to  hparer  or  payablf  to  orflor  and  inflorsorl  in  blank 
can  sue  on  it  in  bis  own  namp.  LUllr  v.  O'Brien.  9  Mass.  423;  Bfekman  v. 
Wt/«07t,  9  Mete.  434;  J'caslee  v.  McLoon,  16  Gray,  488;   Whitton  v.  Uayden,  9 


II.    1.    a.]  INSTRUMENT    COMPLETE    AND    REGULAR.  319 

n.  Holder  in  due  course. 

1.  Requisites  to  Constitute  Holder  in  Due  Course. 

(a)  Instrument  must  be  complete  and  regular. 

§  91  Davis  Sewing  Machine  Co.  v.  Best,  105  N.  Y.  59.  —  1887. 
Action  to  recover  the  value  of  certain  notes  diverted  by  plaintilf's 
president.  At  the  time  defendant  purchased  the  notes  they  were  com- 
plete and  regular  and  signed  by  the  plaintiffs  treasurer,  except  that 
they  were  not  signed  by  the  president  although  a  blank  space  with  a 
diagonally  ruled  line,  with  the  title  of  his  office  printed  thereunder, 
was  left  at  the  foot  of  each  instrument. 

Ruger,  Ch.  J.  —  It  is  not  seriously  questioned,  but  that  the  notes 
were  unlawfully  converted  by  W.,  and  that  the  plaintiff  was  en- 
titled to  recover  their  possession,  unless  the  defendant  became  the 
bona  fde  holder  thereof,  by  virtue  of  their  purchase  from  the  Security 
Bank.     *     *     * 

'i'he  authorities  seem  to  be  consi.stent  and  uniform  to  the  effect 
that  the  defendant  cannot  be  considered  such  a  holder. 

The  suggestion  that  a  party  issuing  negotiable  paper  with  blank 
spaces  therein,  apparently  intended  to  be  filled  up  to  make  a  com- 
plete contract,  impliedly  authorizes  its  holder  to  insert  appropriate 
words  in  such  blanks,  may  be  dismissed  as  inapplicable  to  such  a  case 
as  this. 

It  has  sometimes  been  held  that  a  party  signing  such  paper  and 
delivering  it  to  a  third  party  unfilled  by  implication  confers  such 
authority,  but  it  can  hardly  be  claimed  that  one  drawing  the  form  of 
a  promissory  note  whicli  is  unsigned,  and  falls  into  the  hands  of 
another,  thereby  authorizes  the  holder  to  attach  the  maker's  signa- 
ture or  to  add  anything  which  is  incotnplctc  in  lis  cvoculion. 

The  rule  that  a  party  buving  commercial  paper  which  remains  in 
some  essential  particular  incomplete  and  imperfect,  does  not  acquire 
the  character  of  n  Inma  fidr  holder,  rests  upon  sound  reasons  and 
is  well  established  in  commercial  law.  \o  stronger  eviden'^-e  could 
be  afforded  that  sueh  paper  liad  been  prematurelv  put  in  circulation 
rontrarv  to  the  will  and  intention  of  its  maker,  than  the  fnct  that  it 
had  not  been  fullv  and  completely  prepared,  to  perform  the  office 
for  which  it  was  desiirned.  It  is  apparent  that  such  paper  tnust 
nave  ber-n  taken  frnni  the  possession  of  its  maker  before  an  intention 
to  part  with  it  had  been  fully  formed,  and  that  he  still  designed  to 

AUpn.  408;  Wational  Prmhrrtnn  Hank  v.  Porter,  12.5  Mass.  .1.3.1,  28  Am.  Rop. 
235;  f^pnfjnrd  v.  Vor^on,  120  M-Ti"*.  .'i.l.T.  It  is  not  norrsasry  for  In.n  to  prove 
that  hp  owns  tho  noto  or  if  not  that  hr  has  tho  ronsrnt  of  the  tnio  owner  to 
brinp  suit  on  it  in  his  own  name."  I>OBINO,  J.,  in  Lowcil  v.  Hirkfnrd,  201 
Maw.  543,  545.  —  C. 


o'>.'(>  ii(ti,iii;K  IN   mi;  corusi;:  i;i:guisi'rKs.  |  Mir.  v. 

mid  soiiK"  pntvisioii  or  ritiiiialil y  (o  i^iw  il  vitality  and  cil'i'i-t.  It  \v:is 
said  by  tlu'  lalo.)iid,uv  Folder  in  Lcdiricli  v.  .1/r/w///  (,".;;  N .  \.  ;;u7, 
;>lo).  that  "a  iu'L:^()tial)lo  iiistniiin-nt  iiiiisl  Ik-  a  coiiiplctc  and  pcrTccd 
inslruini'iil  wlini  it  is  issmnj.  cr  tlirro  iiiusl  he  aiilh(iiil\  I'cposrd  in 
stMiio  oiii\  aftor\\ards  to  su|i|ily  anyfliiiii;-  iiet'di'd  to  make  il  [(crrccl." 
Tlio  ruk'  is  also  laid  down  in  hanirl  on  Nci>ot  iahlc  I  nsl  iiinu'iits 
(§§SU,  8r?). 

Wo  cannot,   tlu'rct'orc.   Iiold    that    llir  'i'laist   Cotnpanv    |dclVndant| 
lu'canio  the  Ixnin  jidc  lioldei-  ol'  the  seven  notes.      *      '"      *  ^ 


(b)    I itslnimnil  vnisl  not  bo  overdue,  etc.'^ 
§  91     LE  DUE  V.  FIRST  NATIONAL  BANK  OE  KASSON. 

:n    MiNNKSOTA.    33. —  1883. 

^IiTCiiELL,  J.  At  Kassoii,  Minnesota,  on  tlie  iiriecntli  oJ'  October, 
18S1.  the  plaintiff  drew  its  draft  or  Idll  of  exchange  for  $500  on  the 
Ninth  National  Bank  of  New  York,  payable  on  demand,  to  the  order 
of  plaintiff,  and.  for  value,  deliviTed  the  same  to  tlie  payee,  who,  on 
the  same  day,  indorsed  it  to  one  Edison,  who  held  it  nnlil  the  eighth 
of  March,  1882,  withont  presentation  for  payment,  and,  on  t!io  day 
last  named,  indorsed  it  to  one  dordan.  who.  on  the  eleventh  of  tbe 
same  month,  indorsed  it  to  tlie  Exchange  l-Jank  of  Louisiana,  !\^i^sonri. 
which  cansed  it  to  be  presented  for  payment  on  the  fifteenth  of  the 
month,  when  ]iayment  was  refnsed  and  the  draft  protested.  On  the 
fourth  of  Ajjril,  the  Exchange  Bank  transferred  it  to  plaintiJf.  Xo 
explanation  is  given  why  Edison  held  the  draft  so  long  without  pre- 
senting it  for  payment,  nor  does  it  appear  that  either  Jordan  or  any 
of  the  subsequent  indorsers  asked  for  any  explanation  of  this  fact 
when  they  purchased  it.  In  October,  1S81,  immediately  after  the 
draft  in  question  had  l)een  transferred  to  him,  Edison  absconded  f  I'om 
the  state,  leaving  debts  unpaid,  among  whicli  was  a  promissory  note 
for  $.500  and  interest,  dated  Sejitember  20,  1S81,  |)ayab]e  in  Ihii'ty 
days  to  the  order  of  defendant  bank,  and  whicli  it  then  held  and  still 
holds,  and  v.hich  has  never  been' paid.  About  the  first  of  November, 
1881,  the  defendant,  having  ascertained  that  Edison  was  the  owner 

'' Followpfl  in  Thnrler  v.  Bacon,  127  App.  Div.  (N.  Y.)  .'572.  tho  court  sfiyinfr 
that  the  Ne^otialile  Ttistniments  T^aw  "  is  hut  a  codification  of  the  rule  of  the 
law  merchant,  whicli  w.is  that  a  party  l)iiyinj3j  comrricrcial  paper  wliich  remains 
in  some  <>ssential  particular  incomplete  and  imperfect  rioes  not  acquire  the 
character  of  a  bona  fulr  holder."  —  f '. 

«  See  y.  M.  C.  A.  Chimvnaiinn  Co.  v.  fforkfnrri  No  I.  finnk.  170  Til.  .'iOO. 
reported  in  40  L.  R.  A.  753.  with  exhaustive  note  entitled  "  Ri}i;ht.s  of  holder 
of  negotiable  paper  transferred  after  maturity."  —  C. 


11.  1.  b.]  iNSTRUMb;>iT  Noi  oVi -ii:;'!.! i^.  ."^21 

of  the  draft  in  question,  notified  tlie  drawee  not  to  pay  it.  Tliis  last 
fact  is,  perliaps,  not  material.  Upon  being  sued  upon  the  draft,  the 
defendant  now  seeks  to  set  off  against  it  the  promissory  note  against 
Edison  already  referred  to,  and  the  only  (|ueslion  in  the  ease  is 
whether,  under  the  facts  stated,  this  ean  he  done.  It  m.iy  !u>  here 
remarked  that  La  Due,  the  payee,  was  clearly  discharged  from  liability 
as  indorser.  by  the  delay  of  five  months  in  presenting  tlic  draft  for 
payment;  hence,  he  can  claim  no  rights  as  an  indorser  who  lias  been 
compelled  to  pay.  His  purchase  of  the  draft  from  the  J<]xchange  l^>ank 
was  a  purely  voluntary  act,  and  he  has  now  no  greater  rights  under  it 
than  'f  he  had  never  before  been  a  party  to  the  instrument. 

According  to  the  commercial  law  in  England,  and  in  prol)atily  all 
those  states  where  a  diifereni  rule  has  not  been  fixed  by  statute,  an  in- 
dorsee of  an  overdue  hill  or  negotiable  note  takes  it  subject  only  to 
such  equities  or  defenses  as  attached  to  the  bill  or  note  itself,  and  not 
to  claims  arising  out  of  collateral  matters  or  inde))endent  transactions, 
whether  they  arose  against  the  payee  or  an  immediate  holder;  the  idea 
being  that  six-h  commercial  j)a})cr.  aUhough  overdue,  did  not  lose  its 
negotiability. 

Our  state,  following  the  example  of  many  others,  has  by  statute 
entirely  changed  this  rule.  Section  27,  r.  (!(»,  (Jon.  St.  1S7S.  pro- 
vides: "  Tn  the  case  of  an  assignment  of  a  tiling  in  action,  the 
action  by  fhe  assignee  is  without  ]irejudice  to  any  set-off  or  other 
defense  existing  at  the  time  of  or  before  notice  of  the  assignment; 
but  this  section  does  not  apply  to  a  negotiable  note  or  bill  of  exchange 
traiKsferred  in  good  faith  and  upon  good  consideration  before  due." 
The  effect  of  this  stalute.  clearly,  is  1o  ]>lace  an  ovcidiie  bill  or  note 
ii[)on  the  same  fooling  ;is  any  other  chose  in  aclion.  and  if  it  be  as- 
signed after  due.  a  sel-olV  to  the  amount  of  the  note  or  draft  may  be 
made  of  any  detnand  existing  against  any  ])erson  who  has  assigned 
or  transferred  such  note  or  bill  after  it  lic(ame  due,  if  the  den)an<l  is 
such  as  might  have  been  set  olf  against  the  assignor  while  the  note 
f)r  bill  belonged  to  him.  .\  '^cldlf  arising  oul  of  an  independent 
transaction  against  an  inlerniediate  bolder  is  llms  ]ilaced  upon  ilio. 
same  fo(»ting  as  an  e(juity  attaching  to  the  bill  or  tiole  itself  iigainst 
the  origiiuil  payee.  This  same  rule  is  laid  down  in  somewhat  did'e'- 
ent  langiia'j"  in  the  prf)vision  regarding  set-off  in  jn>lic(>'s  eouit. 
Section  I",  r.  (■;."),  r!eji.  SI.  ISTS.  To  illustrafe,  suppose  Kdison  had 
been  the  payee,  and  had  rdtlained  the  draff  by  framl  ami  wilhont 
I'onsideraf ion.  or  had  received  payment  on  if  while  Iw  owned  il.  but 
by  oversiL'ht  or  mistake  if  renmined  u]  ]\\<i  hands.  These  would  hnv(^ 
been  defenses  aflnehed  to  the  ('raft  il^tdf,  a';  between  the  m-iginal 
parties,  and  if  the  draft  was  over<lne  when  Ivlison  imior-eil  il  lo 
Jordan,  defenrbint  could  have  pet  them  up  even  ntuler  Ibe  foianer  rule 
airainst  the  draft  in  the  bands  of  .Ionian,  or  those  to  whom  lie  sub- 
secpienllv  t  ransfi'rn-d  it. 

NKOOT.    lNST1tUMKNT«  —  21 


3v'\J  iioi,i)i:u  IN  DUK  L"oui:sK:  KKyuisirios.  [aut.  v. 

T?iit  now,  iiiulor  tlie  slatutc,  iloft'mlaut  rould  set  off  this  note, 
altlunii,^li  it  arisos  out  of  an  indt'iMMi.lcnt  mailer,  against  an  interme- 
diate- iioklor,  beeause  it  is  a  .I.Mnaiu!  wliirli  might  liave  been  set  of! 
against  Edison  while  the  draft  belonged  to  him,  had  he  sued  on  it. 
Linn  v.  h'n<](f.  II'  Mimi.  ISl  {Gi\.  145)  ;  Martin  v.  Pillshury,  23  Minn. 
175;  Harris  \.  Hiinrcll.  d-")  X.  V.  584.  Such  a  rule  may  render  pre- 
carious the  business  of  dealing  in  overdue  paper,  especially  when  it 
has  passed  after  iiiatiiiily  through  the  hands  of  several  holders.  The 
policy  of  such  a  law  is  exclusively  for  the  Legislature,  but  we  may 
suggest  that  we  see  no  i-eason  why  overdue  commercial  paper  should 
not  be  placed  on  the  same  footing  as  any  other  chose  in  action. 
Notes  and  bills  of  exchange  are  only  treated  as  business  paper  when 
negotiated  before  maturity.  When  overdue  they  are  dishonored. 
In  the  principal  commercial  states  of  the  Union,  such  as  New  York,^ 
this  same  rule  has  long  been  established  by  statute.  Hence  our  state 
cannot  be  charged  with  having  adopted  a  rule  in  opposition  to  the 
judgment  or  usages  of  the  business  world. ^ 

The  only  question  left,  then,  is  whether  this  draft  was  "  overdue  " 
when  Edison  indorsed  it  to  Jordan  on  the  eighth  of  March,  1882, 
four  months  and  twenty-three  days  after  its  date.  In  the  case  of  a 
bill,  note,  or  check,  payable  on  demand,  no  exact  day  of  payment  is 
fixed  in  the  instrument.     The  general  rule  is  that  it  must  be  pre- 


^  See  N.  Y.  Code  of  Civil  Procedure,  §  502.  —  C. 

8  On  this  point  Mr.  Crawford  says:  "  Tt  was  not  deemed  expedient  to  make 
provision  in  the  Negotiable  Instruments  Law  as  to  what  equities  the  trans- 
feree will  be  subject  to;  for  the  matter  may  be  affected  by  the  statutes  of  the 
various  states  relating  to  set-off  and  counterclaim.  In  an  act  desif,'ned  to  be 
uniform  in  the  various  states,  no  more  can  be  done  than  fix  the  rights  of 
holders  in  due  course.  On  the  question  whether  only  such  equities  may  be 
asserted  as  attach  to  the  paper,  or  whether  equities  arising  out  of  collateral 
matters  may  also  be  asserted,  the  decisions  are  conflicting.  In  England  it  was 
decided  in  Burroughs  v.  Moss,  10  Rarn.  &  Cress.  558,  that  the  indorsee  of  an 
overdue  bill  is  liable  to  such  equities  only  as  attach  to  the  bill  or  note  itself, 
and  not  to  claims  arising  out  of  collateral  matters,  such  as  a  general  set-off 
is.  This  is  a  leading  case,  and  has  since  been  uniformly  followed  in  that 
country."    Crawford's  Neg.  Inst.  Law,  3d  ed.,  p.  70. 

In  Edney  v.  iritis,  23  Neb.  56,  at  p.  01,  Maxwell,  J.,  says:  "Section  31 
of  the  code  provides  that  '  In  the  case  of  an  assignment  of  a  thing  in  action, 
the  action  by  the  assignee  shall  be  without  prejudice  to  any  set-off  or  other 
defense  now  allowed;  but  this  section  shall  not  apply  to  negotiable  bonds, 
promissory  notes,  or  bills  of  exchange,  transferred  in  good  faith  and  upon 
pood  consideration,  before  due.'  This  clearly  implies  that  set-off  may  be 
allowed  against  a  note  transferred  after  due.  .  .  .  The  English  rule  seems 
to  be  based  upon  the  doctrine  of  recoupment,  and  is  not  applicable  in  any 
state  having  a  statute  similar  to  our  own,  where  independent  and  collateral 
claims  may  be  set  off  against  an  overdue  note  in  the  hands  of  a  payee." 

For  a  very  instructive  and  learned  discussion  of  this  matter,  see  Cumber- 
]and  Bank  v.  IJann,  18  N.  J.  L.  222.  See  also  Davis  v.  Miller,  14  Gratt. 
(Va.)   1.  — C. 


II.  1.  b.]  INSTRUMENT  NOT  OVERDUE.  323 

sented  for  payment  within  a  reasonable  time,  having  in  view  ordi- 
nary business  usages,  and  the  purposes  which  paper  of  that  class  is 
intended  to  subserve. 

The  term  *'  overdue,"  as  applied  to  a  demand  bill  of  exchange,  is 
used  in  different  connections,  in  each  of  which  it  has  a  different  mean- 
ing; and  the  failure  to  keep  these  distinctions  in  mind,  has  perhaps 
led  to  some  misapprehension  regarding  the  present  case.  Sometimes 
it  is  used  in  reference  to  a  rigiit  of  action  against  drawer  or  indorser. 
In  that  connection  a  bill  is  not  overdue  until  presented  to  the  drawee 
for  payment,  and  payment  refused.  Sometimes  the  term  is  used  in 
considering  whether  an  indorser  has  been  released  by  a  failure  of  the 
holder  to  present  the  bill  for  payment,  and  to  give  the  indorser  notice 
of  its  dishonor  within  a  reasonable  time. 

Again,  the  term  is  applied  to  a  bill  which  has  come  into  the  hands 
of  an  indorser  so  long  after  its  issue  as  to  charge  him  with  notice  of 
its  dishonor,  and  thus  subject  it  in  his  hands  to  the  defenses  which 
the  drawer  had  against  it  in  the  hands  of  the  assignor.  It  is  in  this 
last  connection  that  the  term  "  overdue  "  is  considered  in  the  present 
case.  That  in  this  case  a  bill  may  be  said  to  be  overdue,  although  it 
has  never  been  in  fact  presented  to  the  drawee  for  paym^^nt,  is  recog- 
nized everywhere  throughout  the  books,  and  will  be  apparent,  we 
think,  on  a  moment's  reflection.  Suppose  a  draft  has  been  held  by  the 
payee  five  years,  without  ever  having  been  presented  to  the  drawee  for 
payment,  and  is  then  indorsed  to  another  party.  It  would  not  be  due 
60  as  to  give  a  right  of  action  against  the  drawer,  because  his  contract 
is  only  to  pay  in  case  it  is  not  paid  by  the  drawee  on  presentation. 
But  there  would  be  no  doubt  that  it  would  be  overdue  or  dishonored, 
so  as  to  charge  it  in  the  hands  of  the  indorsee  with  any  defenses  which 
the  drawer  had  against  it  in  the  hands  of  the  payee,  although,  whi'u 
he  took  it,  it  had  never  been  presented  for  payment.  The  retention 
of  a  demand  draft  so  long  a  time  without  presentment,  when  no  de- 
fense exists  against  it,  is  so  unusual  and  contiary  to  business  usages 
that  this  circumstance  would  be  hold  to  charge  the  indorsee  with 
notice  when  he  purchased  the  draft  that  it  was  dishonored.  The 
lapse  of  time  would  in  such  case  be  so  groat  as  to  put  a  purcliiiscr 
upon  iiKpiiry  as  to  tliQ  ronson  why  it  was  still  outstanding  and  unpaid. 

The  cases  are  almost  iiimimorablo  in  wliicli  it  has  been  held  that 
paper  payable  on  demand  liii<l  lircn  outstanding  so  long,  when  trans- 
forrod,  as  to  be  doomed  overdue  mikI  dishonored,  so  as  to  subject  it.  in 
tbo  hands  of  the  piircliasor,  to  any  clofonsos  which  tlio  maker  or  drawer 
had  against  it  in  tho  hands  of  Iho  payee:  and  in  none  of  these  cas(>s 
is  the  fjuostion  wbothor  or  not  the  paper  had  been,  before  the  transfer, 
prPsont*'d  for  payment  to  the  maker  or  drawee,  referred  to  as  at  all 
material.  Douri  v.  ffallivg.  \  liarn.  &  C.  330;  Firat  Nat.  Bank  of 
Nev'lon  V.  Needham,  'v*?>  Iowa,  '.i  lit ;  f'oirivfj  v.  AUnnni.  71  N.  V.  \'M^; 
Sylvester  v.  Crapo,  15  Pick.  9^;  Hanger  v.  Carey,  1  Mete.  369;  lltr- 


52-i  IIOI.DKIJ    IN    DUK    OOUUSK:    KKQUISITES.  [aRT.    V. 

rick  V.  ]Voohrrtoti,  11  N.  Y.  TiSl  ;  Story,  Prom.  Notes,  §  207  and  note; 
Thompson  v.  Ilalc.  (5  I'ick.  2.">S  ;  Anirrican  />a)i/>-  v.  Jenness,  2  Mete. 
288;  Carlton  v.  liailcif,  27  N.  11.  230;  Parlrr  v.  TuWe,  44  Me.  459; 
Nevins  v.  Toirnscnd.  6  CoTin.  5;  Camp  v.  .'>\-o/f,  14  Vt.  387;  il/ore?/  r. 
^VakcfiehJ.  II  A't.  2  1.  I'lmt  i)i  determining  wlicthor  an  indorsee  took 
r.  demand  note  or  bill  as  dishonored  and  overdne  paper,  subject  to  all 
equities  or  defenses,  the  test  is  tlie  length  of  time  it  lias  been  outstand- 
ing, and  not  wbeihiM-  it  hn^  in  fact  been  presented  for  payincnt.  may 
be  illustrated  in  another  way.  Suppose  a  draft  had  in  fa(  t  been 
presented  for  ]ia\iiiciit,  and  |>nym('iit  refused  on  the  \ovy  (hiy  it  was 
issued,  it  would  then  be  overdue  as  to  tlic  drawiM-,  so  that  an  action 
would  then  lie  against  him.  But  sui»])ose  immediately  after  such 
presentation,  and  on  the  same  day,  tlie  liolder  sliould  indoi'se  the  draft 
to  another,  who  took  it  in  good  faith  for  value,  without  notice  of  this 
actual  dishonor,  clearly  such  indorsee  would  not  take  it  as  overdue 
paper,  subject  to  the  equities  or  defenses  against  it  in  the  hands  of  the 
former  holder,  because,  a  reasonable  lime  for  it-;  prc-cnt.ition  not 
having  expired,  there  was  nothing  to  put  liim  upon  iii((iiiry.  or  to 
charge  him  with  notice  of  such  equities.  // iiii iiwhiinn  v.  flolaUng, 
40  Cal.  111.  In  fact,  in  determining  whether  an  indorsee  takes  such 
paper  as  overdue  paper,  sul)ject  to  such  defenses  or  equities,  the  ques- 
tion of  actual  demand  and  dishonor  does  not  enter  into  the  discussion. 
The  point  of  inquiry  is,  had  tlie  paper  been  outstanding  so  long  after 
its  date  as  to  put  the  purchaser  upon  inquiry,  and  charge  him  with  iio- 
tice  that  there  is  some  dcfen.se  to  it?  In  view  of  the  well-known  fact 
that  bills  of  exchange  are  not  always  transmitted  immediately  for 
payment,  but  first  pass  through  the  hands  of  several  intermediate 
holders  in  the  ordinary  course  of  business,  and  in  other  cases  are  ynir- 
chased  by  travelers  to  be  carried  with  them  instead  of  currency  or  coin, 
to  be  negotiated  as  occasion  may  require,  we  are  not  disposed  to  lay 
down  any  narrow  rule  on  this  subject.  Rut  in  this  case  we  think  that 
the  fact  that  this  draft  was,  without  any  explanation  of  the  reason, 
found  outstanding  nearly  five  months  after  its  date,  fully  justified  the 
trial  court  in  holding  it  overdue  and  dishonored  wlien  Joi-dan  look  i,t, 
.so  as  to  charge  it  in  his  hands,  or  tlie  hands  of  those  who  hold  under 
him,  with  any  defense  or  set-off  which  the  drawer  had  against  it  in  the 
hands  of  Edison. 

Order  d('nvin;f  new  trial  affirmed. 


§  91  GAPtDNEPt  r.  P,E.\C'ON  TPIJST  POMPANY. 

190  Massachi-sett.s,  27.-1000. 

Morton,  J.  —  This  is  a  bill  in  equity  brought  l)y  the  plaintiff,  a 
minor,  by  her  next  friend  a:id  guardian,  to  compel  the  defendant  the 
Beacon  Trust  Company  to  acsign  and  deliver  to  licr  a  mortgage  and 


II.   1.  b.]  ixsti;t:mkxt  vot  ovr:iu>i-i:.  o25 

the  note  thereby  secured,  alleged  to  have  been  fraudulently  obtained 
from  the  plaintiff's  guardian  by  one  Edwin  M.  'IMiayer,  since  deceased, 
and  fraudulently  assigned  by  iiini  to  the  trust  conijjany.  As  to  cer- 
tain of  the  defendants  the  hill  was  dismissed,  and  a  decree  was  entered 
in  favor  of  the  plaintitt'  against  th^  trust  company  and  other  defend- 
ants. The  case  is  Jiere  on  appeal  by  the  trust  company.  All  of  the 
evidence  is  reported. 

Briefly  stated  the  facts  are  as  follows:  In  January,  lUO^,  the 
plaintiff  was  the  owner  of  a  mortgage  and  the  note  thereby  secured  for 
$1,500,  on  land  in  Quiney,  given  by  the  defendant  Bjown  to  one 
Hattie  E.  Carr  and  tiansJVrrcd  by  suceesiive  assignments  to  the  plain- 
tiff. Her  motliei-,  ]\Iary  E.  Gardner,  now  Mary  E.  Wales,  was  her 
guardian.  Tlie  note  and  mortgage  had  been  long  overdue.  By 
means  of  fraudulent  misrepresentations  that  tlie  owner  of  the  equity 
wished  to  pay  off  the  mortgage,  Thayer  obtained  from  the  plaintiff's 
guardian  an  assignment  of  the  note  and  mortgage  to  himself,  and 
subsequently  assigned  them  to  the  trust  company  as  security  for  a 
note  of  $2,000  for  money  borrowed  by  liim  of  the  conijianv.  The 
trust  company  took  the  assignment  in  good  faith,  for  value,  and  with- 
out any  notice  of  Thayer's  fraud,  or  of  any  defect  in  his  title,  unless 
the  fact  that  it  took  fiiem  when  overdue  constituted  such  notice. 

We  assume,  in  favor  of  the  plaintiff,  that  the  fact  that  the  note  was 
secured  by  mortgage  does  not  affect  its  character  as  an  overdue  nego- 
tiable instrument  when  taken  by  the  trust  company,  although  it  is 
-aid  in  Murphy  v.  Barnnrd,  1f)'3  Mass.  7*?,  75,  that  there  is  a  distinc- 
tion between  the  purchase  of  orilinary  coniniercial  paper  and  that  of 
notes  known  to  bo  secured  by  a  mortgage  of  real  estate,  thouLrh  b()u<jht 
as  negotiable  paper.  Sec  Fish  v.  French.  15  (iray,  5-^(»;  \' in  Ion  v. 
King,  4  Allen,  5(i"^ ;  Vi'illro.r  v.  Fnsirr,  \:)-i  Mass.  ;5'^0 ;  linron  v. 
Abholl,  i;>7  Mass.  .'IDT.  But  the  note  did  not  cense  lo  be  projierty  or 
to  be  negotiable  because  overdue,  liaxier  v.  Lillle,  G  Afetc.  (Mass.) 
7:  Fisher  v.  Lrlnuil.  I  Ciish.  15G,  158;  Lcavill  v.  Fulnam,  '.)  N.  Y. 
494.  And  the  question  is  whetlier,  assuming  fur  the  moment  the 
validity  of  the  transfer  by  the  plaintiff's  guardian  lo  'i'liayer,  which 
will  be  consirlered  later,  the  fact  that  the  note  and  moitgage  w(>re 
overdue  when  the  trust  company  took  Ibeiii  so  affi-ited  their  titli-  as 
to  postpone  their  right  to  that  of  the  defrjiudcd  owner.  The  general 
rule  is  thus  stated  by  T>ord  Tfersehel  in  f^midfin  Joint  Slorl-  Tlnnk  v. 
Simmnnf}  (ISfl?)  \.  (\  '?01,  '.'15:  "The  geiieral  rule  of  Inw  is,  that 
where  a  person  has  obtained  the  property  of  anolher  from  one  who 
is  dealing  with  it  without  the  authority  f>f  the  friie  ownei-.  no  title  is 
acquired  as  against  that  owner,  even  tliout:h  full  value  he  "iven,  ;ind 
the  property  be  taken  iti  the  belief  that  an  mupiest  ionahle  title  is 
being  obtained,  unless  the  person  takini:  it  cnn  show  that  the  true 
owner  has  so  acted  as  in  mi-lcid  bini  iido  the  belief  flmt  the  person 
dealing  with  the  properly  iiad  authority  to  do  so.     If  this  can  be 


326  iiui.DKu  IN  nuK  couhsk:  hkquisites.  [art.  v. 

shown,  a  gooil  title  is  luquiivil  by  (xisoiuil  ostoppi'l  against  the  truo 
owner."  He  then  goes  on  to  say  that  there  is  an  e.vecption  in  the 
ease  of  negotiable  instruments,  manifestly  meaning  those  not  yet  due, 
and  that  as  to  them  any  person  in  possession  of  them  can  convey  a 
good  title,  even  if  acting  in  fraud  of  the  true  owner.  This  is  the 
only  exception  mentioned  by  him  to  the  general  rule  which  he  lays 
down,  ai.J  which  would  seem,  therefore,  to  have  been  regarded  by  him 
as  applying  to  overdue  negotiable  notes  as  well  as  to  other  proyjerty 
when  circumstances  brought  them  within  it.  Ap])lying  the  rule  thus 
laid  down,  or  the  rule  that,  where  one  of  two  innocent  persons  must 
suffer  in  consequence  of  the  fraud  of  another,  the  loss  must  fall  upon 
the  one  wlio,  by  his  trust  and  confidence,  has  enabled  the  perpetrator 
of  the  fraud  to  commit  it  (Easter  et  al.  v.  Allen,  8  Allen,  7 ;  McNeil  v. 
Tenth  Nat.  Bank,  46  N.  Y.  325),  it  would  seem  plain  that  the  loss  in 
this  case  should  fall  upon  the  plaintiff,  unless  the  fact  that  the  note 
and  mortgage  were  overdue  makes  a  difference.  She  had  assigned 
the  note  and  mortgage  to  Thayer  by  an  instrument  valid  upon  its 
face,  and  had  delivered  possession  of  them  to  him.  As  a  consequence 
of  her  conduct,  he  had  possession  of  them  as  apparent  owner,  with 
full  dominion  over  the  property  which  they  represented.  This  ap- 
parent ownership  was  obtained  from  the  guardian  by  Tliayer's  fraud, 
it  is  true;  but,  although  that  would  have  enabled  her  to  avoid  the 
transaction  as  between  her  and  him  so  long  as  the  note  and  mort- 
gage remained  in  his  hands,  his  apparent  ownership  was  not  affected 
thereby. 

Does,  then,  the  fact  that  the  note  and  mortgage  were  overdue 
when  the  trust  company  took  them,  make  a  difference?  The  pur- 
chaser of  an  overdue  negotiable  note  takes  it  subject  to  all  the  equi- 
ties, if  any,  that  are  attached  to  it  at  the  time  of  the  transfer  in  favor 
of  the  maker,  the  owmer,  or  of  third  parties.  Vinton  v.  King,  4 
Allen,  562;  Vermilye  £  Co.  v.  Adams  Express  Co.,  21  Wall.  138;  In 
re  European  Bank,  Ex  parte  Oriental  Commercial  Bank  (1870)  5  Ch. 
A  pp.  358 ;  In  re  Overend,  Gurney  &  Co.,  Ex  parte  Swan  (1868)  6  Eq. 
3-1 1.  If  there  are  no  equities  attached  to  the  note  the  purchaser  gets 
as  good  a  title  after  as  before  maturity.  In  re  Overend,  Gurney  & 
Co.,  Ex  parte  Swan,  supra.  And  it  makes  no  difference  that  the  note 
is  dishonored.  Tf  there  are  equities  attached  to  it,  he  takes  it  subject 
to  them.  This  is  what  is  meant  when  it  is  said  that  the  purchaser 
has  no  better  title,  legal  or  equitable,  than  his  transferror  had,  and 
that  the  note  is  subject  in  his  hands  to  the  same  infirmities  of  title 
as  against  the  true  owner,  and  to  the  same  defenses  as  against  the 
maker,  that  it  was  subject  to  in  the  hands  of  his  transferror.  1 
Daniel  on  Negotiable  Instruments  (3d  ed.)  §§  72-74,  et  seq.  If,  for 
instance,  an  overdue  note  is  stolen  from  the  owner,  a  subsequent  pur- 
chaser acquires  no  title  as  against  the  true  owner  (Vermilye  d'  Co.  f. 
Adams  Express  Co.,  supra),  or  if  an  overdue  note  has  been  paid  by 


II.  1.  6.]  INSTRUMENT  NOT  OVERDUE.  337 

the  maker,  and  is  fraudulently  put  in  circulation  by  the  payee,  a 
purchaser,  tliough  for  value  and  in  good  faith,  takes  it  subject  to  the 
defense  of  payment  by  the  maker.  In  such  a  case  the  very  fact  that 
the  note  is  dishonored  is  sufficient  to  put  the  purchaser  upon  inquiry 
as  against  the  maker.  Gold  v.  Eddy,  1  Mass.  1 ;  Brown  v.  Davis,  3 
T.  E.  80 ;  Losee  v.  Dvnkin.  7  Johns.  70.  But  the  case  is  very  different 
where  tht  owner  of  an  overdue  note  transfers  it,  under  circumstances 
which  enable  his  transferee  _lix-4eaHvith  it,  though  obtained  by  fraud, 
as  if  he  were  the  true  owner,  and  when  an  innocent  purchaser  for  value 
takes  it  from  such  transferee  before  the  transfer  has  been  avoided. 
In  such  a  case  no  equity  attaches  to  the  note  in  favor  of  the  true  owner 
as  against  the  innocent  purchaser  for  value,  since  it  was  by  his  own 
act  tliat  tlie  perpetrator  of  the  fraud  was  enabled  to  commit  it.  The 
true  owner  of  an  overdue  note  may  deal  with  it  as  with  any  other 
property,  and  the  mere  fact  that  the  note  is  overdue  does  not,  in  such 
a  case,  in  the  absence  of  anything  in  the  transaction  to  suggest  sus- 
picion, put  a  purchaser  upon  inquiry  any  more  than  a  purchaser  is 
bound  in  any  other  case  to  inquire  into  the  title  of  his  vendor.  See 
White  V.  Dodge,  187  Mass.  449.  The  possibility  that  the  title  may 
have  been  obtained  by  fraud  exists  in  all  cases;  but  that  is  not  enough 
to  put  a  purchaser  upon  inquiry.  Any  other  view  would  put  upon 
the  innocent  purchaser  for  value  of  overdue  negotial)le  paper  the  onus 
of  a  defective  title,  no  matter  how  much  he  may  have  been  misled  by 
the  conduct  of  the  true  owner.  We  do  not  think  that  such  is  the  law. 
Cochran  v.  Sfevarf,  21  Minn.  435,  438,  440:  Moore  v.  Moore.  112  Ind. 
149 ;  Nenhoff  v.  O'Reilhj,  93  Mo.  KM:  EUieridqe  v.  Gallagher,  55 
Miss.  458;  ConneU  v.  Bliss,  52  Me.  476;  Eversole  v.  MaitU,  50  Md. 
95;  1  Jones  on  Mortgages  (3d  rd.)  ^  HI  :  Ames  Cases  on  Trusts  (2d 
ed.)  p.  ;'ilO.  In  Foleij  v.  Sniilli.  H  W:ill.  l!>"i,  Ihc  above  principle  was 
recctgiiized,  tlK)Ugh  it  was  hehl  that  the  farts  did  not  bring  the  case 
witiiiii  it.  So  far,  therefore,  as  the  plaintilf  relies  upon  the  fact  that 
the  noti-  and  mortgage  were  overdiie  when  taken  l)y  the  trust  com- 
pany, her  contention  must  fail.  The  note  being  dat-ed  before  Janu- 
ary 1,  1899,  the  Xegotiable  Instruments  Act  does  not  apply.  See 
Rev.  Laws,  e.  73,  §211.*** 

The  result  is  that  so  much  of  the  decree  as  adjmlges  that  the  mort- 
gage remains  and  still  is  the  property  of  the  plaintiff,  and  orders  the 
trust  cornpanv  to  assiirti  and  convey  its  interest  in  the  same  to  her,  is 
reversed,  and  the  rest  is  atrirmed. 

So  ordered.* 

»  Spe  the  very  enrefnl  notes  to  tliis  case  in  2  L.  X.  R.  707,  and  in  5  A.  A  E. 
Ann.  fas.  583,  nnniyzinp  the  niitlioritie-i  .nnd  pnintint,'  nut  the  (listinctions 
necessary  to  bf  grnspod  in  orcter  f>ro[i(Tlv  t<>  nndcrHtimil  tlie  authorities.  It 
is  recognized,  however,  tlmt  it  may  nf)t  be  poHHiblt-  to  iiarnionize  all  the 
cases.  —  (J. 


328  1101, iiKi;  i.\   nil':  coi'iisi;:  i;i:(t(  isitks.  |.M(1     v. 

§91  ClllvS'n'.l,'  /•.   DOl.'IJ. 

•II   Ni;\v  ^<)l:K.  'J7!t.  —  ISCD. 
Action  ngainst  indoi-sci-,  of  ci^lit  noti's,  v:\c\\  in  the  I'ollowing  form: 

$r)()0.00.  NoHi  111  ii:i.i),  /'((M/'n;//  inili,  1858. 

Ki'jilit  iiioiitlis  afU'P  (li\ti\  \vi'  luoiiiisi'  to  pay  to  the  order  of  .laiiu's  A.  Doir, 
five  hundred  dollars,  at  No.  34  Pine  strpot.  New  ^'ork  City. 

I  iiK  NoUTiiFiixo  IJuicK  Company, 

IJy  J.VMK.S  A.  DoKK,  Treasurer. 
[Indorsed]:    Prote^^t  waived, 
.Tames  A.  Doru. 

Dorr  iiulorscd  the  notes  solely  for  the  aecoiniiioilnlioii  of  one  ]\[yers, 
a  creditor  of  tlie  brick  coni))aiiy,  and  without  consideration.  Some 
two  or  tliree  years  after  the  maturity  and  dishonor  ji"  the  notes  Myers 
transferred  them  to  plaintiff. 

Woodruff,  J.  —  Mr.  Justice  Story,  in  his  treatise  on  Promissory 
Notes  (section  178),  thus  states  the  difference  between  the  Ie,2;al  efTect 
of  the  transfer  of  a  promissory  note,  before  and  after  maturity: 

"If  the  transfer  is  made  hefoi-e  the  maturity  of  the  not(\  to  a 
ho7m  fide  holder,  for  a  valuable  considera(i<»ii,  he  will  take  it  Free  of 
all  equities  between  the  antecedent  parties,  of  w  hi<  li  he  ha?  no  notice, 

••  if  the  transfer  is  after  the  maturity  of  the  note,  the  holder  takes 
it  as  a  dishonored  note,  and  is  alfected  by  all  the  equities  between 
the  original  ])arties.  whether  he  lias  any  notice  thereof  or  not.  But. 
*  *  *  it  is  not  to  be  undei-stood  by  this  expression,  that  all  sorts 
of  equities  existing  between  the  parties,  from  othei-  infle))endent 
transactions  between  them,  are  intended;  but  only  such  e(|iiitics  as 
attach  to  the  particular  note,  and  as  between  those  parties,  would  i)e 
available  to  control,  qualify  or  extinguish  any  rights  arising  theieon." 

The  learned  author  gives  this  as  the  linal  conrlusion,  fioui  the 
numerous  ca.ses  cited  by  him,  an  examination  of  which  shows,  that 
it  is  only  after  some  difference  of  opinion  that  it  has  come  to  be 
deemed  settled..  Or,  as  ^li.  ('bitty  says,  of  the  opinion  of  Buller  and 
Ashhurst,  JJ.,  in  Broirn  v.  DnrU  (3  T.  1>.  ?•<)).  expressed,  when 
Lord  Kenyon  doubted  its  lu-oad  extent,  "  this  lattiu-  opinion  is  now 
the  law."    That  opinion  was  to  the  effect: 

"  That  where  a  note  is  overdue,  that  alone  is  such  a  suspicious 
circumstance,  as  makes  it  incumbent  on  the  party  receiving  it.  to 
satisfy  himself  that  it  is  a  good  one.  otherwise  much  mischief  miuht 
arise."  "If  a  note  indorsed,  be  not  due  nt  the  time,  it  carries  no 
suspicion  whatever  on  the  face  of  it,  and  the  ])arty  receives  it  on  its 
own  intrinsic  credit.  But  if  it  is  overdue,  though  T  do  not  say  that. 
by  law,  it  is  not  negotiable,  yet,  certainly  it  is  out  of  the  common 
course  of  dealing,  and  does  give  rise  to  susiiicion.  *  ""•  *  (J<^n- 
erally,  when  a  note  is  due.  the  paity  receiving  it,  takes  it  on  the 
credit  of  the  person  who  gives  it  to  him." 


n.  1.  b.]  INSTKUMENT  NOT  OVERDUE.  329 

The  foundation  of  the  i-ule,  which  distinguishes  commercial  paper 
from  ordiuary  eu/imioii-law  cliuses  lu  actioii,  i6  iu  haniioiiy  with  the 
law  thus  stated;  the  holder  of  the  i'oiuier  is  protected  against  any 
inquiry  into  il»  previous  history,  and  is  warranted  in  giving  it  full 
faith,  according  lo  its  tenor,  because  comnierciai  convenience  and 
the  importance  of  the  free  and  unembarrassed  use  of  commercial 
crelits  required  it;  and  on  this,  the  mercantile  customs,  Avhich  ripened 
into  the  law  merchant,  were  founded.  These  reasons,  however,  couhl 
l;ave  no  application  to  paper  wliich  had  been  dishonored.  Tlie  credit 
it  was  adopted  to  invite  is  spent,  and  tlie  very  fact  of  dishonor  is 
inconsistent  with  the  purposes  which  the  rule  was  intended  to  subserve. 

The  rule  is  simple  find  convenient  of  application,  is  in  no  srnse 
inconsistent  with  the  usefulness  of  negotiable  paper  Inr  lb(»  purposes 
for  which  it  is  intended,  iind,  as  it  seems  to  me.  is  a  jnst  security 
against  mischief  and  fraud. 

In  the  terms  in  which  it  is  above  stated  it  includes  the  defense  of 
want  of  consideration,  whenever  that  renders  the  note  invalid  in 
the  hands  of  hiin  who  liolds  it.  when  it  becomes  due.  Such  want  ol 
consideration  is  an  inluMent  defect  in  the  contract  itself.  Or,  in  the 
language  of  the  rule,  attaches  to  the  note  itself,  in  the  hands  of  one 
for  whose  accommodation  a  note  is  made,  and  does  not,  like  a  set-olf 
or  other  collateral  matter  a|)art  from  the  note,  arise  out  of  an  inde- 
jji-ndent  transaction. 

But  the  same  learned  writer,  above. referred  to,  states  tli;il  (he  mere 
fact  that  an  accommodation  note  has  been  indorsed  after  it  became 
due,  does  not  of  itself,  without  some  other  equity  in  tiie  maker,  defeat 
a  recovery  by  the  indorsee.  (Story,  §  IHl.)  And  Mv.  Chitty  states 
"that  it  has  been  so  decided.  The  cases  of  Clun-lrH  v.  Mnrx-h'n  (\ 
Tnunt.  221);  Sliirfrnint  v.  Ford  (\  Mun.  ,^:  Cr.  101)  ;  1  S<o||.  COS, 
and  Cnntlhrrx  v.  ^yrfit  (11  Q.  1'.  1  i:'.).  iin-  in  support  of  the  propo- 
sition. 

These  are  the  rnses  upon  the  nut horitv  of  wbi<h  the  present  cnse 
was  decider!  below. 

I  am  eonstrainerl  to  snv  that  I  ;iiii  not  sati-^fied  (hut  such  ;in  excep- 
tion to  the  rule  is  either  just  or  cnlled  lor  bv  miv  priiici|i|e,  nor  am  I 
at  all  convinced  bv  the  reasons  assigned  for  the  exception. 

That  tlx-  maker  or  inrlorser  of  ,i  note  for  the  aecommodat ion  of 
anf)thi'r  shoidd  be  held  to  the  terms  rd"  his  f»u n  indorsement  accord- 
ing lo  their  just  interpretation.  I  I'nlly  agree,  'riml  oik-  who  receives 
such  paper  In  fore  maturity.  shf)uld  not  be  affected  bv  the  mere  f.ut 
that  it  was  made  uv  indoised  willuuit  consideration.  I  erpudlv  agree. 
That  when  a  parly  h-nds  his  note  or  i?idf»rsemeid.  lo  anolher  wilhout 
restriction  as  to  its  use,  he  authorized  Ihc  negotiation  tbeicof  in  any 
manner  which  may  serve  the  convenience  of  credit  of  the  borrower, 
may  be  conceded. 


;?;U)  HOLDER    IN    DUE    COUltSK  :    liKAJUISITES.  [ART.    V. 

From  tliis  latter  couoession  it  is  argued,  that  such  a  lending  of  one's 
name  is  furnishing  a  (.ontinuing  guarauleu  of  the  payment  of  the 
note,  irrespeetive  of  its  terms  as  lo  time  of  payment,  and  is  therefore 
binding  whenevt-r  it  is  transferred,  and  however  long  after  it  has 
become  payable  and  been  dishonored.  That  the  absence  of  express 
restriction  warrants  the  inference,  that  the  making  or  indorsement 
was  to  enable  I'.ie  borrower  to  use  it  whenever  thereafter  it  suited 
his  pleasure,  and  so  "  enforcing  its  payment  is  in  accordance  with 
the  object  I'or  which  the  note  was,  as  matter  of  accommodation,  made 
or  indorsed;"  and  in  the  discussion  in  Englaiul.  it  has  been  suggested, 
tliat  supposing  an  accommodation  acceptance  to  remain  in  the  hands 
of  the  party  accommodated,  it  may  be  treated  as  giving  authority  by 
implication  to  use  it  thereafter,  as  his  convenience  or  needs  may 
require. 

In  respect  to  the  last  suggestion,  two  observations  are  pertinent; 
first,  it  begs  the  question,  for  assuming  the  rule  to  be  that  he  who 
receives  the  note  or  bill,  after  dishonor,  acfjuires  no  better  title  to 
recover  thereon  than  he  Las  from  whom  jL  was  received,  then  tliere 
is  no  reason  why  the  accommodation  maker  or  indorser  sliould  not 
treat  the  note  in'the  hands  of  the  borrower,  after  maturity,  as  functus 
officio,  and  mere  waste  paper.  And,  second,  how  is  the  maker  or 
indorser,  in  such  case,  to  withdraw  his  note  or  indorsement?  Is  he 
to  be  driven  into  a  court  of  equity,  and  to  praying  out  an  injunction, 
to  prevent  a  subsequent  transfer?  I  think  not.  Take  the  present 
case;  the  note  itself  was  the  property  of  the  holder  at  maturity 
(Myers),  and  was  a  valid  note  in  his  favor  against  the  maker.  The 
indorsement  of  the  defendant  (the  appellant's  testator)  was  material 
as  a  transfer  of  title,  although,  being  made  for  Myers'  accommodation, 
it  could  not  be  enforced  against  such  defendant  as  indorser.  I  cannot 
agree  that  it  was  incumbent  on  the  defendant  to  go  into  a  court  of 
chancery  to  compel  Myers  to  sutTer  a  writing  of  the  words,  "without 
recourse."  or  an  equivalent  expression,  as  a  qualification  of  such 
indorsement. 

As  to  the  other  reason,  it  is  even  less  satisfactory,  because  it  pro- 
ceeds, I  think,  upon  an  entire  misconstruction  of  the  act  of  making 
or  indorsing  a  note  for  the  accommodation  of  another.  Its  purpose 
and  object,  is  to  obtain  credit  for  such  other,  or  to  enable  him  to  do 
BO.  The  very  terms  of  the  note  declare  the  credit  it  is  intended  to 
procure,  that  is  to  say,  until  the  maturity  of  the  note.  Within  that 
range,  the  making  or  indorsement  being  unrestricted  as  to  its  use, 
the  borrower  may  use  it  as  his  exigencies  require,  and  a  transferee 
may  receive  it  in  reliance  upon  the  undertaking  which  is  imported 
by  its  terms. 

But  the  very  term  of  payment,  contained  in  the  note,  imports  that 
the  accommodation  party  undertakes  that  the  note  shall  be  paid  at 
its  maturity;  and  that  he  who  then  holds  the  note,  shall  have  recours? 


11.  1.  6.]  INSTRUMENT  NOT  OVERDUE.  331 

to  him,  if  it  be  not  then  paid.  \Miere  the  accommodation  (as  in  the 
present  case)  is  by  indorsement,  that  is  the  precise  contract,  viz., 
that  the  note  shall  be  paid  at  maturity,  and  not  that  it  shall  be  paid 
at  any  future  time.  If  tlie  note  be  not  paid  at  maturity,  the  contract 
is  broken,  and  if  he  who  then  holds  it  can  recover  tliereon,  then  his 
right  of  recovery  may  be  transferred  to  another;  and  the  recovery  of 
the  latter  will  be,  not  because  the  accommodation  indorser  undertook 
that  the  note  should  be  paid  to  him,  or  should  be  paid  at  some  date 
after  it  was  due,  but  because  a  valid  cause  of  action,  existing  in  favor 
of  the  holder  at  mnturity.  lias  been  transferred  to  him. 

It  is  not  according  to  the  intent  or  meaning  of  an  indorsement  for 
another's  accommodation,  to  say  that  the  indorser  intends  to  give 
the  use  of  his  credit  for  any  other  period  than  that  limited  in  the 
note:  or  that  such  an  indorsement  imports  authority  to  use  it,  when 
that  period  has  elapsed. 

One  may  be  willing  by  indorsement,  to  guarantee  the  solvency  of 
another  for  sixty  days,  or  for  six  months,  and  yet  he  would  wholly 
refuse  to  do  so  for  a  period  of  two  years.  And  accordingly,  when 
such  accommodation  is  given,  it  is  a  most  material  circumstance  that 
the  time  during  which  tbe  borrower  is  at  lil)erty  to  obtain  credit  on 
the  note,  is  fixed  by  tbe  limitation  of  the  time  of  payment  therein. 

I  deem  the  just  view  of  the  subject  to  be,  that  when  a  note  has 
become  due  and  is  dishonored,  the  rights  and  responsibilities  of  tlie 
parties  thereto  are  fixed.  The  note  then  loses  tbe  chief  attribute 
of  commercial  paper.  It  is  no  longer  adapted  to  the  uses  and  purposes 
for  which  such  paper  is  made,  and  in  respect  of  which  it  is  important 
that  it  shoidd  circidate  freely.  And  thereafter,  be  who  takes,  it,  takes 
it  with  knowledge  of  its  dishonor,  with  obvious  reason  to  believe  that 
there  exists  some  reason  wbv  it  was  not  paid  to  tbe  bolder:  and  takes 
it  with  just  such  right  to  enforce  it  as  such  bolder  himself  has,  and  no 
other. 

Tn  thus  stating  mv  views,  T  am  not  insensible  of  tbe  appnrent 
authority  for  tbe  decisiou  made  below,  but  I  aru  also  aware  tbat  tbe 
judges  in  Englanrl  have  not  been  at  all  agreed  upon  tbe  subject,  and 
have  expressed  df)ul»t  of  tbe  correctness  of  the  decision  in  Charles 
V.  Mnrsden,  upon  wliidi  tlic  other  two  cases  above  referred  to  were 
decided.  The  cases,  largelv  eoljeeted  in  tbe  notes  to  Oliitty  in  tbe 
recent  edition,  warrnnt.  I  tbink,  tbe  dissatisfaction   I   li.-ive  expressed. 

No  case  in  this  state  has  called  for  a  decision  of  the  r|uestion  :  and 
yet  in  Brown  v.  Mott  (7  J.  1?.  ?,(\\).  ;ind  in  Cnml  v.  I'.JIintIt  (7  W.-nrl. 
227),  the  case  of  Chnrtrs  v.  Mnrsdrn  is  refencil  to  wit  bout  disnppro- 
bation,  and  the  proposition  lo  be  derived  Iberefrom  is  stalecl ;  Iml  in 
neither  case  was  the  ftoint  now  raised  before  tbe  court,  for  in  neither 
did  it  appear,  that  tlie  plaintiff  took  the  tuite  after  it  became  due. 

And  that  in  other  states  in  this  country,  such  an  exception  to  tbe 
general  rule  first  above  stated  is  repudiated,  see  Brown,  v.  FInslings 


332  iu)i.ni;i;  in   i>rK  i'Ouu.sk:  Kix^iusri'Ks.  [MtT.  v. 

(iU;  IVnn.  "s-'Sr))  ;  Hiilhui  v.  llisliop  (11  \l.  H')  ;  Odlonic  v.  Howard 
(10  .\.  IL  o-ltij  ;  (.  ainiiiinys  \.  iaLUc  (IJ  Maiiu-,  18;^);  Vliiiun  v. 
yvi//(/  (^li  Mass.  1  Allen,  olio)  ;  KcUuyy  v.  ikulun  (lU  Mass.  12  Allen, 
52; ).  And  ihe  general  ;)roposilion,  tluil  he  who  lakes  a  iiole  when 
overdue,  ta!v«.s  it  subjeet  to  all  del'eJises  inherent  in  Ihe  note,  or  ai'isiii;^' 
oul  of  any  ;;greeinent  with  the  holder,  e.\i)ressed  or  implied,  and 
relating  thereto,  oi-  in  another  I'drni.  tli;d  such  an  indorsee  ohtains 
no  greater  or  other  riiihts  than  his  indorser  hail  in  it  at  the  lime  of 
tlie  indoisenient.  has  lieen  stated  as  haw  in  eases  almost  wilhnul  nnm- 
ber.  It  will,  jtei-liaps,  sntlico  to  refer  to  two  from  the  Siqirenie  Court 
of  the  United  State?.  Aiulrnrs  v.  Rniirl  (V]  IVt.  79),  says  of 
the  indiii-see  o\'  n  dislionored  hill:  "11'  he  chooses  to  reeeive  it,  ho 
takes  it  wit'i  all  the  infiriuilies  l)elon^in^■  lo  it  ;  and  is  in  no  better 
eondition  than  the  person  from  whom  he  I'cccived  it."  { /''nif/cr  v. 
Bniiiflii/.  14  I'et.  M'^l.)  "A  note  overdue  nr  hill  dishonored  is  a 
cireumstauee  ot  suspicion  to  put  those  dealui'.i'  lor  it  alPu'ward  on 
their  guard,  and  in  wliose  hands  it  is  open  to  l!ie  same  defenses  it  was 
in  tile  bands  of  tiie  holder  when  it  fell  due.  After  maturity,  such 
paper  cannot  be  negotial)le  '  in  the  due  course  of  trade,"  although  still 
assignable."     See  also  Foley  \.  ^■//^'(7i  ( (i  Wallace,  4l)L\) 

in  my  ov.it  opinion,  the  just  rule,  and  the  rule  lesting  on  llic 
soundest  principle,  requires  us  to  reverse.  The  su})posed  exception 
to  the  geneial  rurj  rests  on  neither  reason,  nor  as  1  thiidv  on  authority, 
certainly  not  in  tliis  country. 

It  was  suggested  by  the  counsel  for  the  respondent,  that  as  mailer 
of  fact,  the  defendant's  indorsement  was  not  without  considendion, 
and  for  tV.e  accommodation  of  Myers,  who  held  tlie  note  at  malurity. 

The  finding  of  the  referee  on  that  subject  is  conclusive  in  this 
court;  and  that  finding  is,  that  the  indorsement  was  made  without 
consideration  at  flyers'  request,  and  to  enable  Myers  to  use  the  notes. 
This  is  but  a  statement  that  the  defendant  indorsed  the  notes  for  the 
accounnodation  of  Myers.  It  was  so  treated  in  the  cMurt  below,  mihI 
it  is  an  unwarranted  assumption  to  say,  that  possible  Ihe  defendant 
had  some  other  ijuJucement  to  indorse  the  notes,  in  order  that  the 
plaintiif  might  accept  the  notes,  and  give  credit  to  the  niakei-  tliereof, 
wlio  was  his  del)tor. 

MuKKAY,  J.,  also  read  an  opinion  for  leversal. 

Gisoviiu,  LoTT,  .J.v.MEs  and  JJaniels,  JJ.,  concurred  for  reversal. 

JIa.so-N',  J.,  thought  the  lav/  settled  in  this  State  in  favor  of  the 
plaintiff,  by  the  cases  {7  Johns.  uGl ;  7  Wend.  227;  ajid  1  Jlill,  oV.i), 
and  was  for  afBrmance. 

Hunt,  (  h.  J.,  was  also  for  afllrmance.  lie  did  not  approve  of 
construing    the    defendants'    contract    as   conditioned    u|)oa    liansfei 

hefrirc  due. 

.Tiid'jment  reversed. 


II.  1.  6.]  INSTRUMENT  NOT  OVERDUE.  333 

MARLING  V.  JONES. 
138  Wisconsin,  82.  —  1909. 

Timlin,  j      *     *     * 

The  accommodation  note  in  question  was  transferred  by  the  party 
accommodated,  namely,  the  payee  therein,  after  it  became  due.  Does 
this  circumstance  permit  the  accommodation  maker  to  avoid  the  note 
on  the  ground  that  he  received  no  consideration?  If  the  effect  of  a 
transfer,  after  due,  is  merely  to  leave  the  transferee  subject  to  notice 
or  knowledge  of  the  true  circumstances  attending  the  execution  of  the 
note  in  question,  and  for  this  reason  subject  him  to  defenses,  then,  as 
actual  knowledge  that  the  note  was  accommodation  paper  would  be  no 
defense  by  the  accommodation  maker  as  against  the  transferee  for 
value  from  the  party  accommodated,  it  would  seem  that  it  could  make 
no  difference  in  the  liability  of  the  accommodation  maker  upon  this 
ground  whether  the  note  was  transferred  before  or  after  due.  Aside 
from  this  imputed  notice  or  knowledge,  or  actual  notice  or  knowledge, 
it  is  not  true  that  the  taker  for  value  from  the  party  accommodated 
stands  in  the  shoes  of  the  latter.  The  difference  between  them  is  that 
one  has  parted  with  value  for  the  note  and  the  other  has  not.  Tn 
neither  case  has  the  maker  received  a  consideration  moving  to  liiiii. 
So  that  between  the  party  accommodated  and  the  accommodation 
maker  there  is  no  consideration  parted  with  or  received  Ly  either,  while 
between  the  transferee  for  vahic  mtkI  the  accommodation  maker  there 
is  a  consideration  moving  from  the  former  at  the  instance  of  the  latter 
sufficient  to  support  the  contract.  '^Fhere  is  considerable  conflict  among 
the  decisions  on  this  ])oiiit.  and  those  text-writers  who  profess  to  have 
made  a  thorough  examination  of  the  cases  seem  to  incline  to  the  belief 
that  the  weight  of  authority  upholds  the  view  that  the  transferee  of 
accommodation  paper  after  due  may  enforce  the  same  against  the 
accommodation  maker.  Joyce  on  Oefenses  to  Commercial  Paper, 
§  282;  1  Dan.  Neg.  Instruments  (r)th  ed.)  §  72(5 ;  2  Randolph,  Comm. 
Paper  (2d  ed.)  §  (177;  Story,  Prom.  Notes  (7lh  ed.)  §  194;  2  Par- 
sons, Notes  &  Bills,  p.  29 ;  Mersirk  v.  Alderman,'''  77  Conn.  634  ;  HIack 
V.  Tarhcll,  H9  Wis.  300;  1  Am.  Sc.  Eng.  Ency.  Law,  361. 

Tlie  uniform  Xegotiable  Instruments  Law  (Saidtorn's  St.  Snpp. 
190G,  g§  1075-1684-7)  enacted  by  the  Tx^gislaliire  of  this  state,  and 
in  like  manner  adopted  by  thirty-four  states  of  the  Union,  and  by 
Congress  for  the  District  of  Columbia,  in  the  effort  to  bring  about 
more  uniformity  of  decision  regarding  these  instruments  of  commerce, 
appears  to  distinguish  }»etween  a  holder  for  value  arul  a  holder  in  due 
course.     P)rannan  on  the  Negotiable  Instruments  Law   (.\.   0.   IflOS); 


'"Tliifl  rn«p  is  rcportod  in  2  A.  A  K.  Ann.  Cas.  254,  with  notp  entitled  "  Ripht 
of  transferee  of  areonimofIfit«'<l  party  after  maturity  as  aRainst  aeeommodation 
party."  —  C. 


334  HOLDER   IN   DUE   COURSE:    REQUISITES.  [ART.    V. 

Bunker  on  the  Negotiable  Instruments  Law  (A.  D.  l'J05).  Section 
U)75-r)5,"  Sanborn's  St.  Su{)p.  l!>0<)  to  St.  IcSDH,  defines  who  is  an 
accommodation  party,  and  provides  that  such  party  is  hable  on  an 
instrument  to  a  holder  for  value,  notwithstanding  such  holder  at  the 
time  of  taking  the  instrument  knew  him  to  be  only  an  accommodation 
party.  Section  H)75,'  Sanl)orn's  St.  Supp.  190(5,  defines  "holder"  to 
mean  the  payee  or  indorsee  of  a  bill  or  note  who  is  in  possession  of  it, 
or  the  bearer  thereof,  and  defines  "  value  "  to  mean  a  valuable  con- 
sideration. On  the  other  hand,  a  holder  in  due  course  is  defined  in 
section  167(5-22;  Sanborn's  St.  Supp.  1906  ^  [giving  substance  of  this 
section.] 

In  the  hands  of  a  holder  otherwise  than  in  due  course  such  note  is 
subject  to  the  same  defenses  as  if  the  notes  were  not  negotiable.  Sec- 
tion 167(5-28,''  Sanborn's  St.  Supp.  1906.  A  negotiable  instrument  is 
discharged  by  tlie  payment  in  due  course  by  the  party  accommodated. 
It  is  not  discharged  by  payment  by  a  party  secondarily  liable  thereon, 
but  remits  such  party  to  his  rights  against  him  primarily  liable  (sec- 
tion 1679-2,*  Sanborn's  St.  Supp.  1906),  except  where  it  is  made  for 
accommodation  and  paid  by  the  party  accommodated  (Id.).  On  the 
other  hand,  there  are  the  cases  of  Chester  v.  Dorr,  41  N.  Y.  279; 
Peale  v.  Addicks,  174  Pa.  543 ;  Bacon  v.  Harris,  15  R.  I.  599 ;  Battle  v. 
Weems,  44  Ala.  105,  and  Simons  v.  Morris,  53  Mich.  155.  See,  how- 
ever, in  Alabama,  the  later  case  of  Connerhj  v.  Planters'  &  Mer.  Ins. 
Co.,  66  Ala.  432 ;  in  Michigan  the  later  case  of  Warder  et  al.  v.  Gibhs, 
92  Mich.  29. 

No  doubt  there  exists  a  class  of  defenses  in  favor  of  the  accommo- 
dation maker  of  negotiable  paper  w^hich  may  not  be  urged  in  cases 
where  the  note  is  fair  on  its  face  and  negotiated  in  due  course  before 
due  to  a  purchaser  for  value,  without  notice  or  knowledge  of  any  in- 
firmity, but  which  might  be  urged  in  favor  of  the  accommodation 
maker  if  the  note  were  overdue  when  negotiated,  but  the  fact  that  the 
accommodation  maker  received  no  consideration  is  not  one  of  these 
defenses,  so  long  as  the  note  was  negotiated  by  his  express  or  implied 
authority.  The  fact  is  here  established  that  this  note  was  in  its  incep- 
tion accommodation  paper.  Jones  made  to  Herman  no  express  restric- 
tion upon  its  use  for  that  purpose.  We  do  not  overlook  the  testimony 
of  Brand  with  reference  to  conversations  between  him  and  Herman 
not  in  behalf  of  Jones,  which  the  court  below  from  its  findings  must 
have  rejected  as  incredible.  We  approve  this  rejection.  The  testi- 
mony is  overborne  by  the  circumstantial  evidence.     It  is  a  question 

"N.y.,  §55.  —  C. 
1  N.  Y..  §  2.  —  C. 
2N.  v..  §91.  — C. 
3  N.  Y.,  §  97.  —  C. 
*N.  Y.,  §202.  — C. 


II.  1.  6.]  INSTRUMENT  NOT  OVERDUE.  335 

upon  which  the  precedents  are  at  some  variance  whether  or  not  the 
agency  of  the  party  accommodated  to  use  the  accommodation  paper  to 
raise  money  thereon  (no  express  agreement  appearing)  expires  with 
the  maturity  of  the  paper.  The  greater  number  of  courts  seem  to  favor 
the  view  that  the  agency  to  negotiate  an  accommodation  paper  and 
raise  money  thereon  is  not  so  limited.    See  citations  supra. 

The  courts  of  this  state  are  not  yet  committed  upon  the  question 
presented,  and  it  seems  more  in  harmony  with  the  uniform  Negotiable 
Instruments  Law,  and  with  the  weight  of  judicial  authority,  to  hold, 
as  we  do,  that  the  mere  fact  that  the  accommodation  note  was  trans- 
ferred by  the  party  accommodated  after  due  to  a  holder  for  value  does 
not  permit  the  accommodation  maker  to  defeat  recovery  at  the  suit  of 
the  holder  for  value  merely  upon  the  ground  that  the  note  was  an 
accommodation  note,  and  without  consideration  moving  to  the  accom- 
modation maker.  This  necessitates  a  modification  of  the  judgment  of 
the  court  below  so  as  to  permit  the  appellant  to  take  judgment  against 
the  accommodation  maker,  Jones.' 


§  91    FIRST  NATIONAL  BANK  OF  WAVERLY,  IOWA,  v. 

FORSYTH. 

67  Minnesota,  257.  —  1897. 

Judgment  for  defendants.  From  an  order  refusing  a  new  trial, 
plaintiff  appeals. 

JIiTrnELL,  J.  The  only  question  presented  by  this  record  is 
whether  the  promissory  note  in  suit  was  dishonored  paper  at  the  time 
it  was  indorsed  to  the  plaintiff,  and  therefore  subject,  in  its  hands, 
to  defenses  existing  between  the  original  parties.  The  note  was  exe- 
cuted April  4,  18f)l,  and  was  payable  July  1,  ISO  I,  with  interest  pay- 
able annually.  The  court  finds  that  it  was  indorsed  to  the  plaintiff 
on  the  22d  of  May,  1H04;  that  on  that  day  the  plaintiff  paid  for  it 
$343 ;  that  at  that  time  there  was  interest  overdue  and  unpaid  on  the 
note;  and  that  that  fact  was  known  to  the  pl.'intiff  at  the  time  of  the 
purchase.  The  evidence  amply  sustains  these  findings.  No  interest 
had  ever  been  paid,  and  hence  there  were,  at  the  time  of  the  purchase, 
two  yearly  instai'ments  of  interest  overdue  and  unpaid.  The  sum 
which  was  paid  for  the  paper  fully  justified  the  court  in  finding  that 
the  plaintiff  knew  of  this  default.  Therefore  the  ca.se  is  not  distin- 
gui.^hable  from  nard-  v.  Smft  Co.,  14  Minn.  77  (Oil.  59).  We  are 
asked,  however,  to  overrule  that  case,  for  the  rea.son  that  it  stands 

»  Sor  aNo  \rirf  V.  Pntfrr.  22fl  Til.  fi2S.  ropnrtrd  in  11  T-.  N.  S.  1034.  with  tio(p 
mtitlpd  "  P'ffprt  nf  trnnnff-r,  nffrr  maturity,  of  arrommodntion  paprr  whirli 
has  bepn  divprtrd  from  thp  ubp  for  which  it  was  intptidpd  by  the  accommodating 
party."  —  C. 


336  HOLDER   IN    HUE   COURSE:    REQUISITES.  [ART.    V. 

alone,  and  is  rontr.iry  to  the  uniform  current  of  authorities  in  other 
jurisdietioiis.  If  this  \vas  true,  it  would  j)rohal)ly  he  suflicient  reason 
for  overruling  the  case,  hecause  uniformity  is  eminently  desirable  in 
rules  governing  negotiable  paper. 

All  the  authorities  agree  that,  when  the  principal  of  a  note  is  pay- 
able by  installments,  and  one  installment  is  overdue  and 
unpaid  at  tlie  time  tlie  paper  is  indorsed  and  transferred, 
the  whole  paper  is  dishonored,  and  subject  to  all  equities 
between  the  original  parties.  Whetlier  or  not  the  same  rule 
applies  when  there  is  an  installment  of  interest  overdue  is  a  contro 
verted  question  —  at  least,  the  authorities  are  not  all  agreed  on  it. 
The  cases  holding,  either  directly  or  impliedly,  that  the  indorsee  for 
value  of  negotiable  paper  is  within  the  protection  of  the  law  merchant, 
although  interest  is  overdue  and  unpaid  at  the  time  of  purchase,  are 
the  following:  Bank  v.  Kirhij,  108  Mass.  497;  Cromwell  v.  County 
of  i<ac,  9G  U.  S.  51;  Kelley  v.  Whitney,  15  Wis.  110;  i^tate  v.  Cohh, 
64  Ala.  127;  Brools  v.  Mitchell,  9  Mees.  &  W.  15.  The  first  three  are 
the  only  cases  in  which  the  question  is  discussed,  and  of  these  the  last 
two  adopt  substantially  the  line  of  reasoning  used  in  Bank  v.  Kirhy. 
Among  the  text  writers  Daniels,  Bigelow,  and  Tiedcman  favor  this 
rule.  The  Supreme  Court  of  Wisconsin  had  held  the  same  way  in 
Boss  V.  Hewitt,  15  Wis.  260,  but  held  differently,  or  at  least  expressed 
different  views,  in  Hart  v.  Sfickney,  41  Wis.  630,  but  finally  overruled 
this  dictum  in  Kellry  v.  Whitney,  supra.  The  authorities  on  the  other 
side  of  the  question  are  Newell  v.  Gregg,  51  Barb.  263 ;  Bank  v.  Scott 
Co.,  supra,  and  Chouteau  v.  Allen,  7o'  Mo.  290-339.  While  Newell  v. 
Gregg  is  not  the  decision  of  a  court  of  last  resort,  we  do  not  find  that 
it  has  ever  been  overruled  in  the  state  of  New  York,  or  tliat  the  Court 
of  Appeals  of  that  state  has  ever  passed  upon  the  question.*  These  are 
all  the  cases  we  have  been  able  to  find  on  either  side.  1'lie  line  of  rea- 
soning in  Newell  v.  Gregg  is  that,  as  to  notice  of  dishonor,  there  is  no 
difference  between  an  overdue  and  unpaid  installment  of  principal 
and  an  overdue  and  unpaid  installment  of  interest;  that  payment  of 

•In  Citizens'  fiav.  Bank  v.  Couse,  124  N.  Y.  Supp.  (Sup.  Ct.,  Trial  T., 
Wayno  Co.,  .June  2.3,  1910)  79,  it  was  hold  that  whore  a  note  provided  that 
interest  was  payable  annually,  a  default  of  interest  appearing;  thereon  when 
it  was  transferred  to  plaintiff  was  sufficient  to  put  plaintiff  on  inquiry  as  to 
any  defects  f  nd  to  require  submission  of  plaintiff's  hona  fides  to  the  jury. 
.\fter  discussinfT  Newell  v.  Gregg,  .51  Barb.  26.3,  the  court  said:  "  I  am  unable 
to  distinguish  that  case  from  this.  .  .  .  The  authority  of  the  case  of 
Neioell  V.  Gregg  has  not  been  overthrown  by  subsequent  decisions  in  this 
state,  so  far  as  1  am  aware,  and  I  feel  bound  to  follow  it,  notwithstanding  the 
fact  that  a  different  rule  prevails  in  other  jurisdictions."  Referring  to  a 
dictum  to  the  contrary  in  Town  of  Ontario  v.  Ilill,  33  Hun.  2.50,  affirmed 
99  N.  Y.  324.  the  court  said:  "  Nemell  v.  Gregg  was  not  cited  by  the  court 
or  in  the  briefs  of  counsel,  and  apparently  was  not  brought  to  the  attention 
of  the  court.  Certainly  there  was  no  intention  shown  to  overrule  that 
case."  —  C, 


n.A.    c]  GOOD  FAITH  AND  VALUE.  33? 

one  is  as  muc'.i  a  part  of  the  agreement  as  payment  of  the  other;  and 
tJiat,  in  eitliL-r  case  alike,  the  indorsee  takes'  the  note  with  warning 
tliat  there  has  been  a  default,  and  that  the  maker  may  have  a  defense ; 
and  hence,  if  t!ie  one  renders  the  paper  dishonored,  there  is  no  reason 
for  liolding  tl.at  t!ie  other  does  not.  The  reasoning  in  Bank  v.  Kirhy 
is  th.at,  in  t'lcir  effect  upon  the  credit  of  a  note,  there  is  a  manifest 
difference  hetween  a  failure  to  pay  interest  and  a  failure  to  pay  prin- 
cipal ;  that  interest  is  an  incident  of  the  debt,  and  differs  from  it  in 
that  it  is  rot  sul  jcct  to  protest  and  notice  to  indorsers  or  to  days  of 
grace ;  that  the  statute  of  limitations  does  not  run  against  it  until  the 
principal  is  due,  etc. 

If  the  quei-tion  were  a  new  one  in  this  state,  we  might,  possibly,  be 
inclined  to  adopt  the  Massachusetts  doctrine,  as  founded  on  the  better 
reasoning.  But  Bank  v.  Scott  Co.  has  stood  unchallenged  in  this  state 
for  twenty-seven  years,  and  the  decisions  are  not  so  numerous  or  so 
uniformly  in  favor  of  the  opposite  doctrine  as  to  clearly  pro^'e  that  it 
is  the  established  rule  of  the  commercial  world  generally.  If  the  rule 
ought  to  be  changed,  it  is  a  very  easy  matter  for  the  Legislature  to  do 
it.  The  practical  difference  between  the  two  doctrines  is  not  as  great 
as  might  at  first  seem,  for,  even  under  the  Massachusetts  rule,  the  non- 
payment of  interest  is  a  fact  proper  to  be  considered,  in  connection 
with  other  circumstances,  upon  the  question  whether  the  holder  is  en- 
titled to  the  position  of  one  who  has  purchased  the  paper  in  good  faith 
and  without  notice  of  existing  defenses.  And  we  do  not  think  any 
court  has  ever  gone  so  far  as  to  liold  that  the  defaults  in  payment  of 
interest  may  not  be  so  numerous  and  of  such  long  standing  as  to  be 
Bufficient,  of  themselves,  to  justify  a  court  or  jury  in  finding  that  the 
holder  was  not  a  purchaser  without  notice.  For  these  reasons  we 
think  that  Bank  v.  Scott  Co.  should  be  followed,  upon  the  ground,  if 
no  other,  of  stare  decisis. 

Order  affirmed.' 


(c)   Must  hr  taken  in  r/ood  faitli  and  for  value. 
§91  DkVVITT  v.   I'KWKINS. 

22  Wl.scoNSiN,  473.  —  1808. 

Action  on  di-fctidaiit's  [)n)missory  note  Tlic  jury,  by  direction 
of  the  court,  found  for  llic  |)hiiiitiff;  and  the  ilcfcndaiif  appealed  from 
the  judgment.  The  (juestioiis  in  dispute  will  sufficiently  appear  from 
tlie  opinion. 


•Contra:    Union  Invrntmrni  Co.  v.  Wells.  39  Pan.  Snp.  Ct.  fl2.S.  11    Am.  4" 
Ene.  Ann.  Cns.  .T.3.  wJhto  (be  whole  qiifsfinn  in  HisciiHSfd  nt  prcnt  lont'th,  nml 
where  tlu-re  is  also  a  l<)n>(  (liHHcntiiig  upiniun.  —  C. 
NKOOT.  INBTRDMKNTH — 22 


33tS  UOLDEH   IN    DUE   COUKSE  :    UKQUISITES.  [arT.    V. 

DixON,  C.  J.  —  Till'  plaintiir,  knowing  llio  dei'eudant,  and  tliat  he 
was  iu  fair  credit  aud  able  to  respond,  purchased,  shortly  before  its 
maturity,  a  promissory  note  a<^ainst  him  for  throe  hundred  dollars 
and  interest  for  six  months,  paying  therefor  only  the  sum  of  live 
dollars.  As  between  the  defendant  and  the  payee,  the  note  was 
invalid  for  want  of  consideration.  Is  the  plaintiff  a  bona  fide  holder 
for  value,  so  as  to  protect  him  against  the  defense  of  a  want  of  con- 
sideration? We  answer,  no.  The  consideration  paid  by  him  was 
merely  nominal.  It  is  as  if  the  note  had  been  given  to  him,  and  lie 
sliould  claim  the  protection  afforded  a  bona  fide  holder  for  value.  It 
appears  on  the  face  of  the  transaction  that  it  was  not  a  negotiation 
of  the  note  in  the  usual  course  of  business,  but  that  the  sum  exacted 
on  the  one  side  and  paid  on  the  other  was  to  give  that  the  semblance 
of  a  sale,  which  otherwise  was  intended  as  a  mere  gift,  or,  what  is 
worse,  a  shift  to  get  the  note  out  of  the  hands  of  tlie  payee  so  as  to 
cut  off  the  defense  of  the  maker,  for  the  payee's  benefit.  Either  view 
is  equally  fatal  to  the  action  of  the  plaintiff,  provided  the  defense  of 
a  w^ant  of  consideration  is  established. 

Again,  the  buying  of  a  note  against  a  solvent  maker,  the  purchaser 
knowing  him  to  be  such,  for  a  mere  nominal  consideration,  is  very 
strong,  if  not  conclusive,  evidence  of  mala  fides.  Tt  is  constructive 
notice  of  the  invalidity  of  the  note  in  the  hands  of  the  seller  —  such 
as  to  put  the  purchaser  upon  inquiry,  which  if  l)e  fails  to  make,  he 
acts  at  his  peril.  (Brown  v.  Taber,  5  Wend.  566;  Mathews  v.  Poy- 
thress,  4  Ga.  287,  299  et  seq.,  and  cases  cited;  Anderson  v.  Nicholas, 
28  N.  Y.  600;  Whitbread  v.  Jordan,  1  Younge  &  Collyer  [Exch.], 
303,  328;  Jones  v.  Smith,  1  Hare,  68;  1  Parsons  on  Notes  and  Bills, 
254,  259-60.)  The  proof  offered  to  show  a  failure  of  consideration 
should  have  been  received,  and  the  case  submitted  to  the  jury  on  this 
ground. 

[Omitting  a  question  of  evidence.] 

By  the  Court.  —  Judgment  reversed,  and  a  new  trial  awarded.' 


§  91  Lord  Blackburn  in  JOXES  v.  GORDON. 

L.  R.  2  Appeal  Cases,  616.  —  1877. 

Farttter.  my  Lords,  I  think  it  is  right  to  say  that  I  consider  it  to 
be  fully  and  thoroughly  established  that  if  value  be  given  for  a  bill 

T  Accord:  Smith  v.  Jansen,  12  Neb.  125  ($100  for  $30)  ;  Hunt  v.  f?andfor<J., 
6  Yerp.  (Tenn.)  387  (.$333.33  for  $125);  Gould  v.  Stevens,  43  Vt.  125  ($300 
for  $50).  —  H. 

[See  Bailey  v.  Smith,  14  Oh.  St.  396,  and  exhaustive  note  to  this  case  on 
"  what  amount  paid  constitutes  purchaser  for  value  "  in  84  Am.  Dec.  401- 
404.  —  C.l 


II.    1.    c]  GOOD  FAITH  AND  VALUE.  339 

of  exchange,  it  is  not  enough  to  show  that  there  was  carelessness, 
negligence,  or  foolishness  in  not  suspecting  that  the  bill  was  wrong, 
when  there  were  circumstances  which  might  have  led  a  man  to  suspect 
that.  All  these  are  matters  which  tend  to  show  that  there  was  dis- 
honesty in  not  doing  it,  but  they  do  not  in  themselves  make  a  defense 
to  an  action  upon  a  bill  of  exchange.  I  take  it  that  in  order  to  make 
such  a  defense,  whether  in  the  case  of  a  party  who  is  solvent  and 
sui  juris,  or  when  it  is  sought  to  be  proved  against  the  estate  of  a 
bankrupt,  it  is  necessary  to  show  that  the  person  who  gave  value  for 
the  bill,  whether  the  value  given  be  great  or  small,  was  affected  with 
notice  that  there  was  something  wrong  about  it  when  he  took  it. 
I  do  not  think  it  is  necessary  that  he  should  have  notice  of  what  the 
particular  wrong  was.  If  a  man,  knowing  that  a  bill  was  in  the  hands 
of  a  person  who  had  no  right  to  it,  should  happen  to  think  that  per- 
haps the  man  had  stolen  it,  when  if  he  had  known  the  real  truth  he 
would  have  found,  not  that  the  man  had  stolen  it,  but  that  he  had 
obtained  it  by  false  pretenses,  T  think  that  would  not  make  any 
ditference  if  he  knew  there  was  something  wrong  about  it  and  took 
it.    If  he  takes  it  in  that  way  he  takes  it  at  his  peril. 

But  then  I  think  that  such  evidence  of  carelessness  or  blindness 
as  I  have  referred  to  may  with  other  evidence  be  good  evidence  upon 
the  question  which,  I  take  it,  is  the  real  one,  whether  he  did  know 
that  there  was  something  wrong  in  it.  If  he  was  (if  I  may  use  the 
phrase)  honestly  blundering  and  careless,  and  so  took  a  bill  of  ex- 
change or  a  bank-note  when  he  ought  not  to  have  taken  it,  still 
he  would  be  entitled  to  recover.  But  if  the  facts  and  circumstances 
are  such  that  the  jury,  or  whoever  has  to  try  the  question,  came  to  the 
conclusion  that  he  was  not  lionestly  l)lundering  and  careless,  but  that 
he  must  have  had  a  suspicion  that  there  was  something  wrong,  and 
that  he  refrained  from  asking  questions,  not  l)ecause  he  was  an 
honest  bhinderer  or  a  stui)id  man,  but  because  he  tiiought  in  his  own 
secret  mind  —  I  suspect  there  is  something  wrong,  and  if  I  ask  ques- 
tions and  make  further  incjuiry,  it  will  no  longer  be  my  suspecting 
it,  but  my  knowing  it,  and  then  I  shall  not  be  able  to  recover  —  I 
think  that  is  dishonesty.  I  think,  my  Lords,  thai  that  is  established, 
not  only  by  good  sense  and  reason,  but  by  the  authority  of  the  cases 
themselves.*     *     *     * 


•"It  may  be  true  in  this  case  that  the  plaintiir  Imn^lit  luforr  iimdirity  for 
value,  and  without  noticf  of  any  dpfense;  and  yi-t  hv  may  ixtl  In-  a  purchaser 
in  pood  failli.  H«-  may,  when  he  lioupht,  have  liad  knowledge  of  facts  whicli 
excited  in  his  minfl  huc)i  .mispicions  as  to  the  paper  that  he  feared  to  make  an 
investigation  lest  it  wonhj  disclfise  a  defense,  and  tlierefore  lie  carefully  shut 
hid  eyes  and  houpht  in  the  dark.  In  Buch  a  case  he  would  not  he  a  purchaser 
in  pood  faith."  (V)i{r,i.s.s.  .T..  in  Knmrltrm  v.  Nchuliz,  n  N.  D.  417,  422.  quoted 
in  W'altrrs  v.  Ifork.  11.5  \.  VV.   ( \.  I).)   511. 

The  following  extract  from  a  charge  was  held  correct  in   Mack  v,  Htarr,  78 


;M0  llOLUKK    IN    IllIK    I'OUUSK:    HKQUISITKS.  |akT.    V. 

1  think,  u\\  Loi-ils,  thai  siiitr  ilu'  ri'pi'al  of  llic  Usury  Laws  we 
cau  never  inquiii'  into  tlu-  (luestion  as  to  liow  imu  li  was  given  for  a 
bill,  and  if  Soarhy  was  in  such  a  position  that  he  could  have  proved 
against  the  osiatf  it  would  havf  been  no  objection  at  all  that  he  con- 
voyed those  bills  to  anotiier  for  a  nominal  amount,  that  lie  sold  bills 
nominally  amounting  to  £1,727  for  £',JOl).  Although  1  think  that 
could  not  have  been  inquired  into,  yet  the  amount  given  in  comparison 
with  the  apparent  value  is  an  important  piece  of  evidence  guiding 
us  to  a  conclusion  as  to  whether  or  not  it  was  a  bona  fide  transaction. 
I  am  sure  of  this,  tiuit  in  criminal  cases  the  general  evidence  that  is 
given  to  show  that  the  receiver  of  goods  which  were  stolen  knew  that 
they  were  stolen  is  that  he  has  given  a  great  undervalue  for  them. 
That  is  not  by  any  means  conclusive,  because  it  may  very  well  be  that 
he  has  given  the  undervalue  under  circumstances  which  do  not  suffice 
to  prove  that  he  had  a  felonious  intention,  or  a  felonious  knowledge, 
which  would  be  required  to  make  him  guilty.  In  like  manner,  i  think 
if  it  is  shown  that  a  considerable  undervalue  was  given  for  bills, 
although  that  alone  would  probably  not  be  sufficient,  it  is  an  element, 
and  an  important  element,  in  considering  whether  the  man  who  gave 
that  undervalue  was  bona  fide  doing  it  because  he  was  in  honest 
blundering  and  stupidity  taking  the  thing  without  knowing  that  he 
was  committing  or  assisting  in  fraud,  or  because  he  had  a  suspicion 
that  he  would  deprive  himself  of  a  good  bargain  if  he  made  too  much 
inquiry  and  so  had  it  brought  home  to  him  that  there  was  fraud. 


(d)  Must  be  taken  without  notice  of  infirmity  or  defect. 

§  95  HAMILTON  v.  VOUGIIT. 

34  New  Jersey  Law,  187.  —  1870. 

Beasley,  Chief  Justice.  —  We  have  presented  to  our  considera- 
tion in  this  case  but  a  single  question,  viz.,  whetlier  the  title  of  a  holder 
of  negotiable  paper,  acquired  before  it  was  due,  for  a  valuable  consider- 
ation, is  affected  by  the  fraud  of  a  prior  party,  without  proof  of  bad 
faith  on  the  part  of  such  holder. 

Conn.  184.  187:  "If  there  was  a  wilful  or  fraiuUilent  failure  to  inquire  into 
facts  inviting  inquiry,  the  jury  might  regard  such  failure  as  notice,  if  they 
thought  the  failure  was  due  to  the  belief  that  inquiry  would  result  in  knowl- 
edge of  the  fraud.  Notice  may  be  of  two  kinds  —  explicit  notice  of  the  fraud 
or^illegality,  and  implicit  or  general  notice.  If  the  plaintiff,  when  he  bought 
the  no^es,  had  notice  or  knowledge  of  some  illegality,  or  knowledge  of  some 
illegality  or  fraud  which  vitiated  them,  though  he  was  not  apprised  of  its 
nature,  this  would  Vje  such  general  notice  as  would  affect  his  title.  Mere 
negligence,  however  gross,  not  amounting  to  this  wilful  and  fraudulent  blind- 
ness.'"will  not  of  it=elf  amount  to  notice;  but  the  jury  may  and  should  consider 
the  fact  of  such  negligence,  as  it  may  tend  to  prove  such  general  notice."  —  C. 


it.  1.  d.\  notice:  what  coNSTitDTts.  34l 

At  the  trial  of  this  cause,  the  jury  was  instructed  that  if  the  holder 
of  the  note  sued  on  —  the  plaintiff  in  the  action  —  acquiicd  his  title 
under  circumstances  which  should  have  put  a  person  of  oidiiiary  pru- 
dence upon  liis  guard,  the  note  was  invalid,  if  its  in(e])tion  had  been 
fraudulent. 

The  verdict  was  in  favor  of  the  defense,  and  the  phnrtifT  now  in- 
sists that  the  judicial  instruction  should  have  heov,  t'lnt  suspicious 
circumstances  attending  the  acquisition  of  his  title  were  not  sutticient 
to  defeat  his  claim,  unless  of  a  character  to  raise  a  conviction  of  actual 
fraud  on  his  part. 

Counsel  who  so  ably  argued  this  case  in  behalf  of  defendant,  did 
not  deny  that  the  modern  English  authorities  were  hostile  to  their 
position,  but  they  went  upon  the  ground  that  the  rule  thus  sanctioned 
was  an  innovation,  and  consequently  would  not  be  followed  by  this 
court.  The  ancient  rule,  it  was  maintained,  is  that  declared  in  Gill  v. 
Cubitt  (3  Barn.  &  Cress.  466).  This  decision  was  made  in  the  year 
1824,  and,  beyond  all  question,  it  sustains  the  principle  now  claimed 
by  the  defense,  for  in  the  reported  case  referred  to  the  jury  were  ex- 
plicitly told  that  "  there  were  two  questions  for  their  consideration : 
first,  whether  the  plaintiff  had  given  value  for  the  bill,  of  which  there 
could  be  no  doubt;  and,  secondly,  whether  he  took  it  under  circum- 
stances which  ought  to  have  excited  the  suspicions  of  a  prudent  and 
careful  man."  The  authority  is  directly  in  point,  and  the  only  ques- 
tion which  can  arise  is,  whether  it  correctly  states  the  ancient  rule  of 
the  common  law  upon  the  subject. 

My  first  remark  in  this  connection  is,  that  from  the  opinion  of  the 
judges  in  the  case  of  Gill  v.  Cubitt,  it  appears  that  the  doctrine 
adopted  was  intended  to  be  an  innovation  upon  the  antecedent  prac- 
tice, and  that  it  was  avowedly  opposed  to  a  decision  of  the  greatest 
weight.  Twenty-three  years  before,  in  the  year  1801,  Lord  Kenyon, 
in  Lav>son  v.  Wef^lnn  (\  Esp.  56),  had  expressly  repudiated  the  idea 
that  suspicious  circumstances,  in  the  absence  of  actual  fraud,  would 
avoid  a  note  in  the  hands  of  a  holder  for  value.  But  this  doctrine  did 
not  harmonize  with  the  views  of  the  judges  in  the  case  of  Gill  v.  Cubitt, 
and  it  was  accordingly  overruled.  Thus,  Chief  Justice  Abbott  says,  in 
his  of)inion  :  "  I  think  the  sooner  it  is  known  that  the  case  of  Lairsnn 
v.  Weston  is  doubted,  at  least  by  this  court,  the  better.  I  wish  doubts 
had  Ixien  cast  on  that  case  at  an  earlier  time."  And  he  concludes: 
"  For  these  reasons,  notwithstanding  all  the  unfeigned  reverence  T  feel 
for  everything  that  fell  from  Tiord  Kenyon,  by  whom  Tmu'sotx  v.  Wal- 
ton was  decided,  T  cannot  think  that  the  view  taken  by  that  learned 
lord  was  a  correct  one."  Nor  is  this  rejection  of  this  antecedent  deci- 
sion attempted,  in  the  slightest  degree,  to  be  put  upon  the  foundation 
of  pre-existing  authority.  Not  a  case  is  referred  to  for  its  justifieation, 
and  althnuL'"!)  in  Lniranu  v.  Wrntnv.  the  nuthoritv  r)f  Tidrd  Mansfield, 
in  Miller  v.  Race,  was  mooted,  no  remark  is  made  on  that  circum- 


342  HOLDKli   IM    UUh   COUKSK:    Kli(iUlSlTES.  L'^"'^-    ^'• 

stauce.  1  tliink  a  porusal  of  Iho  oi>iiiioMs  in  (lill  v.  Cubitt  will  satisfy 
auyoue  that  it  was  a  we  11 -understood  intention  to  deviate  from  the 
le^'al  rule  upon  this  subjeet  which  had  previously  existed;  or,  if  any 
doubt  should  remain,  sueli  doubt  will  certainly  be  dispelled  by  a  refer- 
ence to  the  case  of  Slater  v.  West  (;5  Carr.  &  Payne,  335),  decided  in 
the  year  1838,  in  which  Chief  Justice  Abbott  (then  Lord  Tenterden), 
in  laying  down  the  doctrine  that  a  person  is  not  entitled  to  recover 
who  takes  a  bill  of  exchange  "  under  circumstances  which  ought  to 
excite  suspicions  in  the  mind  of  a  reasonable  man,"  says:  "This 
doctrine  is  of  modern  origin.  I  believe  I  was  the  first  judge  who 
decided  this  point  at  nisi  prius.  The  court  to  which  I  belong  con- 
firmed my  decision,  and  the  other  courts  have,  I  believe,  acted  on  the 
same  principle."  And  Chief  Justice  Bayley,  in  his  opinion  in  Gill  v. 
Cubitt,  is  equally  explicit.  "  But,  it  is  said  "  —  such  is  his  language 
—  "  th^t  the  question  usually  submitted  for  the  consideration  of  the 
jury  in  cases  of  this  description,  up  to  the  period  of  time  at  which 
my  Lord  Chief  Justice's  direction  was  given,  has  been  whether  the  bill 
was  taken  bona  fide,  and  whether  a  valuable  consideration  was  given 
for  it.    I  admit  that  has  been  generally  the  case." 

From  these  citations,  I  think  it  is  manifest  that  the  judges  who 
participated  in  the  decision  of  the  case  of  Gill  v.  Cubitt  were  aware 
that  by  the  views  expressed  by  them,  they  introduced  a  novelty,  and 
departed  from  the  older  practice  of  the  courts.  That  the  principle 
adopted  in  that  case  w^as  an  innovation,  seems  to  me  unquestionable. 
I  have  shown  that  it  is  irreconcilable  with  Lawson  v.  Weston.  So  it 
plainly  occupies  the  same  relation  to  the  case  of  Peacock  v.  Rhodes 
(Doug.  632),  decided  by  Lord  Mansfield  in  1781.  The  rule  which  it 
endeavors  to  overthrow  will  be  found  sustained  in  Miller  v.  Race,  (1 
Burr.  452)  ;  Price  v.  Neal  (3  Burr.  1355)  ;  Grant  v.  Vaughn  (3  Burr. 
1516)  ;  Anonymous  (1  Lord  Raymond,  738)  ;  Morris  v.  Lee  (2  Lord 
Raymond,  1396.)  There  was  not  a  case  cited  upon  the  argument,  nor 
have  my  researches  led  me  to  one  anterior  to  the  decision  of  Gill  v. 
Cubitt,  which  sustains  the  doctrine  there  propounded.  T  confidently 
conclude,  therefore,  that  the  case  above  criticised  cannot  stand  on  the 
ground  of  ancient  authority.  In  my  apprehension,  the  original  rule 
as  it  existed  in  the  time  of  Lords  Kenyon  and  Mansfield  was,  that 
nothing  short  of  mala  fides  would  vitiate  the  title  of  the  holder  of 
negotiable  paper  taking  it  for  value,  before  maturity.  It  is  entirely 
out  of  the  question,  therefore,  for  this  court  to  regard  Gill  v.  Cubitt 
as  imperative  authority.  It  is  true  that  that  case  was  followed  for  a 
time  to  a  considerable  extent  by  the  English  courts.  But,  as  I  have 
already  said,  in  England  the  original  rule  has  been  reinstated.  In 
Backhouse  v.  Harrison  (5  B.  &  Ad.  1098),  Mr.  Justice  Patterson 
says :  "  I  have  no  hesitation  in  saying  that  the  doctrine  first  laid  down 
in  Gill  V.  Cubitt,  and  acted  upon  in  other  cases,  has  gone  too  far  and 
ought  to  be  restricted."     And  in  Goodman  v.  Harvey  (4  Ad.  &  El. 


il.    1.    d.]  NOTICE:    WHAT    CONSTITUTES.  343 

81:0),  Lord  Denman  thus  forcibly  expresses  the  rule  at  present  pre- 
vailing in  tlie  courts  at  Westminster :  "  The  question  I  offered  to  sub- 
mit to  the  jury  was,  whether  the  plaintiff  had  been  guilty  of  gross 
negligence  or  not.  I  believe  we  are  all  of  opinion  that  gross  negli- 
gence only  would  not  be  a  suflBcient  answer  where  the  party  has  given 
consideration  for  the  bill.  Gross  negligence  may  be  evidence  of  mala 
fides,  but  it  is  not  the  same  thing.  We  have  sliaken  off  the  last  rem- 
nant of  the  contrary  doctrine.  Where  the  bill  has  passed  to  the  plain- 
tiff without  any  proof  of  bad  faith  in  him,  there  is  no  objection  to  his 
title."  The  following  cases  recognize  and  enforce  the  same  rule: 
(Uther  V.  Rich,  10  Ad.  &  El.  784;  Artbouin  v.  Anderson,  1  Ad.  &  El. 
(N.  S.)  498;  Stephens  v.  Foster,  1  Cromp.,  Mees.  &  Ros.  894;  Palmer 
V.  Richards,  1  Eng.  L.  &  Eq.  529;  Marston  v.  Allen,  8  Mees.  &  Wels. 
494;  Raphael  v.  Bank  of  England,  17  C.  B.  161.) 

An  examination  of  the  American  reports  will  disclose  a  similar 
mutation  of  judicial  opinion  upon  this  subject.  For  a  time,  in  sev- 
eral of  the  states,  the  rule  broaclied  in  the  case  of  Gill  v.  Cuhitt  has 
been  acted  upon ;  but  now,  in  most  of  them,  and  in  those  of  the  most 
commercial  importance,  that  rule  has  been  entirely  discarded.'  (34 
New  York,  247,  Magee  v.  Badger;  7  Bosworth,  543,  Bel.  Bank  of 
Ohio  V.  Hodge  et  al;  10  Cush.  488,  Worcester,  etc..  Bank  v.  Dorches- 
ter, etc..  Bank;  4  Geo.  287,  Mathews  v.  Poythress;  6  Md.  509,  Ellicott 
V.  Martin;  36  New  Hamp.  273,  Crosby  v.  Grant.) 

The  subject  has  also  recently  been  settled,  after  an  elaborate  dis- 
cussion and  full  consideration  in  the  Supreme  Court  of  the  United 
States,  in  the  case  of  Goodman  v.  Simonds  (20  TTow.  343),  the  result 
being  an  explicit  repudiation  of  the  doctrine  that  suspicious  circum- 
stances will,  per  se,  vitiate  the  title  to  commercial  paper. 

From  this  brief  review  of  the  cases,  I  think  it  may  be  safely  said 
that  the  doftrine  introdured  by  Lord  Tonderdon  stands  at  the  present 
moment  marked  with  the  disapproval  of  the  highest  judicial  authority. 
Nor  does  such  disapproval  rest  upon  merely  speculative  grounds.  That 
doctrine  was  put  in  practice  for  a  course  of  years,  and  it  was  thus, 
from  experience,  found  to  be  inconsistent  with  true  commercial  poliey. 
Its  defect  —  a  great  defect,  an  I  think  —  was,  that  it  provided  nothing 
like  a  criterion  on  which  a  verdict  was  to  be  based,  'i'he  rule  was, 
that  to  defeat  the  note,  circumstances  must  be  shown  of  so  suspicious 


» The  earlier  Mat-aachusetts  caRc«  which  were  in  accord  with  the  rule  of 
Oill  V.  Cubitt  wore  ovprniled  by  later  cases.  See  FiUebrnum  v.  Haywood,  190 
Mass.  472.  470.  In  Tennessee  this  rtile  was  in  forre  initil  chnnpod  liy  the 
ennctment  of  the  \ppotial>le  Instruments  I, aw.  See  Vnaka  Nat.  flank  v. 
Butler.  113  Tenn.  574. 

The  rule  of  <lxU  v.  Cuhitt  is  still  followed,  however,  in  Vermont  where  the 
Negotiable  Instninnnts  Law  has  not  yet  been  enacted.  See  l.imrrirk  \at. 
Bank  v.  Adnmi.  70  Vt.  1.12:  followed  in  Capital  Sav.  Hank  v.  Montprlicr  Hav. 
Bank,  77  Vt.  189,  and  I'iersun  v.  Uuntinyton,  82  Vt.  482.  —  C. 


344  HOLDER   IN    UUt:   COURSK:    HEc^UialTES.  [aUT.    V. 

a  iluiracter  that  the}-  would  put  a  luau  ol  urdinary  prudence  on  in- 
quiry—  and  by  force  of  such  a  rule  it  is  obvious  every  case  possessed 
of  unusual  incidents  would,  ui"  necessity,  pass  under  the  uncontrolled 
discretion  of  a  jury.  An  incident  of  the  transaction  from  whiili  any 
suspicion  could  arise  was  sullicient  to  take  the  case  out  of  the  control 
of  the  court.  There  was  no  judicial  standard  by  which  suspicious 
circumstances  could  be  measured  before  connnitting  them  to  the  jury. 
And  it  is  precisely  (his  want  which  the  modern  rule  supplies.  When 
mala  fides  is  the  point  of  inquiry,  suspicious  circumstances  must  be 
of  a  substantial  character,  and  if  such  circumstances  do  not  appear, 
the  court  can  arrest  the  inquiry.  Under  the  former  practice,  circum- 
stances of  slight  suspicion  would  take  the  case  to  the  jury;  under  the 
present  rule,  the  circumstances  must  be  strong,  so  that  bad  faith  can 
be  reasonably  inferred.  Thus  tlie  subject  has  passed  from  the  indefi- 
nite to  comparatively  definite;  from  the  intangible  to  the  compara- 
tively tangible.  From  a  mere  matter  of  fact,  the  question,  to  some 
extent,  has  become  one  of  law. 

I  cannot  doubt,  when  we  recollect  that  inquiries  of  this  nature 
always  attend  that  class  of  cases  where  judgments  are  sought  against 
innocent  and  unfortunate  parties,  that  the  change  is  most  beneficial. 
All  experience  has  shown  how  hard  it  is  to  prevent  juries  from  seizing 
on  the  slightest  circumstance,  to  avoid  giving  a  verdict  against  the 
maker  of  a  note  wiiich  had  been  obtained  l)y  fraud  or  theft.  To  pre- 
serve the  negotiability  of  commercial  paper  and  guard  the  interests 
of  trade,  it  is  absolutely  necessary  that  large  power  should  be  placed 
in  the  judicial  hand  when  the  question  arises  as  to  what  facts  are 
sufficient  to  defeat  the  claim  of  the  holder  of  a  note  or  bill  which  has 
been  taken  before  maturity,  and  for  which  value  has  been  paid.  It  is 
only  in  this  mode  that  the  requisite  stability  in  transactions  of  this 
kind  can  be  retained. 

But  I  do  not  think  the  difference  between  the  two  rules  above  dis- 
cussed is  as  ffreat  as  some  persons  have  supposed.  In  my  apprehen- 
sion, the  entire  variance  consists  in  the  degree  of  proof  which  the  court 
will  require  in  order  to  submit  the  inquiry  to  the  jury.  Mere  care- 
lessness in  taking  the  paper  will  not,  of  itself,  impair  the  title  so 
acquired;  but  carelessness  may  be  so  gross  that  bad  faith  may  be 
inferred  from  it.  Nor  is  it  necessary,  in  order  to  defeat  the  title  of 
the  holder,  that  he  have  actual  knowledge  of  the  facts  and  circum- 
stances constituting  the  particular  fraud ;  it  is  sufficient  if  he  have 
knowledge  that  the  paper  is  tainted. with  any  fraud,  although  he  may 
be  ignorant  of  the  nature  of  it.  In  the  case  of  May  v.  Chapman  (16 
Mees  &  W.  35.^,),  Baron  Parke  says:  "T  agree  that  'notice  and 
knowledge  '  means  not  merely  express  notice,  but  knowledge,  or  the 
means  of  knowledge,  to  which  the  party  wilfully  shuts  his  eyes." 
Revif'Wfd  in  this  sense,  ns  T  have  already  rprr>arlced.  the  nri^ciple 
seems  to  me  a  highly  salutary  one,  and,  in  the  language  of  Professor 


II.  1.  d.]  notice:  what  constitutes.  345 

Parsons,  is  well  "  adapted  to  the  free  circulation  of  negotiable  paper 
and  the  true  interest?  of  trade."     (1  Par.  B.  &  N.  259.) 
I  think  a  new  trial  should  be  granted. 


§  95    NATIONAL  BANK  OF  COMMONWEALTH  v.  LAW. 
127  Massachusetts,  72.  —  1879. 

Contract,  against  maker  and  indorsers  of  the  following  instru- 
ment: 

$3000.  New  York,  January  20,  1877. 

Four  montlis  after  date  I  promise  to  pay  to  the  order  of  Charles  F.  Parker 
&  Co.  three  thousand  dollars  at  the  National  Bank  of  Commerce,  Boston,  Mass. 
Value  received. 

Alexandeb  Law. 
[Indorsed] :  John  Saveby's  Sons. 

Charles  F.  Parker  &  Co. 

Law  was  a  member  of  the  firm  of  Charles  F.  Parker  &  Co.,  and 
also  of  the  firm  of  John  Saverv's  Sons.  Law  indorsed  the  firm  name 
of  "John  Saverv's  Sons"  and  one  D.  (a  partner),  indorsed  the  firm 
name  of  Charles  F.  Parker  &  Co.,  and  deposited  the  note  as  collateral 
for  a  loan  at  plaintiff  bank.  The  note  was  in  fact  made  without 
authority  of  the  firm  of  John  Savery's  Sons  and  in  fraud  of  the  firm. 
The  trial  judge  ruled  that,  from  the  form  of  the  note  itself  plaintiff 
was,  as  a  matter  of  law,  affected  witli  notice  of  the  defense  e.xisting  to 
the  note  on  the  part  of  flie  defendants  (John  Savery's  Sons),  other 
than  Law,  and  directed  a  verdict  for  such  defendants.  Tf  this  ruling 
was  incorrect,  a  new  trial  was  to  be  ordered;  otherwise,  judgment  on 
the  verdict. 

Gray,  C.  J.  [.\fter  deriding  that  the  liability  of  John  Savery's 
Sons  was  secondary  to  that  of  Law.]  '  One  partner  has  no  authority, 
without  the  a.ssent  of  his  copartners,  to  sicrn  the  name  of  the  part- 
nership to  a  note  for  the  individual  debt  of  hiinself  or  of  a  ptran<jer; 
and  all  persons  who  take  surh  a  note  with  knowledge,  either  from 
its  appearanco  or  otherwise,  that  it  was  made  fof  the  separate  accom- 
modation of  one  partner  or  of  another  person,  cannot  recover  against 
the  other  partners  without  proving  their  authoritv  or  assent.  In  the 
present  rase,  the  flefendants'  name  being  uj)on  the  baek  of  the  note 
above  that  of  the  jtayees,  it  was  apparent  upon  the  note  itself,  read  in 
the  light  of  the  statute,  which  everyone  was  bound  In  know,  that  the 
liability  of  the  partnership  was  but  conditional  ajid  secondary,  and 
therefore  that,  prima  facie  at  least,  their  signature  was  afTixed  for  the 
accommodation  and  benefit  of  Law;  and  the  ruling  at  the  trial  was 


1  Mass.  St.  of  1874,  c.  404.     See  Neg.  Inst.  L.,  §   114.  — H. 


346  HOLDER   IN   DUE   COFRSE  :    REQUISITES.  [aRT.    V. 

correct.  {Angle  v.  Northurstcni  Infi.  Co.,  92  U.  S.  330;  West  St. 
Louis  Savings  Bank  v.  Shawnee  Bank,  95  IT.  S.  557;  Chazonrnes  v. 
Edwards.  3  Pick.  5;  Swectser  v.  French,  2  Cusli.  300;  Rollins  v. 
Stevens.  31  Maine,  454;  Fielden  v.  Lahens,  2  Abbott,  N.  Y.  App.  Ill ; 
Lemoine    v.    Bank    of    North    America,    3    Dillon,    44.) 

Judgment  on  the  verdict.* 


§  95  CHEEVER  v.  PITTSBURGH,  ETC.,  R.  CO. 

150  New  York,  59.—  1896. 

Action  by  holder  against  maker.  Judgment  for  defendants. 
Plaintiff  appeals. 

O'Brien,  J.  —  The  complaint  in  this  action  contained  four  separate 
causes  of  action,  each  upon  a  promissory  note  of  the  defendant.  The 
last  two  causes  of  action  were  not  defended,  and  upon  these  the  plain- 
tiff recovered,  but  was  defeated  upon  the  two  notes  embraced  in  the 
first  and  second  causes  of  action.  The  defense  to  these  two  notes  was 
that  they  were  made  by  the  defendant's  president,  one  M.  S.  Frost, 
and  by  him  wrongfully  diverted  from  the  uses  and  purposes  for  which 
thev  were  intended  to  his  own  personal  or  private  benefit,  or  the 
benefit  of  a  firm  of  which  he  was  a  member,  and  that  the  plaintiff 
is  not  a  bona  fide  holder,  but  chargeable  with  notice  of  these  facts. 

The  following  are  copies  of  the  two  notes  in  controversy,  with  the 
indorsements  thereon  when  put  in  circulation  by  the  defendant's 
president : 

2  Similar  notes  were  made  by  Law  and  indorsed  first,  in  the  name  of  CharleB 
F.  Parker  &  Co..  and  second,  in  tlie  name  of  John  Ravery's  Sons,  and  discounted 
for  D.  by  plaintiff.  The  trial  judpe  made  the  same  ruling  as  nhovo.  Held: 
error.  "  Upon  the  face  of  the  note  in  this  case,  there  is  nothing  which  indi- 
cates any  irregularitv  or  invalidity  in  the  origin  or  negotiability  of  it."  The 
note  indicates  that  Charles  F.  Parker  &  Co.  had  transferred  it  to  John  Savery's 
Sons,  and  the  latter  by  blank  indorsement  to  a  new  holder.  There  is  no  con- 
clusive evidence  that  plaintiff  knew  it  was  discounting  the  note  for  C.  F. 
Parker  &  Co.  The  inference  is  quite  as  natural  that  D.  was  the  owner.  Free- 
man's 'Sational  Bank  v.  Savery,  127  Mass.  75,  78. 

Where  one  of  four  partners  signed  in  his  individual  name  a  note  payable  to 
his  firm,  and  another  partner  indorsed  the  firm  name,  and  the  first  partner  then 
took  the  note  to  the  plaintiff,  filled  in  certain  blanks  in  plaintiff's  presence,  and 
transferred  the  note  to  plaintiff  to  take  up  another  similarly  executed,  but 
plaintiff  testified  that  he  had  no  knowledge  that  the  loan  was  not  for  the 
benefit  of  the  firm,  hehl,  that  there  is  no  conclusive  proof,  as  matter  of  law, 
from  the  form  of  the  note  or  other  circumstance,  that  plaintiff  had  notice  that 
the  indorsement  was  for  the  maker's  accommodation.  It  was  a  question  of 
fact  for  the  jury.     Wait  v.  Thayer.  118  Mass.  473. 

D.  loaned  money  to  the  firm  of  Stewart.  Hammond  &  Mead,  taking  a  note 
signed  by  Hammond  and  indor=ed  by  the  firm.  This  firm  was  dissolved,  and 
the  firm  of  Hammond  &  Scripture  was  formed.  rJammond  arranged  with  D. 
to  retain  the  money  for  the  benefit  of  the  firm  of  Hammond  &  Scripture,  and 


II.  1.  d.]  notice:  what  constitutes.  347 

$5,000.  Gbeenville,  Pa.,  Feh'y  24th,  1888. 

Four  Tnonth<;  after  date  the  Pittsburgh,  Shenango  and  Lake  Erie  Railroad 
Company  promises  to  pay  to  the  order  of  John  T.  Bruen  live  thousand  dollars, 
at  the  American  E.\change  National  Bank,  New  York  City.     Value  received. 
Attest:   E.  S.  Templeton,  Secretary. 

The  Pittsbubgh,  Shenango  &  Lake  Erie  Railroad  Company, 

By  M.  S.  Frost,  President. 
[Indorsed] : 
Pay  to  the  order  of  M.  S.  Frost  &  Son. 

John  T.  Bruen. 
M.  S.  Frost  &  Son. 

$5,000.00.  Greenville,  Pa.,  Feb'y  24th,  1888. 

Three  months  after  date  the  Pittsburgh,  Shenango  and  Lake  Erie  Railroad 
Company  promises  to  pay  to  the  order  of  John  T.  Bruen  five  thousand  dollars, 
at  the  American  Exchange  National  Bank,  New  York  city.     Value  received. 
Attest:   E.  S.  Templetox,  Secretary. 

The  Pittsburgh,  Shenango  &  Lake  Erie  Railroad  Company, 

By  M.  S.  Frost,  President. 
[Indorsed] :  John  T.  Bruen, 

M.  S.  Frost  &  Son. 

The  body  of  these  notes,  and  every  part  of  them  except  the  signa- 
ture of  the  president,  was  in  the  handwriting  of  Templeton,  the  sec- 
retary. The  president  was  authorized  by  the  board  of  directors  to 
issue  the  corporate  notes  to  the  extent  of  $10,000  for  the  purpose  of 
purchasing  flat  cars.  In  March,  1888,  before  the  notes  became  due, 
Frost  went  to  Boston  and  there  negotiated  a  cash  loan  of  $30,000 
from  Francis  A.  Brooks  for  the  benefit  of  M.  S.  Frost  &  Son,  giving 
the  firm  note  therefor  and  delivering  to  him  the  two  notes  in  question, 
indorsed  as  they  now  appear,  with  other  obligations,  as  collateral 
security  for  the  payment  of  this  loan.  Subsequent  to  the  maturity 
of  the  notes  Brooks  became  the  absolute  owner  by  consent  of  the 
pledgor  and  the  proceeds  applied  upon  the  debt,  and  still  later  he 
transferred  them  to  a  tbird  party,  and  tbey  have  come  to  the  hands 


gave  D.  a  new  note  signed  by  Hammond  and  indorsed  in  the  firm  name. 
Rcripttire  had  no  knowledge  of  this,  fjrlrf .-  Scriptnre  not  liable.  "  Wo  do  not 
think  a  partner  can  shift  his  private  indebtedness  from  his  own  shoulders  to 
those  of  bin  (irni  by  ofTcring  tf)  his  creditor  to  pay  his  debt,  and  then  asking 
him  to  lend  the  nniount  to  the  firm  of  which  ho  is  a  member,  and  thereupon,  on 
the  creditor's  assenting,  giving  him  without  anything  more  a  firm  note  for  the 
amoiint.  unless  it  is  shown  that  the  transaction  is  in  some  way  brought  to  the 
knowledge  of  and  assented  to  by  the  other  meml)cr  or  members  of  the  firm.  It 
certainly  would  opc-n  a  wide  door  to  fraud  to  admit  such  a  doctrine."  Pnnirls 
V.   Itnmmnnd.   l.')4   ^fass.    \f^5. 

The  results  of  the  cases  on  constructive  notice  from  the  form  of  the  paper  in 
the  case  of  partnership  signatures  u|ion  bills  or  notes  negotiated  by  or  for  a 
partner  for  his  own  benefit,  are  fully  stated  in  Ames'  Cases  on  PJrtnership, 
pp.  52r).  527-r,20,  sn.l-fl.'H.  .See  the  same  work  (pp.  400-521)  for  a  discussion 
of  the  subject  of  the  authority  of  a  partner  to  execute  or  transfer  negotiable 
inHtruments  in  behalf  of  his  firm,  and  the  manner  in  which  such  instruments 
must  be  executed  in  order  to  bind  the  partnership.  —  H. 


348  HOLDKH  IN  nni-:  course:  requisites.  [art.  v. 

of  the  plaintitT  for  value.  It  is  iiol  claimt'd  thai  tlio  plaintiff  occu- 
pio?  anv  other  or  ditVoront  jiositioii  than  Brooks  would  if  bo  had 
brought  the  action  u])on  the  notes  at  maturity.  Bnien,  the  payee  of 
the  notes,  was  the  private  secretary  of  Frost,  the  presi(lent,  and  the 
notes  were  made  payable  to  Iiim  by  Templeton,  the  secretary  of 
defendant,  wlio  drew  them  in  that  form  at  the  sufjgestion  of  the 
president.  'JMiere  is  not  and  cannot  be  any  dispute  with  respect  to 
the  authority  of  Frost  to  nuike  the  notes.  '^IMiey  were  made  with 
sufficient  autliority,  the  fraud  upon  the  defendant  consisting  in  the 
wrongful  use  of  them,  wlien  luaile  for  a  legitimate  purpose,  by  the 
president  for  his  own  private  business. 

Xor  is  there  any  dispute  with  respect  to  the  fact  appearing  on  the 
plaintiff's  case,  that  Brooks  paid  value  for  the  notes  and  made  present 
advances  in  cash  to  Frost  in  the  sum  already  stated.  It  is  equally 
clear  upon  the  record  that  Brooks  had  no  actual  knowledge  of  the 
facts  surrounding  the  origin  of  the  paper  or  of  the  diversion  of  it  by 
the  president.  He  received  the  notes  and  made  the  advances  in  Bos- 
ton, whereas  they  were  made  and  the  transactions  stated  with  respect 
to  them  took  place  in  a  distant  state,  where  the  office  of  the  company 
was,  and  is  indicated  on  the  paper  as  the  place  where  made. 

The  learned  trial  judge  held  as  matter  of  law  that  the  plaintifE 
could  not  recover  upon  the  notes  for  the  reason  that  he  was  chargeable 
with  knowledge  of  the  facts  and  circumstances  that  rendered  them 
invalid  in  the  hands  of  Frost.  The  plaintiff  is,  doubtless,  chargeable 
with  such  knowledge  or  notice  as  to  the  antecedent  equities  of  the 
defendant  as  Brooks,  his  assignor,  had,  but  with  no  others.  If  the 
notes  were  valid  obligations  in  the  hands  of  Brooks  the  plaintiff  may 
assert  every  right  that  he  could  have  asserted.  It  needs  no  argu- 
ment to  show  that  if  Brooks  had  knowledge  or  notice  or  is  in  law 
chargeable  with  knowledge  or  notice  of  the  fraud  by  means  of  which 
the  notes  were  diverted  from  the  pui-pose  for  which  they  were  author- 
ized to  be  made,  that  the  plaintiff  cannot  recover.  But  it  is  not 
claimed  that  he  knew  anything  about  the  origin  or  diversion  of  the 
paper  in  fact.  All  that  is  claimed  is  that  when  it  was  presented  to 
him  in  Boston  by  Frost,  whom  he  knew  to  be  the  president  of  the 
railroad,  there  was  enough  upon  the  face  of  the  paper  to  put  him  upon 
inquiry  and,  therefore,  to  charge  him  with  knowledge  of  all  the  facts 
that  such  inquiry  would  have  disclosed.  He  knew  nothing,  so  far  as 
appears,  outside  of  the  paper  itself,  except  the  fact  that  the  party  pre- 
senting it  was  defendant's  president,  and  that  he  was  proposing  to 
pledge  the  notes  for  his  own  debt,  or  rather  for  the  debt  of  his  firm, 
which  for  all  the  purposes  of  the  question  may  be  assumed  to  be  the 
same  thing.  The  question  in  the  case  is,  therefore,  reduced  to  a  very 
narrow  inquiry,  and  that  is,  whether  Brooks,  standing  in  all  other 
respects  in  the  position  and  sustaining  the  character  of  a  bona  fide 
purchaser  of  negotiable  paper,  is  deprived  of  that  character  and  the 


^i-  1-  ^0  notice:  what  constitutes.  349 

benefits  of  that  position  by  reason  of  anything  appearing  upon  the 
face  of  the  notes  themselves. 

The  minf],  at  the  threshold  of  the  inquiry,  encounters  two  principles 
that  point  in  opposite  directions  and  lead  to  different  conclusions,  as 
the  one  or  the  other  is  allowed  to  preponderate  in  the  mental  process 
of  determining  the  legal  rights  of  the  parties.  On  the  one  hand  is 
the  principle  which  protects  a  bona  fide  holder  of  commercial  paper 
from  existing  antecedent  equities  between  the  parties,  and  on  the 
other  the  principle  which  protects  a  corporation  from  the  unauthor- 
ized and  fraudulent  acts  of  its  own  officers.  There  is  not  much  diffi- 
culty in  stating  the  rule  of  law  defining  the  duties  and  obligations  of 
a  party  to  whom  negotiable  paper  is  presented  for  discount  or  sale 
before  due.  He  is  not  hound  at  his  peril  to  be  on  the  alert  for  cir- 
cumstances which  might  possibly  e.vcite  the  suspicion  of  wary  vigi- 
lance ;  he  does  not  owe  to  the  party  who  puts  the  paper  afloat  the  duty 
of  active  inquiry  in  order  to  avert  the  imputation  of  bad  faith.  The 
rights  of  the  holder  are  to  be  determined  by  the  simple  test  of  honesty 
and  good  faith,  and  not  by  a  speculative  issue  as  to  his  diligence  or 
negligence.  The  holder's  rights  cannot  be  defeated  without  proof  of 
actual  notice  of  the  defect  in  title  or  bad  faith  on  his  part  evidenced 
by  circumstances.  Though  he  may  have  been  negligent  in  taking  the 
paper,  and  omitted  precautions  which  a  prudent  man  would  have 
taken,  nevertheless,  unless  he  acted  tiwla  fide,  his  title,  according  to 
settled  doctrine,  will  prevail.  (Magee  v.  Badger,  34  N.  Y.  249;  Am. 
Ex.  Nat.  Bank-  v.  A^.  Y.  Belting,  etc.,  Co.,  148  N.  Y.  70.5;  Knox  v. 
Eden  Musee  .Am.  Co.,  148  N.  Y.  454;  Canajoharie  Nat.  Banlc  v.  Die- 
fendorf,  123  X.  Y.  202;  Voshvrgh  v.  Diefendorf,  119  N.  Y.  3.57; 
Jarvis  v.  Manhattan  Beach  Co.,  148  N.  Y.  6.52.) 

Applying  these  rules  to  the  conceded  facts  of  the  case,  it  seems  to 
me  to  be  impossible  to  impute  bad  faith  to  Brooks  in  the  transartion. 
He  advanced  a  large  sum  of  money  on  the  faith  of  the  paper,  with- 
out any  actual  knowledge  that  <fie  relations  of  the  partv  with  whom 
he  dealt  to  tho  paper  were  different  from  wbiit  they  appeared  to  be 
on  the  face  of  it.  The  question  now  is,  not  ulmt  thr  fncts  were,  but 
what  they  appeared  to  be,  and  what  he  had  the  right,  from  the  notes 
themsj'lves,  to  assume.  He  had  the  right  to  a.«sume  that  the  relations 
to  the  paper  of  every  party  whose  name  appeared  on  it  were  precisely 
what  they  appeared  to  be.  {11  age  v.  Lansing,  3.5  N.  Y.  13fi.)  He 
had  the  right  to  believe  that  the  notes  had  been  issued  by  the  defend- 
ant to  Brupn  for  valno  in  the  regular  fourse  of  business,  and  were  bv 
him  transferred  to  Frost  k  Son  in  like  mannrT.  There  was  nothing 
to  suggest  to  him  that  Frost  was  dealing  with  paper  that  belonged  to 
the  railroad  for  his  own  benefit.  The  appearances  were  that  the 
defendant  had  put  tlie  notes  in  cireulation  by  delivery  to  Rruen,  and 
that  they  rame  to  Front's  firm  in  the  regular  course  of  business  for 
value  and  were  then  the  property  of  the  firm.     H  is  quite  true  that  all 


350  HOLDER    IN    nUE    COrRSK  :    REQUISITES.  fART.    V. 

those  appearances  were  deeeptive  and  that  the  actual  facts  were  other- 
wise. But  liow  was  a  banker  or  business  man  in  Boston  to  know  or 
suspivt  tliat  liruen  was  only  the  nominal  payee  and  a  mere  instrument 
in  the  transaction  to  enable  the  president  to  divert  the  paper  to  his 
own  use.  The  name  of  the  party  who  presented  it  and  had  it  in  his 
possession  appeared  on  the  face  of  the  paper  to  have  signed  it  as  presi- 
dent. The  name  of  another  officer  of  the  corporation  was  upon  it 
also,  attesting  its  regularity,  and  everything  was  in  his  handwriting 
except  the  signature  of  the  president  and  the  indorsement  of  the 
payee.  So  far  as  Brooks  was  concerned,  the  paper  showed  that  it  had 
been  issued  to  a  stranger  in  the  regular  course  of  business,  and, 
through  his  indorsement,  had  come  to  the  hands  of  a  mercantile  firm 
of  which  the  president  of  the  corporation  was  a  member.  If  this 
were  the  fact,  there  is  no  doubt  as  to  his  right  to  use  it  in  the  business 
of  the  firm.  The  holder  of  a  note  who  has  no  actual  knowledge  or 
notice  of  a  defect  in  the  title,  or  other  equities  between  the  parties, 
when  circumstances  come  to  liis  knowledge  suflleient  to  put  him  upon 
inquiry,  is  chargeable  with  knowledge  of  all  the  facts  that  such  in- 
quiry would  have  revealed.  The  difficulty  in  this  case  is  to  find  the 
circumstance  which  can  be  said  to  be  sufficient  to  put  Brooks  upon 
the  inquiry.  There  was  absolutely  nothing  on  the  face  of  the  paper 
except  the  signature,  as  president,  of  the  party  who  was  dealing  with 
it,  and  that,  we  think,  was  not  sufficient  in  view  of  the  fact  that  the 
appearances  were  that  he  was  a  purchaser  from  a  third  party. 

The  principle  that  applies  in  a  case  where  an  officer  of  a  corpora- 
tion makes  the  corporate  obligation  payable  to  himself,  and  then 
attempts  to  deal  with  it  for  Ids  own  benefit,  does  not  aid  in  solving 
the  question  in  this  case.  When  paper  of  that  character  is  presented 
by  the  officer  or  agent  of  the  corporation,  it  bears  upon  its  face  suf- 
ficient notice  of  the  incapacity  of  the  officer  or  agent  to  issue  it.' 
(Hanover  Bank  v.  Am,.  Dock  &  T.  Co.,  148  N.  Y.  612;  Bank  of  N. 
Y.  V.  Am.  Dock  tf-  T  Co.,  143  N.  Y.  550;  Wilson  v.  M.  E.  R.  Co., 
120  X.  Y.  145;  Genma  v.  McCormick,  130  N.  Y.  261.)  There  are 
numerous  cases  that  belong  to  that  class  cited  by  the  learned  counsel 
for  the  defendant  on  his  brief.  There  is  a  manifest  distinction 
between  them  and  the  case  at  bar.     Here  the  officer  was  not  dealing 


3  "  fndonbtpdly  tho  ppneral  rule  is  thnt  one  who  ppppives  from  an  officer  of  a 
corporation  tlip  notps  or  Bpciirities  of  such  corporation,  in  payment  of,  or  as 
Becnrity  for,  a  personal  debt  of  such  oflicer,  does  so  at  his  own  peril.  Prima 
facie  the  act  is  unlawful,  and,  unless  actually  authorized,  the  purchaser  will  be 
deemed  to  have  taken  them  with  notice  of  the  riphts  of  the  corporation.  {Gar- 
rard V.  r.  rf  (1.  R.  R.  Co.,  29  Penn.  St.  154;  Pendleton  v.  Fny.  2  Paige,  202; 
Shaw  V.  Spencer.  100  Mass.  388)."  —  Wilson  v.  Metropolitan  El.  Ry.,  120  N. 
Y.  145,  150.  Contra:  Doe  v.  Northwestern  Coal,  etc..  Co..  78  Fed.  Rep.  62, 
68. —  H. 

[But  see  Borouf/h  of  Montvale  v.  People's  Bank,  74  N.  J.  h.  464,  reported 
herein  at  p.  352.  — .  C] 


II.    1.    d.]  NOTICE:    WHAT    CONSTITUTES.  351 

with  the  corporate  notes  payable  to  himself,  but  with  notes  that  had 
been  regularly  issued,  so  far  as  appeared  from  their  face,  to  a 
stranger  and  by  him  transferred  to  a  firm  of  which  the  officer  was  a 
member,  and  for  which  he  acted  as  agent  in  procuring  the  loan  from 
Brooks  and  pledging  them  as  security.  The  presence  of  Frost's  name 
upon  the  paper,  as  one  of  the  agents  who  issued  it,  was  not  naturally 
or  reasonably  calculated,  under  the  circumstances,  to  arouse  suspicion 
in  the  mind  of  Brooks,  or  to  lead  him  to  believe  that  the  president  was 
attempting  to  defraud  the  corporation  in  disposing  of  the  notes. 
None  of  the  cases  cited  by  the  learned  counsel  for  the  defendant  sus- 
tain the  proposition  that  such  a  circumstance  is  sufficient  to  put  the 
purchaser  of  negotiable  paper  upon  inquiry  or  charge  him  with 
knowledge  of  the  fact  in  case  he  fails  to  make  it,  and  there  are  many 
cases  that  tend  to  support  the  contrary  view.  (Am.  Ex.  Nat.  Bank 
V.  N.  Y.  B.  &  P.  Co.,  148  N.  Y.  698 ;  Miller  v.  Consolidation  Bank,  48 
Penn.  St.  514;  Walker  v.  Kee,  14  S.  C.  142.) 

It  is  said  that  if  the  plaintiff's  right  to  recover  in  this  case  is  sanc- 
tioned by  this  court  an  easy  way  will  be  opened  for  the  perpetration  of 
frauds  upon  corporations  by  officers  intrusted  with  its  negotiable  obli- 
gations, and  that  the  device  of  making  the  paper  payable  to  the  order 
of  a  nominal  payee,  interested  or  aiding  in  the  fraud,  will  be  a  favor- 
ite one  to  accomplish  the  end.  We  must  leave  all  such  cases  to  be 
dealt  with  upon  the  peculiar  facts  and  circumstances  as  they  arise.  It 
is  more  reasonable  and  just  to  assume  that  corporations  will  be  able 
to  protect  themselves  by  proper  vigilance  from  the  dishonesty  of  their 
own  officers,  than  to  impute  to  parties  who  have  taken  the  paper  for 
value,  ignorant  of  its  origin,  constructive  knowledge  of  the  facts  upon 
such  circumstances  as  exist  in  this  case. 

We  think  that  there  was  nothing  on  the  face  of  the  paper  or  in  the 
facts  shown  to  warrant  the  court  in  holding,  as  matter  of  law,  as  it 
did,  that  the  obligations  were  received  by  Brooks  and  the  advances 
made  on  them  main  fide.  That  is  the  effect  of  the  ruling  at  the  trial, 
and  the  conclusion  was  not  supported  by  the  facts. 

It  follows  that  the  judgment  must  be  reversed  and  a  new  trial 
granted,  costs  to  abide  the  event. 

Bahtlh;tt,  J.,  delivered  a  dissenting  opinion. 

Andrkws,  Ch.  J.,  CiRAY  and  Martin,  JJ.,  concur  with  O'Brien,  J; 
IIaioht  and  Vann,  JJ.,  concur  with  Bartf.ett,  J. 

Judgment  reversed.* 


♦  In  Orr  v.  ffouih  Amboy  Terra  Cotta  Co.,  113  App.  Div.  (N.  Y.)  10,3,  it 
was  hrH  flint  thr  fnrt  that  tho  payor  of  a  notn  rxpctitoH  by  a  cnrporafinn  is 
a  dirpctor  of  iho  rorporation  flops  not  put  a  ptirchaspr  of  th«'  note  upon  in<]uiry 
as  to  whrttifr  its  iHsuanop  wiis  iiuthori/,««fJ.  Lai<;hi.in,  J.,  said  in  part:  "The 
rulp  applirablp  to  notrs  maHp  t)y  oflirprs  of  a  corporation  to  Mipir  own  order, 
and  )ispd  to  pay  tlipir  indivilual  olilifr.ition'J,  lias  nf>  appliration  to  nofps  madp 
by  the  duly  autliorized  ofTicprH,  and  payable  to  a  director.     It  is  not  uncommon 


368  HOLDER   IN    DUK   GOURSK  :    RliQUISITES.  [aRT.    V. 

§96      BOKOUCH  OF  MONTVALE  v.  PEOPLE'S  RANK. 
74  Nkw  Jersey  Law  (Ct.  Err.  and  Arp.)  464. —  1007. 

GuMMKRE,  (\  ,1.  This  is  an  actioii  of  ii'plcv  in  Inou.^lit  liy  tlio  bor- 
ough of  MoTitvnle  to  recover  from  the  possession  of  the  People's  Bank 

for  iliipctors  to  liave  business  dealinps  with  the  corporation,  and  it  is  porfectly 
le<:itiiiiaU'  if  tliey  refrain  from  votiiiff.  ami  do  not  use  llieir  personal  inlliience 
witli  tlieir  fellow  directors  for  their  own  advantage  at  the  expense  of  the 
corporation.  But  the  olficers  of  a  corporation  individually  make  the  contracts 
in  behalf  of  the  corporation  and  issue  its  obligations.  They  may  not  lawfully 
contract  witii  themselves,  or  use  the  credit  of  the  corporation  for  their  own 
benefit  individually.  There  is  reason,  therefore,  for  the  rule  that  one  taking 
the  neijotiable  i)aper  of  a  corporation  in  payment  of  an  individual  obligation 
of  an  ollicer  is  charpeable  with  notice  and  is  put  upon  inquiry  as  to  whether 
the  issuance  of  the  paj)er  was  authorized  (  Wilson  v.  Met.  El.  It.  It.  Co.,  120 
N.  V.  150;  Hanover  Nat.  Bank  v.  Am.  Dock  dc  Trust  Co.,  148  N.  Y.  012; 
Chrrrrr  v.  Iti/.  Co..  150  N.  Y.  59;  Rochester  d-  C.  T.  R.  Co.  v.  Paviour,  104  N. 
Y.  281)  :  but  the  reason  does  not  exist  in  the  case  of  a  director,  and  therefore 
the  rule  is  not  applicable.  The  plaintifl's.  therefore,  were  entitled  to  have  the 
jury  instructed,  as  matter  of  law.  that  the  fact  that  the  payee  was  a  director 
of  a  corporation  was  not  notice  to  the  plaintiffs  of  any  infirmity  in  the  note, 
and  did  not  put  them  upon  any  inquiry  concerning  the  circumstances  under 
which  it  was  issued  or  came  into  the  hands  of  the  payee.  Any  other  rule 
would  seriously  impair  the  negotiability  of  the  corporate  securities." 

In  Havana  Cent.  R.  Co.  v.  Knickerbocker  Trust  Co.,  198  N.  Y.  422,  it  was 
held  (quoting  the  headnote)  tliat  "  \Vliere  the  treasurer  of  a  corporation, 
authorized  to  sign  checks  for  it  as  treasurer,  drew  cheeks  to  his  own  order 
and  deposited  tliem  in  a  bank  to  his  own  account,  the  bank  on  which  the 
checks  were  drawn  paid  them,  and  the  bank  in  which  they  were  deposited,  and 
which  collected  them,  credited  tlie  proceeds  thereof  to  the  individual  account 
of  the  treasurer,  who  thereafter  drew  out  such  proceeds,  the  latter  bank  is  not 
liable  to  the  corporation.  The  deposit  bank  of  the  corporation  upon  which  the 
checks  were  drawn  was  its  agent  to  determine  whether  the  checks  were  proj)- 
erly  payable  or  not.  When  it  decided  that  they  were  and  paid  them  to 
another  bank,  in  which  they  had  been  deposited  by  the  treasurer  for  his  indi- 
vidual account,  which  latter  bank  received  the  proceeds  in  good  faith,  this 
was  an  acknowledgment  that  its  treasurer  in  fact  possessed  authority  to  draw 
such  checks,  and  the  corporation  has  no  right  to  leeover  the  proceeds  from 
the  bank  in  which  they  were  deposited."  Wii.L.VRn  Baimi.ktt,  J.,  on  p.  429, 
said:  "The  distinguishing  feature  between  this  ease  and  the  cases  relied  upon 
to  support  the  judgment  which  has  been  rendered  herein  is  that  in  the  cases 
cited  the  form  of  the  transaction  was  notice  to  the  party  receiving  the  check 
or  other  instrument  that  it  was  sought  to  be  used  to  pay  an  individual  debt 
out  of  trust  funds.  Here  the  checks  were  not  designed  to  discharge  any  obliga- 
tion owing  to  the  defendant.  The  defendant  merely  colbeted  the  amounts 
thereof  and  placed  the  same  to  the  credit  of  the  payee.  ...  It  seems  to  me 
that  when  a  corporation  opens  an  account  with  a  banking  institution  it  con- 
fers upon  that  institution  the  power  to  determine  whetlier  any  check  drawn 
upon  the  account  conforms  to  the  contract  between  the  depositor  and  the 
depository.  When  it  makes  a  mistake  in  the  determination  of  such  a  question 
the  depository  may  be  liable  to  the  depositor;  but  the  depositor  cannot  recover 
back  the  money  paid  on  such  check  to  a  third  person  who  has  nceived  it  in 
pood  faith  reiving  on  the  representation  of  the  deposit  bank  that  the  check 
was  all  right  and  has  subsequently  parted  with  the  money."  —  C. 


n     1.    d.]  NOTICE:    WHAT    CONSTITUTES.  353 

certain  coupon  bonds,  dated  July  1,  1903,  payable  to  bearer  on  the 
first  day  of  July,  1913,  and  made  and  executed  by  the  borough,  but 
which  it  avers  were  never  issued  or  delivered  by  it.  The  case  was  tried 
in  the  court  below  upon  an  agreed  state  of  facts,  from  which  it  ap- 
peared that  the  bonds  in  suit  were  two  of  an  issue  of  thirty  $500 
bonds,  each  of  which  was  signed  by  the  mayor  of  the  borough,  one 
Alfred  M.  C'rotty,  sealed  with  the  corporate  seal  of  the  municipality 
and  duly  attested  by  the  borough  clerk;  that  some  of  the  bonds  were 
sold  by  the  borough,  and  th'e  remainder  were  left  by  it  in  the  custody 
of  the  mayor  until  some  further  disposition  of  them  should  be  made 
by  the  borough;  that  the  bonds  in  suit  are  two  of  those  which  were 
left  in  the  custody  of  the  mayor;  that  while  in  his  custody  the  latter 
hypothecated  them  with  the  defendant  bank  to  secure  the  payment 
of  a  loan  made  by  it  to  him;  that  the  bank  had  no  knowledge,  until 
long  after  the  making  of  the  loan  and  the  pledging  of  the  bonds,  that 
Crotty  was  not  in  lawful  possession  of  them  and  authorized  to  sell 
and  dispose  of  them  ;  and,  finally,  that  the  loan  made  by  the  bank 
to  Crotty  still  remains  unpaid.  Upon  these  facts,  the  court  held  as 
matter  of  law  that  there  was  never  any  delivery  of  the  bonds  in  suit 
such  as  to  impress  upon  them  the  quality  of  negotiable  instruments, 
and  that  they  had  no  legal  force  or  existence  in  the  hands  of  the  de- 
fendant, and  directed  judgment  to  be  entered  in  favor  of  the  borough. 

It  will  be  observed  that  the  bonds  in  suit  were  made  and  executed 
about  a  year  after  the  act  of  the  Legislature,  entitled  "  A  general  act 
relating  to  negotiable  instruments  (being  an  act  to  establish  a  law 
uniform  with  the  laws  of  otlier  states  on  that  subject),"  approved 
April  4,  1902,  went  into  eHect.     P.  L.  p.  583.     *     *     * 

It  is  suggested  that,  altliough  the  bank  had  no  knowledge  of  any 
lack  of  authority  on  the  part  of  Crotty  to  dispose  of  the  bonds,  the  fact 
that  he  signed  them  as  mayor  charged  it  with  notice  of  the  defect  in 
his  title  witiiin  the  meaning  of  tiie  fifty-second  section  '■  of  the 
statute.  But  it  is  provided  by  the  fifty-sixth  section  ®  of  the  act 
that  '*  to  constitute  notice  of  an  infirmity  in  the  instrument  or  defect 
in  the  title  of  the  person  negotiating  the  same,  the  person  to  whom 
it  is  negotiable  must  have  had  actual  knowledge  of  the  infirmity  or 
defect,  or  knowledge  of  such  facts,  that  his  action  in  taking  the  in- 
strument amounted  to  bad  faith."  Knowledge  on  the  part  of  the 
bank  that  the  person  to  whom  they  made  the  loan  was  the  mayor  of 
the  borough,  if  it  had  such  knowledge,  afTords  no  ground  for  holding 
that  its  action  in  taking  the  bonds  amounted  to  bad  faith.  Not- 
withstanding that  Crotty  executed  them  in  his  ofhrial  capacity,  he  had 
as  complete  a  right  as  any  other  citizen  of  the  borough  or  any  member 
of  the  public  at  large  to  become  a  purchaser  of  its  securities,  and  the 


»N.  Y.,  §ni.  — r. 
e  N.  Y.,  §  flf).  —  r. 

NEOOT.   INSTttUMENTB  — 23 


464  llOLDKK    IN    DUM    C'OlMJSK:    HKQUISITES.  [^Rt.    V. 

fact  that  lie  assumed  to  deal  with  them  as  his  own  iu  his  transaction 
with  the  bank,  instead  of  being  notice  to  it  that  he  was  betraying  the 
trust  reposed  in  him  by  the  municijiality  and  was  fraudulently  putting 
upon  the  m.lrket  securities  which  had  not  beeii  issued  by  it,  justified 
the  bank  in  believing  that  he  was  in  fact  just  what  he  represented 
himself  to  be  by  his  conduct,  namely,  the  owner  of  the  securities. 
The  bank  is  therefore  the  holder  in  due  course  of  the  bonds  in  suit, 
as  such  holder  is  defined  by  the  statute. 

The  rights  of  the  holder  in  due  course,  and  the  liability  of  the 
maker  of  a  negotiable  instrument  which  has  been  put  into  circulation 
by  a  person  other  than  the  maker  and  without  the  authority  of  the 
latter,  are  prescribed  by  the  fifteenth  section  ^  of  the  act,  which  ia 
as  follows:  [Quoting  it.]  Applying  to  the  borough  the  conclusive 
presumption  which  this  last-cited  section  of  the  statute  prescribed  for 
the  protection  of  a  holder  in  due  course>  it  must  be  held  to  have  made 
a  valid  delivery  of  these  bonds,  so  far  as  the  defendant  bank  is  con- 
cerned, and  the  latter  is  therefore  entitled  to  retain  possession  of 
them  as  outstanding  obligations  of  the  municipality.     *     *     * 

The  judgment  under  review   will   be   reversed.^ 


§  95    FOX  V.  CITIZENS'  BANK  AND  TRUST  COMPANY. 
37  Southwestern  Reporter  (Tenn.)   1102.  —  1896. 

Bill  to  enjoin  defendants  from  further  prosecuting  suits  on  notes 
executed  by  complainants  to  J.  C.  Anderson,  trustee,  and  indorsed 
by  him  to  defendants.     Decree  for  defendants.     Complainants  appeal. 

It  is  conceded  that  there  is  a  total  failure  of  consideration,  and  that 
there  would  be  a  perfect  defense  against  Anderson. 

7  N.  Y..  §  .3.5.  —  C. 

8  This  casfi  is  commented  upon  as  follows  in  24  Banking  I-f»w  .Tournal,  at  p. 
673:  "  Bankers  are  aware  of  manj'  eases  under  the  law  mercliant  where  the  fact 
of  the  person  negotiating;  an  instrument  signed  by  him  in  his  official  capacity 
for  a  personal  debt  or  transaction  —  as  for  example,  a  cashier  of  a  bank  or 
treasurer  of  a  corporation  paying  his  private  debt  by  a  check  signed  by  him 
in  his  official  capacity  —  has  been  held  to  put  the  taker  on  inquiry  and  chargi? 
him  with  notice  of  the  officer's  want  of  authority,  if  such  be  the  fact;  dtpriving 
such  taker  of  the  riglits  of  a  holder  in  due  course.  But  in  tliis  case  the  New 
Jersey  court  holds  the  pledgee  bank  not  charged  with  notice  by  reason  of  the 
fact  that  the  person  personally  negotiating  the  bonds  was  the  official  who  had 
signed  them.  It  bases  its  decision  upon  .  .  .  the  Negotiable  Instruments 
Law  fN.  Y..  §  95].  ...  If  this  construction  of  the  act  in  its  efl"ect  on  the  free 
transferability  of  paper  by  persons  who  sign  such  paper  officially  and  negotiate 
it  personally,  is  to  be  universally  followed,  it  will  mean  a  sweeping  away  of  all 
the  old  cases  which  hold  purchasers  charged  with  notice  where  they  take  paper 
signed  by  an  official,  which  is  given  in  his  private  transaction.  It  is  a  con- 
struction which  enlarges  the  negotiability  of  paper  in  this  class  of  cases,  and 
it  may  be  the  best  rule  or  policy  for  commercial  interests." 

See  also  Fillehrown  v.  Haywood,  190  Mass.  472.  —  C. 


11.  1.  d.]  notice:  what  constitutes.  355 

Wilson,  J.  (After  stating  the  facts  and  holding  there  was  no  actual 
notice  given  the  bank.) — It  is  next  insisted  tliat  the  notes,  being 
payable  on  their  face  to  Anderson,  trustee,  carried  notice  of  the 
equities  of  complainants.  (Billiard,  Vend.  §  408,  1  Story,  99,  §§ 
399,  400,  and  Covington  v.  Anderson,  16  Lea,  310,  are  cited.)  Be- 
yond question,  a  trustee  converting  trust  assets  to  his  own  use  is  liable 
to  the  beneficiaries;  and  equally  liable  is  any  one  purchasing  from  liim 
knowing  of  his  fraudulent  intention,  as  having  knowledge  of  facts 
that  would  put  a  reasonably  prudent  man  on  inquiry  as  to  the  power 
and  dishonest  ends  of  the  trustee,  and  wliich  inquiry,  if  properly 
prosecuted,  would  discover  the  truth.  This  is  the  extent  to  which  the 
authorities  cited  go.  But  we  are  unable  to  perceive  the  direct  con- 
nection and  application  of  the  principle  cited  to  the  facts  of  this  case. 
It  is  well  settled  tliat  tlie  fact  that  the  consideration  for  which  a  note 
is  given  is  stated  in  it  will  not  destroy  its  negotiability,  unless  the 
recital  qualifies  the  promise  to  pay,  or  renders  it  uncertain  either  as 
to  the  time  of  payment  or  the  sum  to  be  paid.  And  if  the  note  be 
received  before  maturity,  and  before  a  failure  of  consideration,  it  will 
be  held  free  from  the  equities,  although,  from  the  recital,  it  was  known 
to  the  indorser  that  the  consideration  was  future  and  contingent. 
(Goodloe  V.  Taylor,  10  N.  C.  458;  Stevens  v.  Blvnt,  7  Mass.  240; 
Davis  V.  McCready.  17  N.  Y.  230;  Banh  v.  Cason,  39  La.  Ann.  865,  2 
South.  881  ;  Siegrl  v.  Banl-,  131  III.  569,  23  N.  E.  417;  Daniel  Neg. 
Inst.  §§  790-796.)  In  other  words,  says  the  Louisiana  Annual  (2 
South.)  case  and  the  cases  in  131  111.  569,  and  23  N.  E.  417,  "it 
cannot  affect  the  negotiability  of  a  note  that  its  consideration  is  to  be 
hereafter  realized,  or  that,  from  contingency,  it  may  never  be  enjoyed." 

The  argument  or  proposition  is  advanced  l)y  implication,  at  least, 
that  the  fact  that  these  notes  are  made  payable  to  Anderson,  trustee, 
impaired  their  negotiability,  or  put  a  transferee  on  notice  of  all  equi- 
ties existing  as  between  the  maker  and  the  trustee.  In  a  contest 
between  the  beneficiaries  of  the.se  notes  assuming  that  Anderson  was 
not  their  real  owner,  and  the  transferee  of  Anderson,  the  fact  that 
the  notes  af)peared  on  their  face  to  be  payable  to  liim  as  trustee  would 
put  the  transferee  on  notice,  and  the  claim  of  I  he  limeficiaries  would 
be  superior  (Cardvell  v.  Cheatham,  2  Head,  1  I  :  Duncan  v.  Jandon, 
15  Wall.  175;  Shaw  v.  Spenrrr.  100  Mass.  389;  Mrxnndrr  v.  Mdrrson. 
7  Ba.xt.  103),  because  the  notes  gave  direct  information  that  they  were 
trust  property,  and  the  direct  purpose  of  the  transfer  was  to  pay  his 
individual  debt.     (Covington  v,  Anderson,  16  Lea.  310.)  » 


"For  an  illustration  of  the  proposition  laid  dnwii  in  tliis  pnraRraph,  see 
Ford  V.  Hroun.  114  Ti-nri.  407.  In  lliis  chhp  cortificiitis  of  (lc|H)sit  issued  by 
the  B.  Bank  (nnr  payahir  to  "  ('.  N.  Woodworth.  tru^fcc,"  and  the  other  to 
"  C.  N.  Woodworth.  TniHtcf  to  Bftty  Ford"),  had  Iwen  indor^pd  hy  Woodworth, 
"  C.  N.  Woodworth,  'I  rUHtw  for  Betty  Ford."  and  sold  for  his  own  iK-nefit  to 
A.,  who  indorsed  them  in  blank  and  sold  them  for  cash  to  the  C.  Bank  who 


356  iioi.ni'i;  i\  niM'  cornsiF. :  niXiUisiTKs.  [art.  V. 

The  question  as  to  wlu'tlicr  a  note  j^ayable  to  one  as  trustee  is  nego- 
tiable is  a  subjeet  of  disjiute  in  tbe  autborities  or  adjudged  eases. 
In  Marybind  it  seems  to  bave  been  hekl  tliat  such  a  note  is  not  eom- 
mereial  paper,  and  that  an  indorsement  of  it  by  the  trustee  transfers 
it,  subjeet  to  the  trust,  and  tliat,  after  sueb  transfer,  it  is  open  to 
tbe  equitable  defenses  between  the  original  parties.  {Hank  v.  Lange, 
51  Md.  \'M\)  But  it  is  holden  in  other  jurisdictions  that  a  note  to 
and  indorsed  by  one  as  trustee  of  a  named  person  does  not  carry  to 
an  innocent  purchaser  any  notice  of  a  restriction  upon  the  payee's 
right  to  transfer  it.  {Downer  v.  Read,  17  Minn.  493  [Gil.  470]: 
Bush  V.  Peckard,  3  Har.  |  Del.]  385;  citing  Rand.  Com.  Paper,  §  158, 
p.  242 ;  Davis  v.  Garr,  6  N.  Y.  124 ;  s.  c.  55  Am.  Dec.  387,  and  note ; 
Pierce  v.  Rohic,  63  Am.  Dec.  614;  Conner  v.  Clark,  73  Am.  Dec.  529.) 

As  a  general  thing,  the  addition  of  the  words  "  trustee  "  and  the 
like  will  be  treated  as  descriplio  persona'.  (Authorities  supra;  2 
Am.  and  Eng.  Enc.  Law,  p.  358,  notes  on  pages  358  and  359.)  We 
take  it  that  the  decided  weigbt  of  authority,  and,  it  seems  to  us,  of 
sound  reason,  supports  tlie  position  tbat  the  addition  of  tbe  word 
"  trustee "  to  tbe  name  of  tbe  payee  of  a  note  of  itself  does  not 
destroy  its  negotiability.  Tinder  tbe  rules  of  the  common  law,  all 
conveyances  by  a  trustee,  whether  to  innocent  purchaser  or  not,  even 
if  made  in  contravention  of  tbe  trust,  operated  upon  the  legal  title, 
and  vested  it  in  tbe  grantee.     Tbe  beneficiary  had  to  go  into  equity, 

souorht  to  collect  them  from  the  B.  Bank.  Betty  Ford  brought  an  action 
against  A.,  the  B.  Bank  and  the  C.  Bank  to  enjoin  the  B.  Bank  from  paying 
the  certificates.     A  decree  in  favor  of  the  complainant  was  affirmed  on  appeal. 

McAlli.ster,  J.,  said  in  part:  "These  authorities  sustain  our  position  that 
the  word  '  trustee,'  in  an  indorsement  of  this  character,  is  express  notice  to  a 
purchaser  that  there  is  a  cestui  que  trust  or  beneficiary,  and  that  his  rights 
may  not  be  sacrificed  by  the  trustee  in  the  sale  or  pledge  of  the  note  for  his 
own  benefit.  In  other  words,  our  holding  distinctly  is  that  such  an  indorse- 
ment is  actual  notice  to  the  purchaser  of  such  paper  within  the  meaning  of 
section  56  [N.  Y..  §  9.51  of  the  Negotiable  Instruments  Law."  P.  479.  "We 
are  therefore  of  opinion  that  the  indorsements  and  recitals  of  these  certificates 
communicated  actual  knowledge  to  the  [C]  bank  that  they  represented  a 
trust  fund  and,  even  under  the  Negotiable  Instruments  Act,  no  title  was 
acquired  by  the  [C]  bank  to  the  paper."    P.  482. 

A  note  to  this  case  in  1  L.  N.  S.  188,  says:  "Some  confusion  has  existed 
between  the  question  of  the  effect  of  the  use  of  the  word  *  trustee,'  in  describ- 
ing the  payee  or  holder  of  an  instrument,  upon  its  negotiability,  and  the  other 
question  of  the  effect  of  the  use  of  that  word  to  give  notice  to  subsequent 
takers  of  the  trust  character  of  the  instrument  and  of  tlu-  rights  of  the  bene- 
ficiaries. In  some  of  the  treatises  on  the  subjects  of  trusts  and  of  negotiable 
instruments  there  has  be«'n  a  failure  to  distinguish  between  these  quite  dif- 
ferent questions.  The  question  of  the  effect  of  describing  a  payee  as  a 
'  trustee  '  upon  the  negotiability  of  the  instrument  relates  to  the  defenses  of 
the  makers  or  obligors  a«  against  those  to  whom  the  trustee  has  transferred 
the  instrument,  while  the  other  question  relates  to  the  rights  of  the  bene- 
ficiaries as  against  such  transferees."  —  C. 


II.    1.    e]  NOTICE  BEFORE  FULL  AMOUXT  PAID.  357 

and  there  lie  could  compel  the  grantee  to  respect  the  trust,  as  the 
original  trustee  should  have  done.  (Gale  v.  Mensing,  20  Mo.  461; 
8.  c.  64  Am.  Dec.  197,  and  notes;  see,  also,  Tyler  v.  Herring,  67  Miss. 
169,  6  South.  840;  s.  c,  19  Am.  St.  Rep.  263,  and  extended  note 
where  the  .subject  with  the  authorities,  is  fully  presented.)  The  sub- 
stance or  real  rule,  in  the  absence  of  a  statute,  in  respect  to  unauthor- 
ized sales  or  transfers  of  property  by  trustees,  is  that  they  are  voida- 
ble at  the  election  of  the  parties  in  interest,  and,  until  so  avoided, 
the  grantee  has  all  rights  in  the  property  as  to  third  parties.  In  this 
case  tliere  is  no  evidence  that  the  notes  did  not  belong  to  Anderson, 
or  that  he  did  not  have  the  right  to  deal  vi'ith  them  as  he  pleased.  The 
result  is  that  as  to  these  complainants,  the  defendant  bank  is  an  inno- 
cent purchaser  of  the  notes,  for  value,  without  notice  of  any  equities 
in  their  favor;  and,  this  being  so,  the  decree  of  the  chancellor  is  cor- 
rect, and  must  be  athrmed,  with  costs. ^ 


(e)  Notice  before  full  amount  paid. 

§  93  DRESSER  v.  MISSOURI,  ETC.  COMPANY. 

93  United  States,  92. —  1876. 

Mk.  Justice  Hunt  delivered  the  opinion  of  the  Court. 

This  action  is  brought  upon  three  several  promissory  notes  made 
by  the  Missouri  and  Iowa  Railway  Construction  Company,  dated 
Nov.  1,  1872,  payable  at  two,  three,  and  four  months,  to  the  order  of 
William  Irwin,  for  the  aggregate  amount  of  $10,000. 

The  defense  is  made  that  they  were  obtained  by  his  fraudulent 
representations. 

Rut  a  single  point  rprpiires  discussion.  Conreding  that  the  present 
plaintifT  received  the  notes  before  maturity,  and  that  his  holding  is 
bona  fide,  the  fpicstion  is  as  to  the  amount  of  his  recovery. 


»  The  addition  of  the  term  "  trustee,"  "  agent,"  etc.,  to  the  name  of  the 

payee  is  restrictive  in  efT<ct.  It  nicn-ly  K'VfH  notice  of  the  rights  of  the  cestui 
or  the  principnl;  it  cannot  logically  be  liflil  to  give  notice  of  a  defense  in  favor 
of  the  ninkfT.  See  as  to  rnstrictive  indorsements,  \eg.  Tnst.  L.,  §  00.  See 
also  8  27.  siibsoc.  0;  Dnuis  v.  darr,  0  N.  Y.  124,  nntr,  p.  121. 

A  f|ualified  indorsement  is  not  notice  of  any  infirmity  in  the  instrument. 
r^omax  V.  l'i(;ot,  2  Rand.  (Va.)  247.  The  death  of  the  maker,  known  to  the 
hnyor,  does  not  deprive  the  buyer  of  the  jiosition  of  a  lioldir  in  due  course. 
f}lark  V.  1  hni/rr.  inS  Mass.  210. 

The  doctrine  of  notice  by  Uh  prmlenti  has  no  application  to  negotiable  paper. 
County  of  Wdirrn  v.  Marvxf,  97  I'.  S.  100.  Nor  sliouM  the  maker,  before 
maturity,  be  liable  to  garnishment  at  the  suit  of  a  creditor  of  tlic  payee,  for  a 
purchaser  from  the  payee  in  due  course  should  be  protected.  1  Daniel  on  Neg, 
Inst..  §  800a.  —  H. 


358  llOl.DKK    IN    DUE   COUUSK :    REQUISITES.  [aRT.    V. 

Under  the  riiliiii;  dI"  tlio  roint  lio  recovered  $500.  flis  conlosta- 
tion  is,  that  he  is  cnlitlcd  to  recover  tlie  i'aee  of  tlie  note,  with  interest. 

After  the  evideiue  was  concluded,  the  phuntilV  asked  the  court  to 
charge  the  jury,  that  if  tliey  helieved,  from  tlie  evidence,  that  the 
plaintitf  purchased  the  notes  in  controversy  of  WiHiam  Irwin  for  a 
valuable  consideration,  on  the  1st  of  November,  1<S72,  and  paid  $500, 
part  of  the  consideration,  on  2lst  day  of  January,  1873,  before  any 
notice  of  any  fraud  in  the  contract,  he  was  entitled  to  recover  the 
whole  amount  of  the  notes;  and  the  court  refused  this  instruction. 
But  the  court  charged  the  jury, — 

"  That,  in  the  iirst  place,  the  jury  must  find  that  there  was  fraud 
in  the  inception  of  the  notes  as  alleged;  and  that  if  the  defendants 
failed  to  satisfy  the  jury  of  that  fact,  the  whole  defense  fails. 

"  That  if  the  fact  of  fraud  be  established,  and  the  jury  find  from 
the  evidence  that  the  plaintiff  paid  $500  upon  the  notes  witliout 
notice  of  the  fraud,  and  that  after  receiving  notice  of  the  fraud  tlie 
plaintiff  paid  the  balance  due  upon  tlie  notes,  he  is  protected  only 
pro  tanio;  that  is,  to  the  amount  paid  before  he  received  notice." 

It  does  not  appear  that,  upon  the  purchase  of  the  notes  in  suit, 
the  plaintiff  gave  his  note  or  other  obligation  which  might  by  its 
transfer  subject  him  to  liability.  His  agreement  seems  to  have  been 
an  oral  one  merely,  —  to  pay  the  amount  agreed  upon,  as  should  be 
required ;  and  he  had  paid  $500,  and  no  more,  when  notice  of  the 
fraud  was  brought  home  to  him. 

The  argument  of  the  plaintiff  in  error  is  that  negotiable  paper  may 
be  sold  for  such  sum  as  the  parties  may  agree  upon,  and  that,  whether 
such  sum  is  large  or  small,  the  title  to  the  entire  paper  passes  to  the 
purchaser.  This  is  true;  and  if  the  plaintiff  had  bought  the  notes 
in  suit  for  $500,  before  maturity  and  without  notice  pf  any  defense, 
and  paid  that  sum,  or  given  his  negotiable  note  therefor,  the  authori- 
ties cited  show  that  the  whole  interest  in  the  notes  would  have  passed 
to  him,  and  he  could  have  recovered  the  full  amount  due  upon  them. 
{Fowler  v.  StricMand,  107  Mass.  552;  Park  Bank  v.  Watson,  42  N. 
Y.  490 ;  Ba7iJc  of  Michigan  v.  Green,  33  Iowa,  140.)  The  present  case 
differs  from  the  cases  referred  to  in  this  respect.  The  notes  in  ques- 
tion were  purchased  upon  an  unexecuted  contract,  upon  which  $500 
only  had  been  paid  when  notice  of  the  fraud  and  a  prohibition  to  pay 
was  received  by  the  purchaser.  The  residue  of  the  contract  on  the 
part  of  the  purchaser  is  unperformed,  and  honesty  and  fair  dealing 
require  that  he  should  not  perform  it;  certainly,  that  he  should  not  be 
permitted,  by  performing  it,  to  obtain  from  the  defendants  money 
which  they  ought  not  to  pay.  As  to  what  he  pays  after  notice,  he 
is  not  a  purchaser  in  good  faith.  He  then  pays  with  knowledge  of 
the  fraud,  to  wliicb  he  becomes  a  consenting  party.  One  who  pays 
with  knowledge  of  a  fraud  is  in  no  better  position  than  if  he  had  not 
paid  at  all.     He  has  no  greater  equity,  and  receives  no  greater  pro- 


11.    1.    e]  NOTICE  BlvFORF  FULL  AMOUNT  PAID.  .359 

tection.  Sucli  is  tlie  rule  as  to  contracts  general!}-.  In  the  case  of 
the  sale  of  real  estate  for  a  sum  payable  in  instalments,  and  circum- 
stances occur  showing  the  existence  of  fraud,  or  that  it  would  be 
inef|uitablo  to  take  the  title,  the  purchaser  can  recover  back  the  sura 
l»ni(l  before  notice  of  the  fraud,  but  not  that  paid  afterwards.  {Bar- 
uard  V.  CampheU,  53  N.  Y.  73;  Lewis  v.  Bradford,  10  Watts,  82; 
Juvenal  v.  Jackson,  2  Harris,  529;  Id.  430;  Youst  v.  Martin,  3  S.  & 
K.  423,  430.) 

In  Weaver  v.  Barden  (49  N.  Y.  291),  the  court  use  this  language: 
"  To  entitle  a  purchaser  to  the  protection  of  a  court  of  equity,  as 
against  a  legal  title  or  a  prior  equity,  he  must  not  only  be  a  pur- 
chaser without  notice,  but  he  must  be  a  purchaser  for  a  valuable 
consideration  ;  that  is.  for  value  paid.  Where  a  man  purchases  an 
estate,  pays  part  and  gives  bonds  for  tlie  residue,  notice  of  an  equita- 
ble incumbrance  before  payment  of  the  money,  though  after  giving 
the  bond,  is  sufficient.  (rouviUe  v.  Naish,  3  P.  Wms.  306;  Story  v. 
Lord  Witidsor,  2  Atk.  630.)  Mere  security  to  pay  the  purchase  price 
is  not  a  purchase  for  a  valuable  consideration.  (Ilardingham  v. 
Nicholls,  3  Atk.  304;  Maundrell  v.  Mamidrell,  10  Ves.  246,  271; 
Jaclcson  v.  CadwelJ,  1  Cowen,  622;  Jewell  v.  Palmer,  7  J.  C.  65.) 
The  decisions  are  placed  upon  the  ground,  according  to  Lord  Ilard- 
wicke,  that  if  the  money  is  not  actually  paid  the  purchaser  is  not  hurt. 
He  can  be  released  from  his  bond  in  equity." 

The  plaintiff  here  occupies  the  same  position  as  the  bona  fide  pur- 
chaser of  the  first  of  a  series  of  notes,  of  which,  after  notice  of  a  fraud, 
he  purchases  the  rest  of  the  series.  He  is  protected  so  far  as  his  good 
faith  covers  the  purchase,  and  no  further. 

Upon  receiving  notice  of  the  fraud,  his  duty  was  to  refuse  further 
payment;  and  the  facts  before  us  required  such  refusal  by  him. 
(Authorities  supra).  Crandell  v.  Vickery  (45  Barb.  156),  is  in 
point.     *     *     ** 

To  the  same  purport  in  principle,  although  upon  fads  somewhat 
different,  are  the  cases  of  darland  v.  The  Sali')ii  Haul-  (!>  Alass.  lOS)  ; 
The  Fulton  Bank  v.  The  Phrrnix  Bank  (1  Hall,  562)  ;  and  ^Yhilc  v. 
Springfield  Bank  (3  Sandf.  S.  V.  227). 

The  cases  are  numerous  that  where  a  hnna  fide  holder  takes  a  note 
misappropriated,  fraiidulcntly  obtained,  or  without  consideration,  as 
collateral  security,  he  holds  for  the  amount  advanced  upon  it,  and 
for  that  amount  only.  Williams  v.  Smith.  2  Hill,  'M)\  \  Mhiirr  v. 
Hartshorn.  1  Zabr.  603.)      *     *     * 

The  case  before  us  is  governed  by  the  rule  (lint  the  portifni  of  jin 
unperformed  contraft  which  is  coinph'ted  after  notice  of  a  fraud  is 
not  within  the  principle  which  protects  a  bona  fide  purfhaser. 

No  respectable  authority  has  been  cited  to  us  sustaining  a  contrary 
position,  nor  have  we  been  able  to  find  any.  The  judgment  below  is 
baaed  upon  authority,  and  upon  the  soundest  principles  of  honesty 
and  fair  dealing.     It  has  our  concurrence,  and  is  affirmed. 


360  nOLDKU    IN    DUli   COUKSli.  [aKT.    v. 

2.  Holder  Dehivino  Title  fkom  Holder  in  Due  Course. 

§97  SIMON  V.  MEKRITT. 

33  Iowa,  537. —  1871. 

Action  by  the  holder  of  a  promissory  note  against  the  maker. 
There  was  a  verdict  and  judgment  for  defendant.     Plaintiffs  appeals. 

Beck,  Ch.  j.  *  *  *  Among  other  instructions  the  court  gave 
the  jury  the  following:  "  If  you  find  from  the  evidence  that  the  note 
in  question  was  obtained  of  the  makers  by  fraud  and  deception,  and 
if  you  further  find  that  the  plaintiff,  Simon,  knew  of  such  fraud  and 
deception,  or  if  he  had  reason  to  know  or  believe  that  said  note  was 
fraudulently  obtained  of  the  maker,  and  that  it  is  void,  and  if,  be- 
cause of  such  knowledge  or  belief,  he  refused  to  receive  or  purchase 
it  of  Leggett  until  an  indemnifying  bond  was  executed  to  him  by 
Leggett,  then  the  law  of  the  case  is  with  the  defendant,  and  if  you 
so  find  then  your  verdict  should  be  for  defendant."  And  the  instruc- 
tion directed  the  jury  tbat  if  plaintiff,  "  in  good  faitli,  for  a  valuable 
consideration,  obtained  the  note  in  the  ordinary  course  of  business, 
before  maturity,  without  notice  of  fraud,  or  without  having  reason  to 
know  or  believe  that  the  note  was  obtained  by  fraud  of  the  maker," 
they  should  find  for  plaintiff. 

These  instructions  are  erroneous.  They  leave  out  of  view  the  well- 
settled  doctrine  that  if  Leggett,  the  transferer  of  plaintiff,  was  such 
an  innocent  and  bona  fide  holder  of  the  paper,  that  in  his  hands  it 
could  have  been  enforced  against  defendant,  plaintiff,  although  he  may 
have  taken  the  note  charged  with  notice  of  its  infirmities,  may  re- 
cover in  this  action.^  If  Leggett  so  held  the  note,  his  title  and  rights 
thereto  were  such  that  they  could  not  have  been  defeated  by  defendant. 
In  the  transfer,  the  title  and  rights  held  by  him  passed  to  plaintiff. 
The  notice  which  plaintiff  may  have  had  of  the  fraud  in  the  original 
transaction  does  not  defeat  the  rights  he  acquired  by  the  transfer. 

2  This  doctrine  applies  to  a  purchase  after  maturity  as  well  as  to  a  purchase 
before  maturity.  Barker  v.  Lichtenbrrper,  41  Nel).  7.51.  But  it  does  not  apply 
to  a  purchase  from  a  subsequent  holder  in  due  course  by  a  prior  party  who 
when  he  held  the  instrument  was  chargeable  with  notice  of  its  infirmities. 
Thus,  in  Kost  v.  Bender,  25  Mich.  515,  510,  Cooley,  J.,  said: 

"  It  is  perfectly  true  as  a  general  rule,  that  the  bmia  fide  holder  of  nego- 
tiable paper  has  a  right  to  sell  the  same,  with  all  the  rights  and  equities 
attaching  to  it  in  his  own  hands,  to  whoever  may  see  fit  to  buy  of  him,  whether 
such  purchaser  was  aware  of  the  original  infirmity  or  not.  Without  this 
right  he  would  not  have  the  full  protection  which  the  law  merchant  designs 
to  afford  him,  and  negotiable  paper  would  cease  to  be  a  safe  and  reliable 
medium  for  the  exchange  of  commerce.  For,  if  one  can  stop  the  negotiability 
of  paper  against  which  there  is  no  defense,  by  giving  notice  that  a  defense 
once  existed  while  it  was  held  by  another,  it  is  obvious  that  an  important 
element  in  its  value  is  at  once  taken  away.  But  T  am  not  aware  that  this 
rule  haa  ever  been  applied  to  a  purchase  by  the  original  payee,  nor  can  I 


II.    3.]  AMOUNT    OF    RECOVERY.  361 

One  reason  of  the  rule  is  obvious.  The  maker  of  the  note  would 
be  liable  to  the  transferer;  his  condition  is  made  no  harder  by  the 
note  coming  into  the  hands  of  one  having  notice  of  its  infirmities. 
We  do  not  understand  that  there  is  any  conflict  in  the  authorities  upon 
this  point.  {Uosl-elJ  d-  Gervey  v.  Whitmore,  10  Me.  102;  Smith  v. 
Hiscock,  11  Id.  449;  Prentice  &  Messenger  v.  Zane,  2  Graft.  262; 
Boyd  v.  McCann,  10  Md.  118;  Howell  v.  Crane,  12  La.  An.  126;  see 
authorities  cited  in  Story  on  Prom.  Notes,  §  191.) 

The  instructions  above  set  out,  being  in  conflict  with  this  doctrine, 
ought  not  to  have  been  given.  For  this  reason  the  judgment  of  the 
District  Court  is  reversed. 


3.  Rights  of  Holder  in  Due  Course  to  Recover  Full  Amount. 

§  96  BTSSELL  v.  DTCKERSON. 

64  Connecticut.  61.  —  1894. 

Baldwin,  J.  (After  disposing  of  another  matter.) — The  plaintiff's 
appeal  is  based  on  the  instruction  given  to  the  Jury,  tliat  in  the  action 
against  tfie  maker  of  a  negotiable  accommodation  note  by  an  indorsee, 
who  took  it  in  good  faith  for  value  before  maturity,  and  witliout 
notice  of  any  infirmity,  if  the  defendant  proves  that  it  was  obtained 
from  him  by  the  payee  and  indorser  by  fraud,  the  rule  of  damages 
is  the  amount  paid  by  the  plaintiff.  A  note  given  for  the  accommoda- 
tion of  the  payee,  which  he  has  thus  negotiated  to  a  bona  fide  pur- 
chaser, stands,  as  between  the  holder  and  maker,  on  the  same  footing 
as  if  it  were  business  paper.^     The  jury  should  therefore  have  been 


perceivp  that  it  is  osspntini  to  thp  protootion  of  fbp  innocptit  indorspp.  that  it 
should  he.  It  cannot  Ik*  very  important  to  liim,  that  thprp  is  onp  pprson 
incapablp  of  micpppHinp  to  his  pqiiitips.  and  who  ponsoqnpntly  would  not  bp 
likely  to  hpconip  a  pnrrhaHPr.  If  he  may  spII  to  all  tlip  rrst  of  the  conunMiiity, 
the  market  value  of  his  security  is  not  likely  to  he  alTcctrd  hy  the  circumstance, 
that  a  Rin^jlp  iiulividiial  cannot  compctp  for  its  purchase,  psppcially  when  we 
ronsidcr  that  thp  nature  of  negotiahlp  securities  is  such  that  their  market 
value  is  very  little  inlluenced  hy  competition.  Nor  do  I  perceive  that  any 
rule  or  principh-  of  law  would  Im'  violated  hy  permitting  the  maker  to  set  up 
thin  defense  against  the  payee,  when  he  becomes  iuflorsee,  with  the  same  effect 
as  he  miplil  ha\e  done  before  it  had  been  sold  at  all.  or  that  tiiere  is  anv  valid 
reason  a^rainst  it." 

KoHt  v.  livmlrr,  miprn,  is  approved  in  Arnriort  ('nffrc  Co.  v.  Ifnfjrrs,  lOfj  Va. 
51,  reported  in  S  .\.  &  V,.  Ann.  (as.  02.T.  with  note  entitled  "  'lille  acf|Mired 
by  payee  of  instrument  fraiululently  procured  from  maker,  or  subject  to  dlher 
defenses,  by  refiurctiasp  after  transfer  to  innocent  third   person."  —  ('. 

3  Business  paper  (ns  dist intruished  frcmi  accommodation  paper),  may  lie 
purchased  (or  any  price  without  involviny  any  <|uestion  of  usury,  for  tiie  trans- 
action is  a  sale  and  purcha-e  and  not  a  loan,  ('mm  v.  Ilrtuhirlxs.  7  Wend.  ( N. 
Y.)   560;   Corning  v.  Pond,  20  Hun    (N.  Y,),   120,     Hut  a  transfer  of  accom- 


'M\2  ii(»i,ni:K  in  di'k  c"Oursk.  [art.  v. 

instructed  that  tlie  rule  of  (lamaj^'i's  uiuliM-  the  eiivumstances  stated 
in  the  charge,  was  tlie  I'ace  of  tlic  note,  with  interest  from  its  maturity. 
{Belden  v.  Lamb,  17  Conn.  111.  ir).'5;  Firttt  Ecilesiastical  Society  v. 
Loomis.  Vi  Conn.  570,  i^',  I  ;  Hdii-hiiid  v.  Fowler,  47  Conn.  347;  Croin- 
well  V.  Couiily  of  Sac,  Dli  V.  S.  :>!,  (lO.) 

There  is  error,  and  a  new  ti-ial  is  ordered  upon  the  plaintiff's 
appeal,  in  case  one  should  not  he  granted  hy  the  City  Court,  on  the 
ground  that  tlie  verdict  was  against  the  evidence. 


§96     JKFFERSON  BANK  v.  CHAPMAN-WHITE-LYONS  CO. 

123  SouTHWKSTERN  (Tenn.)  641.  —  1909. 

Action  on  note.     Judirment  for  plaintiflf  and  defendant  appeals. 

McAltster,  j.     *     *     * 

It  is  said,  however,  by  counsel  for  appellant,  that  in  no  event  is 
the  complainant  entitled  to  recover  exceeding  the  amount  it  paid  for 
said  note,  with  interest.  It  appears  that  the  decree  below  was  for 
the  full  amount  of  the  note,  with  interest  and  attorney's  fees  amount- 
ing to  $251.75.  Counsel,  in  support  of  his  position,  invokes  the  prin- 
ciple announced  in  Oppenlieiriicr  v.  Bank,  97  Tenn.  19,  wherein  it 
was  said: 

"  We  hold,  however,  that,  these  notes  being  fraudulent  in  their 
inception  and  without  consideration  between  the  original  parties,  the 
bank  will  only  be  entitled  to  recover  to  the  extent  of  the  sum  actually 
paid  by  it,  to  wit,  the  sum  of  $1,200  and  interest.  In  oilier  words, 
we  hold  there  was  a  negotiation  of  the  notes  in  due  course  of  trade 
only  to  the  extent  of  the  amount  actually  paid." 

Again,  in  Campbell  v.  Broirn,  100  Tenn.  215,  it  i-^  said  : 

"The  purchaser  of  a  note  at  a  rate  of  discount  equivalent  to  40 
per  cent,  per  annum  cannot,  though  innocent  of  any  wrong,  recover 
more  than  the  amount  actually  paid  against  tl'c  maker  in  fraud  of 
whose  rights  the  note  was  transferred."  *  *  *  Bnt  we  are  of 
opinion  that  this  question  is  now  settled  by  section  57 ''  of  the  nego- 

moriation  pap^^r  by  the  accommodatpd  party  to  one  knowing  the  faf-ts,  is  a  loan 
and  not  a  purchase  and  sale,  and  if  it  be  at  a  rate  of  discount  <,Mvater  than 
that  allowed  by  the  usury  laws,  is  usurious.  Ibid;  1  Dmiel  on  Neg.  Inst., 
!5§  7.50-7.53.  'Many  cases  hold  the  same  as  to  accommodation  paper  even 
thoufih  the  buyer  does  not  know  it  to  be  accommodation  yjayx-r:  but  this  view 
has  been  criticised.     Ibid. 

There  has  been  great  conflict  among  the  authorities  as  to  the  amount  a  holdci 
in  due  course  may  recover  from  an  accommf)dation  party  oi-  m  party  whose 
assent  to  the  paper  has  been  procured  by  fraud.  1  Daniel  on  Neg.  Tnst.. 
g§  7.54-7.5fi.  The  Neg.  Inst.  Law,  §  00.  settles  the  law  in  conformity  to  the 
rule  of  the  Supreme  Court  of  the  United  States.  Cromwell  v.  County  of  Sac, 
96  I'.  S.  60;  R.  Co.  v.  Scltuttc,  103  U.  S.  118. —  H. 

4  N.  Y.,  §  96.  —  C. 


II.    3.]  AMOUNT   OF    RECOVERY.  363 

liable  instruments  law,  which  provides  that  the  innocent  holder  "  may 
enforce  payment  of  the  instrument  for  the  full  amount  thereof  against 
all  parties  liable  thereon." 

Judgment  aflBrmed.' 


§96        NATIONAL  BANK  OF  MICHIGAN  v.  GREEN. 
33  Iowa.  140.—  1871. 

Action  by  holder  against  indorser.  The  answer  set  up  a  sale  for 
less  than  the  face  value.  Demurrer  to  this  defense  overruled.  Judg- 
ment for  defendant. 

Day,  Ch.  J.  —  In  objection  to  the  second  count  "^  it  is  claimed  that 
the  holder  of  negotiable  paper  is  entitled  to  recover  of  the  indorser 
the  whole  amount  thereof  without  reference  to  the  amount  paid 
therefor.  Upon  this  question  the  decisions  are  not  in  harmony.  *  *  * 
Without  attempting  a  review  of  the  authorities  bearing  upon  this 
branch  of  the  demurrer,  we  deem  it  sufficient  to  state  as  our  opinion 
that  the  indorsee  in  good  faith  of  a  promissory  note,  is  entitled  to 
recover  of  the  indorser  the  amount  of  the  note. 

This  view  has  the  unqualified  indorsement  of  Mr.  Parsons.  (See 
2  Parsons,  Notes  and  Bills,  428.  Also,  Dvrant  v.  Bavia,  3  Dutch. 
623,  635.)  It  follows  that  the  demurrer  to  the  second  count  should 
have  been  sustained. 

Reversed.^ 


§96  MERRITT  v.  BENTON. 

in  VVKNOKir.,   llfi.  —  1833. 

Action  against  indorser.  Juflgmont  for  amount  of  note  and 
notary's  fens.     Dr-fondant  moves  for  new  trial. 

» "  It  is  innisted  by  defernlant's  counsel  that  as  plaintifT  paid  only  $1,000 
for  the  note  and  niort^afic.  the  excrtition  of  which  was  indncrd  by  fraud,  the 
Biim  =o  paid  and  interest  thereon  is  the  limit  of  hi.s  recovery,  and  not  the  sum 
Bpecified  in  the  note.  A  diversity  of  jndioial  utterance  exists  on  this  important 
r)neHtifin.  aH  will  be  seen  by  examinirif;  the  aiitliorities  collated  in  the  notes 
appended  to  the  cases  of  finiUy  v.  StiiUh.  If  Oh.  St.  300.  84  Am.  Dec.  385. 
and  firilrH  V.  JJrrrirtfi.  11  fal.  T>12.  II  Am.  St.  Rep.  307.  Whatever  the  rule 
may  Ik*  in  other  jiirisdiet ion",  it  is  settled  in  this  state  by  statute  [the  Nepo- 
tiable  Instruments  Law],  enacted  prior  to  the  pivinp  of  the  note  and  mortpajje, 
that  the  hf)lder  of  a  ne;,'ot  iablr-  instrument  in  due  cf)urHe  may  enforce  payment 
for  the  full  amount  thereof  ajrainst  all  [larties  lialile  thcref)n;  P..  fi  C  f'omp., 
<5  44.10  fN.  Y..  ?  Ofij."  MonnK.  .T,.  in  f.assns  v.  }frrnrty.  47  Or.  474,  at  p. 
484.  — f. 

•  Only  HO  much  of  the  o|>inion  is  jriven  as  relates  to  this.  —  H. 

T  The  amount  of  recovery  a^'ainst  the  indnr.Hcr  has  beeu  a  matter  of  ^reat 
oontention.  1  Danifl  on  \<'.v  Tnsf..  §?  700  7fi«  It  i«  now  ^fttlcd  by  the  Nef», 
Inst,  T>aw,  §  06,  in  conformity  with  the  view  of  the  principal  case.  —  TT, 


364  HOLDKR    IN    DUK   COURSE,  |  ART.    V. 

/)//  llic  Courf,  S.WACiK,  C.  J. — Tlu'  rcinainiii^  question  is,  whether 
the  foes  of  protest  were  [)ro{)erly  c  linigeabli'  to  the  tlefendaiit.*'  x\s 
to  this  we  liave  not  been  referred  to  any  decided  ease,  and  we  under- 
stand that  the  praetiec  at  tlii'  circuit  is  not  iiniroiiii,  though  tiie  fees 
of  protest  are  <,^Mierally  aUowed.  It  is  an  e.\j)ense  to  wiiieh  tlie  hohler 
of  a  note  is  subjected  hy  reason  of  the  default  of  the  in(h)rser,  whose 
duty  it  is  to  pay  the  note  at  maturity,  and  it  is  right,  therefore,  that 
the  holder  shouhl  reeover  it.  It  may  fairly  be  eonsidei-ed  as  a  chargi! 
incident  upon  the  indorser's  failure  to  perfoi-ui  his  conti-act,  and 
should  be  allowed  to  the  phiintiffs  in  the  assessment  of  damages. 

New  trial  denied." 


§96  SIMPSON  V.  GRIFFIN. 

9  .ToiiNSON    (N.  Y.)    l.^l.  — 1812. 

Ty  ERROR,  on  rerfinrari  from  a  justice's  court. 

Ciriffin  sued  Simpson  befoi'o  tlie  justice,  and  declared  for  money 
had  and  received  to  his  use,  and  for  money  lent.  The  defendant 
pleaded  non  a.^surnpfiH.  The  plaintitT  proved,  that  he  had  l)een  sued 
as  indorser  of  a  note  drawn  by  the  defendant,  and  had  been  obliged 
to  pay,  besides  the  amount  of  the  note,  nineteen  dollars,  costs  of 
suit.  The  taxed  bill  was  produced  to  the  justice,  who  gave  judg- 
ment for  the  plaintiff,  for  the  amount. 

Per  Curiam. —  If  the  indorser  of  a  note  be  duly  fixed,  he  ought 
to  pay  it,  without  waiting  to  be  sued,  but  if  he  finds  it  more  con- 
venient to  delay  taking  up  the  note,  until  he  is  prosecuted  to  judg- 
ment and  execution,  the  drawer  ought  not  to  pay  for  that  convenience. 
It  is  his  own  fault  or  misfortune  that  subjects  him  to  costs,  and  he 
cannot  resort  to  the  di'awer  for  indemnity  against  those  costs.  The 
mere  fact  of  drawing  the  note  does  not  imply  a  promise  to  save  the 
payee  harndess  from  all  costs  nnd  charges  that  he  may  be  subjected  to, 
as  indorser.  There  must  ho  a  special  pi-omise  to  save  harmless  before 
the  paj'ee  can  call  upon  the  drawer  for  costs  accrued  by  the  default 
of  the  payee  himself.  As  payee,  he  can  only  look  to  the  di'awer  for 
the  amount  of  the  note.     The  judgment  must,  therefore,  be  reversed. 

Judgment   reversed.' 


*  Only  so  much  of  the  opinion  as  relates  tn  tins  qnostion  is  liorp  j»ivcn.  —  H. 
9  For  recovery  of  "  re-exchange"  see  Bills  nf  Exchanpje  Act,  §  57.  subsec.  2; 

2  Daniel  on  Nefj.  ln>,t..  SS  1444-1447;   ISdnk  nf  U.  S.  v.  U.  S..  2  How.   (  U.  S.) 
737. —  TT. 

•  Accord:  Mnrrh  v.  Bnrr>ct.  114  Tnlif.  37.'j.  ".A  surety.  inrltuliTijr  n  drawer  or 
indorser.  may  recover,  in  an  action  ajrainst  his  principal.  .  .  .  his  reason- 
able costs  and  other  expenses,  incurred  necessarily  and  in  good  faith,  in  the 
prosecution  or  dcfensf,  iiy  the  express  or  implied  consent  of  the  principal  .  .  . 
of  an  action  or  spccifil  proceeding,  relating  to  the  demand  secured,"  N.  Y- 
Code  Civ,  Proc,  §  1916. —  H, 


ri.   4.]  BURDEN   OF   PROOF.  365 

4.  Burden  of  Proof. 

§98  PARSONS  V.  UTICA  CEMENT  CO. 

73  Atlantic  (Conn.)  785. —  1909. 

Baldwin,  C.  J.  The  result  of  a  former  trial  of  this  cause,  in  which 
a  verdict  was  rendered  for  the  plaintiff,  is  reported  in  SO  Conn.  58. 
On  a  second  trial  there  has  been  a  verdict  for  the  defendant,  and  error 
is  claimed  in  respect  to  the  charge  to  the  jury. 

The  complaint  contained  two  counts,  each  alleging  (as  in  Practice 
Book,  form  334)  that  $2,000  is  due  to  the  plaintiff  from  the  defendant 
on  an  instrument  under  seal,  of  which  a  copy  is  annexed  and  marked 
as  an  exhibit.  The  first  defense  to  each  count  was  a  general  denial. 
A  second  defense  to  each  was  that  the  bonds,  which  were  payable  to 
bearer  and  matured  January  1,  1890,  more  than  16  years  before  the 
suit  was  brouglit,  were  owned,  in  1887,  by  the  Continental  Life  In- 
surance Company,  and  were  then  fraudulently  taken  from  its  posses- 
sion by  the  plaintiff's  husband,  who  was  its  president,  without  any 
consideration  moving  to  the  company,  and  came  into  her  possession 
with  notice  of  that  fact,  without  any  consideration  moving  from  her, 
and  that  she  was  never  a  bona  fide  holder.  These  allegations  were 
denied  by  the  reply. 

On  the  first  trial  the  jury  were  instructed  that,  as  the  plaintiff  had 
possession  of  the  bonds,  the  burden  of  proof  was  on  the  defendant  to 
show  that  she  was  not  a  bono  fffe  holder,  and  that  to  do  this  it  must 
satisfy  them,  by  a  fair  preponderance  of  evidence,  that  she  acquired 
the  bonds,  either  without  paying  any  value,  or  knowing  that  her  hus- 
band had  taken  them  from  the  insurance  company  improperly  and 
fraudulently.  It  having  been  an  undisputed  fact,  during  that  trial, 
that  her  husband's  title  was  defective,  we  held  this  cliarge  erroneous, 
since  the  burden  was  upon  her  to  show  value  paid  or  want  of  notice 
of  the  defect,  not  on  the  defendant  to  show  no  value  paid  or  the 
existence  of  notice.  In  support  of  this  conclusion  we  referred  to  the 
Negotiable  Instruments  Act  (Cien.  St.  i:»02,  i^ij  4171,  1222,  4229).= 
Our  attention  is  now  called  to  the  provision  in  fJen.  St.  1902,  §  4170,' 
that  the  succeeding  sections  of  the  chai)ter,  which  include  those  above 
mentioned,  shall  not  apply  to  negotiable  instruments  made  and  de- 
livered prior  to  1897. 

The  Negotiable  Instruments  Act,  in  most  respects,  was  sitnply  a 
codification  of  the  common  law  in  reference  to  the  subject  in  hand. 
It  was  such  in  respect  to  the  provision  of  section   1229*  that  "every 

JN.  ¥.,§§20,01,08. —  C. 
8  N.  Y..  §  6.  —  C. 
4N.  Y.,  §08.  — C. 


366  HOLDER   IN   DUE  COURSE.  [ART.    V. 

holder  is  doomed  prima  jacxc  to  ho  a  lioldcr  in  due  courpo ;  hut,  when 
it  is  shown  that  tho  title  of  any  person  who  has  negotiated  the  instru- 
ment was  defe(^tiv(\  the  hnrden  is  on  the  liolder  to  prove  that  he,  or 
some  person  under  whom  he  chiims,  aequired  the  title  as  a  holder  in 
due  eourse."  In  liyles  on  Hills  (chapter  4,  p.  *60)  the  common  law 
on  this  suhject,  with  reference  to  the  hurden  of  proving  a  considera- 
tion, is  thus  stated:  "The  defendant  is  not  in  general  permitted  to 
put  the  plaintiff  on  proof  of  the  consideration  which  the  plaintiff  gave 
for  the  hill,  unless  the  defendant  can  make  out  a  prima  facie  case 
against  him  hy  showing  that  the  hill  was  ohtained  from  the  defendant, 
or  from  some  intermediate  party,  by  undue  means,  as  by  fraud,  felony, 
or  force,  or  that  it  was  lost,  or  that  he  received  no  consideration." 

Where,  as  here,  it  appears  that  the  negotiable  paper  in  suit,  though 
there  was  nothing  wrong  in  its  original  issue,  was  obtained  from  an 
intermediate  party  by  fraud,  proof  of  consideration  is  only  called  for 
from  the  plaintiff  because  it  would  tend  to  show  that  he  nevertheless 
is  a  "  bona  fide  "  holder  within  the  meaning  of  that  term  in  the  law 
merchant.  Whether  he  acquired  the  paper  by  purchase  or  gift  would, 
under  ordinary  circumstances,  be  of  itself  unimportant.  But  after 
proof  that  it  was  once  in  the  hands  of  a  fraudulent  holder,  it  may 
justly  be  presumed  to  continue  in  the  hands  of  a  holder  of  that 
character  until  the  contrary  be  proved.  Collins  v.  Gilbert,  94  U.  S. 
753,  761,  24  L.   Ed.  170. 

The  position  of  the  bolder  of  negotiable  paper  is  of  an  exceptional 
character.  Tie  may  acquire  a  title  through  a  thief,  and  yet  maintain 
it  against  the  original  owner.  But  his  possession  is  not  enough  to 
support  a  recovery,  after  it  once  appears  that  he  must  trace  title 
through  fraudulent  practices  and  unclean  hands.  Totten  v.  Bucy,  57 
Md.  452.  Tliis  is  equally  true  whether  the  fraudulent  practices  were 
connected  with  the  original  inception  of  the  paper,  or,  as  in  the 
present  instance,  occurred  subsequently,  to  the  prejudice  of  an  inter- 
mediate holder.  Fulton  Bank  v.  Phoenix  Bank,  1  Hall  (N.  Y.)  562; 
2  Parsons  on  Xotes  and  Bills,  *283 ;  4  Am.  &  Eng.  Encycl.  of  Law, 
322.  The  case  of  Kinney  v.  Kruse,  28  Wis.  183,  asserts  the  contrary, 
but  is  opposed  to  the  strong  current  of  authority. 

The  cause  went  to  the  jury,  as  respects  each  count,  on  two  issues. 
One  was  on  the  truth  of  the  complaint;  the  other  was  on  the  truth 
of  the  ppeeial  defense.  As  to  the  former  issue,  the  plaintiff  had  the 
burden  of  proof  from  the  outset  and  to  the  end.  Lockwood  v.  Lock- 
wood,  80  Conn.  513,  521.  As  to  the  latter  issue,  her  production  of 
the  bond,  its  due  execution  being  admitted,  raised  a  presumption  of 
title,  which  made  out  a  prima  facie  case.  But  as  soon  as  it  appeared, 
either  by  her  witnesses  or  those  of  the  defendant,  that  this  bond  was 
fraudulently  abstracted  from  the  assets  of  a  third  party  to  which  it 
originally  belonged,  this  presumption  no  longer  availed  her,  and  her 
original  burden  of  proof,  only  temporarily  satisfied  by  its  aid,  rested 


II.    4.]  BURDEN   OF   PROOF.  367 

upon  her  again,  and  now  required  her  to  show  a  title  by  affirmative 
evidence  that  she  obtained  the  instrument  botli  in  good  faith  and 
for  a  valuable  consideration.  Her  good  faith  she  could  only  show  by 
proof  that,  when  the  bond  came  to  her,  she  had  no  knowledge  of  such 
fraud,  and  was  not  equitably  chargeable  with  notice  of  it.  Baxter  v. 
Camp,  71  Conn.  245,  253;  Fulton  Bank  v.  Phoenix  Bank,  1  Hall 
(N.  Y.)   577. 

The  defendant,  it  is  true,  had  the  burden  for  certain  purposes  of 
proving  that  she  took  the  bond  with  such  notice,  and  without  con- 
sideration ;  but  these  purposes  were  accomplished  when  the  fact  was 
established  of  its  fraudulent  abstraction  from  the  assets  of  the  in- 
surance company  by  her  grantor.  One  legal  presumption  established 
by  the  law  merchant  was  thus  met  with  another  legal  presumption 
established  by  the  same  law,  which  by  that  law  was  sufficient  to  destroy 
it.  In  a  concurring  opinion,  often  quoted,  given  in  a  case  of  similar 
character,  in  which  a  ruling  of  his  at  nisi  prius  was  pronounced  errone- 
ous, Baron  Martin  observed  that  he  did  not  profess  to  understand  how, 
when  several  facts  were  alleged  in  a  plea,  all  necessary  to  make  it 
good,  and  all  put  in  issue,  proof  of  one  could  relieve  a  defendant  from 
the  burden  of  proving  the  rest ;  but  that,  whatever  might  be  the 
philosophy  of  that  matter,  the  rule  was  so,  and  it  was  a  useful  one 
because  it  threw  a  difficulty  in  the  way  of  fraudulent  indorsements. 
Harvey  v.  Tovers.  15  Jur.  544  ;  i  Eng.  Law  &  Equity,  531. 

The  charge  to  the  jury  in  the  Superior  Court,  which  followed  the 
rule  as  stated  by  us  when  the  cause  was  previously  here  (Par.9on.<i  v. 
Utica  Cement  Co.,  80  Conn.  60),  was  in  conformity  to  the  principles 
of  common-law  procedure  prior  to  the  adoption  of  the  Negotiable  In- 
struments Act.  The  instructions  thus  given  were  that,  while  the  plain- 
tiff, as  holder  of  the  bonds,  was  prima  facie  their  owner  in  good  faith, 
if  the  defendant  had  satisfied  them  by  a  fair  preponderance  of  evi- 
dence that  they  were  fraudulently  obtained  from  the  true  owner,  the 
insurance  company,  then  the  burden  rested  on  the  phiintifT  of  proving 
that  she  acquired  them  in  good  faitli  and  for  a  valnalile  consideration, 
without  knowledge  of  the  fraud,  or  witlioiit  being  chargeable  with 
knowledge  of  it. 

The  law  merchant,  which  governed  the  disposition  of  the  cause, 
gave  to  hriTW  fulr  holders,  in  due  course,  of  neg(»tiable  bonds  payable 
to  bearer  tlu-  valuable  privilege  of  suing  on  them  in  their  own  name, 
with  all  the  rights  for  the  purposes  of  the  action  of  an  absolute  owner. 
But  it  deemed  no  one  a  bona  fide  holder  in  due  course  who  obtained 
possession  without  giving  anv  vahiable  consideration  in  return.  Brush 
V.  Srrihnrr.  11  Conn.  3Hft,  SD  Am.  Dec.  303.  It  recogni/,e<l  the  bona 
fide  holder  in  due  course,  not  ns  owner,  but  as  having  the  rights  of 
an  owner  for  the  purposes  of  s^iit,  to  he  protected  no  farther  than  the 
neressity  of  maintaining  the  free  negotiation  of  commercial  paper 
requires.     Olmstrnd  v.  Winsled  Bank,  32  Conn.  27H,  2H7.     'Inhere  was 


■THS  HOLDKR  i\  nuic  COURSE.  [art.  v. 

no  lUHTssity  of  tlinl  doscriplidii  to  r;ill  for  Oic  allowance  of  actions  by 
hoMors  of  stolen  Pocnritifs  who  pnid  nolliinsjj  for  llioni.  even  if  they 
acce})te(l  tlioiii  hofore  their  maturity,  and  with  no  notice  of  any  in- 
firtnity  in  thoir  p:rantor's  title.  Tliey  niiri;ht  be  bona  fide  holders,  but 
they  were  not  "  liolders  in  due  course ;"  for  tliat  term  refers  to  due 
course  of  trade,  and  trade  rests  on  an  exchanp^e  of  values.  Roberts  v. 
Hall,  37  Conn.  205,  212.  *  *  *  There  is  no  error.  The  other 
judges  concur.* 


§  98  CLARK  V.  PEASE. 

[Reported  herein  at  p.  370.] 


§  98  VIOLET  V.  ROSE. 

39  Nebraska,  660.—  1894. 

Irvine,  C.     *     *     * 

It  is  a  universal  principle  that,  in  the  absence  of  any  attack  upon 
the  validity  of  a  negotiable  instrument,  as  between  its  original  parties, 
the  holder  bringing  the  action  upon  it  is  presumed  to  be  a  bona  fide 
holder  for  value.  When,  however,  the  holder  or  acceptor,  in  an  action 
against  him  upon  the  instrument,  sets  up  matter  in  defense  which 
would  constitute  a  valid  defense  were  the  action  brought  by  the  original 
payee,  it  is  frequently  a  question  of  difficulty  as  to  where  the  burden 
of  proof  lies  upon  the  issue  of  bona  fides.  The  writer  is  unable  to 
perceive  why,  upon  different  defenses,  there  sliould  be  any  distinction 
as  to  the  burden  of  proof  upon  that  issue,  whatever  the  defense 
pleaded.  It  may  be  urged,  upon  one  side,  that  the  policy  of  the  law 
merchant  in  favoring  the  free  negotiation  of  bills  and  notes  demands 
that  the  maker,  in  order  to  defend  against  an  indorsee,  should  prove 
affirmatively  that  such  indorsee  is  not  a  bona  fide  holder  for  value; 
and  to  this  argument  there  may  be  added  that  the  plaintiff  in  such 
a  case  has  already  in  his  favor  a  presumption  of  bona  fides,  and  that 
no  evidence  of  a  defense  growing  out  of  transactions  between  the 
original  parties  has  a  natural  tendency  to  rebut  such  presumption  ;  but, 
upon  the  other  tiand,  whatever  may  be  the  fundamental  defense,  it 
would  seem  that  the  proof  of  a  bona  fide  purchase  for  value  before 
maturity  lies  peculiarly  within  the  possession  of  the  plaintiff;  that 
such  facts  are  always  easily  susceptible  of  proof  by  him,  whereas  proof 
of  mala  fides  or  want  of  consideration,  even  where  the  facts  exist,  is 


s  For  other  cases  decided  under  the  Negotiable  Instruments  Law,  see 
Mcyifjhl  V.  Parsfim,  136  Towa,  .390,  and  Keene  v.  Behan,  40  Wash.  .505. 

The  English  Bills  of  Exchange  Act  is  construed  to  the  same  effect  in  Tatatn 
T,  Baslar,  L.  R.  23  Q.  B.  D.  345.  —  C. 


H.   4.]  BURDEN  OF  PROOF.  369 

frequently  beyond  the  knowledge  or  reacli  of  the  defendant.     These 
arguments  upon  either  side  apply  with  equal  force,  whatever  may  be 
the  fundamental  defense;  but  unfortunately  the  courts  have  drawn 
distinctions   between   defenses.      The    numerous   decisions   disclose    a 
general  tendency  to  cast  the  burden  of  bona  fides  upon  the  plaintiff, 
where  illegality  of  consideration  or  fraud  is  alleged,  and  in  other  cases 
to  cast  the  burden  of  showing  notice  or  want  of  consideration  upon  the 
defendant.     But  even  the  test  suggested  by  this  general  tendency  of 
authorities  is  not  trustworthy,  for  the  classification  thus  resorted  to 
has  not  been  strictly  recognized,  and  possibly  it  has  not  been  absolutely 
observed,  by  the  courts  of  any  state      While  this  confusion  of  au- 
thorities is  to  l)e  regretted,  the  distinctions  referred  to,  whether  well 
or  ill  founded,  have  been  recognized  everywhere,  and  our  own  decisions 
probably  approach  the  general  classification  referred  to  as  nearly  as 
those  of  any  state.    Thus,  it  has  been  held  that,  where  usury  is  estab- 
lished, the  burden  is  upon  the  plaintiff  to  show  bona  fides.     Worten- 
dyke  v.  Meehan,  9  Neb.  221;  Olmsted  v.  Security  Co..  11  Neb.  487; 
Darst  V.   Baclus,  18   Neb.   231;  Sedgwick  v.   Di.von,   18   Neb.   545; 
Cheney  v.  Janssen,  20  Neb.   128;  Kno.T  v.   Williams,  24  Neb.   630; 
Bank  v.   Davis,  25   Neb.   376;  BlackweU  v.    Wright,   27   Neb.   269; 
Richardson  v.  Stone,  28  Neb.   137;  Bank  v.  Miltonberger,  33   Neb. 
847;  Colby  v.  Parker,  34  Neb.  510.    So,  also,  where  the  evidence  estab- 
lished the  theft  of  a  note  payable  to  bearer.     Hooper  v.  Browning,  19 
Neb.  420.    So,  too,  where  fraud  in  the  inception  of  the  note  is  proved. 
Haggland  v.  Stuart,  29  Neb.  69.     On  the  other  hand,  where  the  de- 
fense was  in  the  nature  of  failure  of  consideration,  and  the  plaintiff, 
as  a  part  of  his  case  in  chief,  had  introduced  evidence  tending  to  show 
a  bona  fide  purchase,  it  was  held  that  no  testimony  in  support  of  the 
fundamental  defense  was  proper  unless  the  defendant  introduced  evi- 
dence tending  to  show  that  the  plaintiff  was  not  a   bona  fide  pur- 
chaser.    Organ  Co.  v.  Boyle,  10  Neb.    109.     In  Cannon  v.  Canfield, 
11    Neb.  506,  the  inference  is  that,  where  want  of  consideration  is 
shown,  the  burden  is  also  upon  the  maker  to  prove  notice  to  the  in- 
dorsee.   The  same  inference  is  to  be  drawn,  in  ca.se  of  failure  of  con- 
sideration, from   Bank  v.  flyman,  12  Neb.  511.      But  a  contrary  in- 
ference  might   be   drawn    from   a   closing   ])nragraph   of   the   opinion 
in  Bank  v.  Kdhohn,  25  Neb.  741.      In  Coakley  v.  Christie.  20  Neb. 
509,    it    was   distinctly   decided    that,    in    the   case   of   a    note   given 
in  payment  of  a  piano  sold  with  a  warranty,  evidence  of  the  funda- 
n)ental  defense  was  properly  excluded,  for  the  reason  that  there  was 
no   tender    made   of    proof    that    the    i)laintiff    was   not    an    iiuioccnt 
purchaser. 

It  would  seem,  from  this  review  of  the  authorities,  that  the  defend- 
ant, where  fraud  is  pleaded,  makes  out  his  ca.se  simplv  bv  proof  of  tht 
fraud,  and  that  the  plaintiff  must  affirmntivdv  establish  Imtin  fidrs; 
but  that,  where  the  defense  is  failure  of  consideration,  the  defendant 

NBOOT.   IN8TRUMBNTH  —  24 


370  KiiiiiTs  or  iioLDKK.  [art.  v. 

imist  cslahlisli  holli  rnilmc  of  considcratioii  and  iiiala  fides  on  the  part 
of  tlie  plainlilf,  or  tlio  tact  that  he  was  not  a  piirdiascr  for  value." 
Now,  iu  the  case  before  us,  tlie  defendant  {)leaded  hoUi  fraud  and 
failure  of  consideration.  When  lie  opened  his  case,  the  situation  was 
thi.>^:  Should  he  succeed  in  sho\vin_«,f  that  the  instrument  of  assignment, 
hrouglit  to  him  by  McC'urday,  purporting  to  be  signed  l)y  both 
McCurday  and  wife,  did  not  in  fact  bear  Mrs.  McCurday's  genuine 
signature,  and  that  the  note  was  procured  tlirougli  the  representation 
that  such  signature  was  genuine,  then  fraud  would  be  established,  and 
it  would  lie  with  the  plaintiff  to  show  his  bona  fides  in  the  purchase 
of  the  note.  If,  on  the  contrary,  the  proof  of  this  defense  should  fail, 
but  the  defendant  should  succeed  in  showing  that  he  failed  to  obtain 
the  property  in  question  because  Mrs.  McfCurday  refused  or  failed 
thereafter  to  acknowledge  the  instrument,  then  there  would  be  merely 
a  failure  of  consideration,  and  the  defendant,  to  prevail,  would  be 
required  to  attack  plaintiff's  bona  fides.  The  burden  of  proof,  there- 
fore, depended  upon  the  evidence  introduced  upon  these  issues.  The 
order  of  proof  rests  within  the  discretion  of  the  trial  court.  Consaul 
v.  SJieldun,  35  Neb.  247.  The  court,  therefore,  did  not  err  in  allowing 
evidence  of  the  fundamental  defense  to  be  introduced  before  evidence 
was  offered  as  to  the  good  faith  of  the  purchaser.  The  court  instructed 
the  jury  that  the  burden  of  proof  was  upon  the  defendant  upon  this 
issue,  so  there  was  nothing  in  this  procedure  of  which  the  plaintiff 
can  complain.^ 


m.  Defenses  to  negotiable  instruments. 

§  94  CLARK  V.  PEASE. 

41  New  Hampshire,  414.  — 1860. 

Action  by  indorsee  against  maker  on  a  promissory  note.  Defenses : 
duress  by  imprisonment;  illegality  because  given  to  compromise  a 
crime.     The  defendant  offered  evidence  to  substantiate  the  defenses. 

The  plaintiff  excepted  to  this  evidence,  as  no  defense  against  the 
indorsee,  without  proof  that  he  was  not  the  bona  fide  holder  of  the 
note.  But  the  court  ruled  that  if  the  note  was  obtained  by  duress, 
it  was  void  in  the  hands  of  an  innocent  indorsee,  and  thereupon  the 

8  This  was  also  held  to  be  the  rule  under  the  Negotiable  Instruments  Law 
in  Cole  Banking  Co.  v.  Hinclair,  34  Utah,  454,  where  the  court,  after  quoting 
sections  ntimbered  in  New  York  91,  98,  94.  anrl  96,  says  that  "the  defense 
pleaded  was  not  illegal,  but  merely  partial  failure  of  consideration.  Failure 
or  want  of  consideration  does  not  constitute  a  defective  title  within  the  mean- 
ing of  the  foregoing  provisions."     P.  456.  —  C. 

T  The  above  case  was  approved  in  Norwood  v.  Bank  of  Commerce  of  Lincoln, 
77  Neb.  205.  — C. 


III.]  DEFENCES.  371 

plaintiff,  admitting  for  the  purposes  of  this  trial  that  the  defendant's 
witnesses  wuLihl  testify  to  the  facts  stated,  a  verdict  for  the  defendant 
was  taken  by  consent,  subject  to  the  opinion  of  the  court;  and  the 
questions  thus  raised  were  reserved,  and  assigned  to  the  determination 
of  tlie  whole  court. 

Sarcknt.  J. --That  the  case  presented  is  clearly  one  of  duress, 
there  can  \'.o  no  question.  The  abuse  of  any  process,  either  civil  or 
criminal,  to  compel  a  party,  by  imprisonment,  to  do  any  act  against 
his  will  ovcept  to  pay  the  debt  for  which  he  is  arrested,  is  entirely 
illegal,  and  the  act  may  be  avoided  on  the  ground  of  duress.  (Rich- 
anison  v.  Duncan,  3  N.  H.  508;  Severance  v.  Kimball,  8  N.  H.  386; 
:<hair  v.  SiiDoner.  9  N.  H.  197;  Burnham  v.  Spooner,  10  N.  H.  523; 
Beck-  V.  HUwchard,  22  N.  H.  303.)  Here  the  arrest  was  without  any 
warrant  or  lawful  authority.  Such  duress  is  a  perfect  defense,  upon 
all  the  authorities,  to  an  action  between  the  original  parties. 

The  note  in  this  cavse  was  not  only  void  as  between  the  original 
])arties.  on  the  ground  of  duress,  but  was  given  to  compromise  a 
charge  of  crime,  and  was  wholly  illegal  upon  that  ground.  {Plumer 
V.  Smith,  5  X.  H.  553.) 

But  the  principal  ipicstion  raised  here  by  the  ruling  of  the  court 
is.  whether  such  a  note  is  ai)solutely  void  in  the  hands  of  any  holder; 
and  if  not,  then  another  (juestion  arises  upon  the  exception  which 
was  taken  by  the  ))laintiff,  which  is  this:  After  an  indorsee  has 
made  out  a  /iriiiia  fade  case  by  proving  the  indorsement,  etc.,  and 
the  defendant  has  shown  that  the  note  was  obtained  from  him  by 
duress,  upon  whom  rests  the  burden  of  proof?  Must  the  defendant 
prov(>  that  the  plaintiff  was  not  the  bona  fde  holder,  and  that  he  did 
not  pav  a  valid  consideration  for  it,  as  the  plaintiff  claimed?  or,  the 
duress  being  [iroved,  does  that  throw  the  burden  of  proof  upon  the 
plaintiff,  to  prove  how  he  came  by  the  note,  and  the  consiileration 
lie  paid.  etc..  as  the  defendant  claims?  We  will  examine  these  ques- 
tions in  the  order  in  wliicb  we  have  stated  them. 

I.  Is  this  note  absnintelv  void  in  the  hands  of  anv  bolder,  however 
innocent,  who  has  paid  a  valid  consirleration  for  it  before  it  was  due? 

[The  court  here  discus.ses  the  grounds  for  avoiding  contracts  gen- 
erallv.  | 

Now  bills  and  notes  stand  upon  the  same  foiindation  as  all  other 
(•t)ntracts  do,  in  all  the  above  respects,  so  long  as  they  remain  in  the 
liands  of  the  original  payee.  liut  bills  and  notes  have  another  attribute, 
which  other  c(»ntra(ts  ordinarily  do  not  possess  —  that  is,  negotiability. 
Where  a  bill  or  note  has  been  negotiated,  and  pa.ssed  into  the  hands 
of  a  bona  fide  liohler  before  it  is  due,  and  for  a  valuable  consideration, 
iii  such  case  the  holder  acfpiires  rights  which  did  not  belong  to  the 
payee.  He  stands  in  a  different  relation  to  the  promisor.  These 
rMitininl  ri'jhl'^  and  privi'cgcs  have  lieen  conferred  upon  stich  holder 
by  law,  for  good  and  sufficient  reasons,  too  well  known  and  understood 


378  uiini  rs  of  iiolueb.  [aht.  v. 

to  need  to  he  stated,  but  wliich  are  iueident  to,  and  dependent  upon, 
the  attribute  of  uoii;otiability,  which  these  instruments  possess. 

And  it  may  be  hiid  down  as  tlie  general  rule,  as  the  general  prin- 
ciple applying  to  this  class  of  eases,  that  such  a  note,  thus  negotiated 
and  in  tlie  hands  of  such  a  holder,  is  not  liable  to  any  defense  \\lii(;h 
the  maker  had  as  against  tlie  original  payee.  To  this  general  rule 
there  are  some  exceptions,"  among  which  ai'c  -  - 

1.  When  a  statute  not  only  prohibits  the  making  of  a  contract, 
but  provides  that  the  same  shall  be  void  to  all  intents  and  purposes; 
or  where  the  law  provides  that  any  contract  made  or  securities  given 
upon  any  illegal  consideration  shall  be  absolutely  void,  then  the 
note  which  embodies  such  contract,  or  is  based  upon  such  considera- 
tion, is  held  void  everywhere  and  in  the  hands  of  every  holder.  In 
England,  and  in  most  of  the  United  States,  there  are  or  have  been 
laws  against  usury,  which  not  only,  by  a  general  prohibition  of  usury, 
made  that  an  illegal  consideration  for  a  note,  but  also  provided  that 
all  bills  or  notes  founded  upon  such  a  consideration  should  be  abso- 
lutely void.  Such,  however,  is  not  the  law  in  this  state  on  that  sub- 
ject, and  it  is  believed  that  we  have  no  statutes  with  similar  provisions. 
Hence,  here  usury  may  be  a  good  defense  to  a  note  as  against  the 
original  party,  but  not  as  against  an  innocent  indorsee,  for  value,  etc. 

2.  When  the  note  is  a  forgery,  it  is  void  everywhere. 

3.  When  the  maker  belongs  to  a  class  of  persons  who  are  ordinarily, 
and  as  a  general  rule,  on  grounds  of  j)ul)lic  policy,  held  incompetent 
to  contract  at  all,  such  as  infants,  married  women,  alien  enemies,  and 
insane  persons,**  including  spendthrifts  and  otiiers  under  guardianship, 
who  hrive  been  by  some  statute  declared  incompetent  to  contract. 

4.  Notes  signed  by  agents  without  autliority. 

In  none  of  these  cases  (except  the  first,  which,  as  we  have  seen, 
does  not  apply  in  this  State),  is  a  note  valid  in  the  hands  of  anyone; 
and  the  party  who  discounts  such  paper  is  bound  to  incpiire,  at  bis 
peril,  whether  the  note  offered  to  him  is  signed  by  a  party  capable  and 
competent  in  law  to  bind  himself,  or  by  an  agent  duly  authorized  to 
bind  his  principal.  Besides  this,  he  is  bound  to  inquire  whether  the 
party  from  whom  he  receives  it  is  competent  to  make  such  transfer 
in  his  own  right,  or  is  authorized  to  do  it  for  his  principal,  for  whom 
he  assumes  to  act. 

If  there  is  a  failure  in  either  of  these  points  of  capacity  or  authority, 
it  will  not  avail  the  party  that  he  is  a  bona  fide  holder,  for  value, 
without  notice.  He  must  look  to  his  indorser  if  he  has  one,  and  if  he 
has  not  he  must  suffer  loss. 


*  These  exceptions  constitute  what  are  known  as  real  or  absolute  defenses. 
See  Bijjelow,  Rills,  Notes  and  Checks    (Students'  ed.),  pp.   174-205. —  Fi. 

9  See  Walker  v.  Winn,  142  Ala.  5f>0,  reported  in  4  A.  &  E.  Ann.  fas.  537, 
with  notf  entitled  "  Validity  and  effect  of  negotiable  paper  signed  or  indorsed 
by  lunatic."  — C. 


III.]  DEFENCES.  373 

5.  Another  case  might  be  mentioned,  which  has  been  made  an  ex- 
ception to  the  general  rule  above  stated  by  express  provisions  of  the 
statute,  —  as  where  a  note  is  attached  by  the  trustee  process.  There, 
by  operation  of  the  statute,  the  maker  of  a  note  may  liave  a  perfect 
defense  against  an  indorsee,  for  value,  without  notice,  and  before  due. 
So  notes  discliarged  by  operation  of  insolvent  laws  might  afterwards 
be  transferred,  by  possibility,  so  as  to  form  another  exception,  where 
the  indorsee,  holding  the  note  bona  fide,  etc.,  might  be  met  with  a 
perfect  defense  on  the  part  of  the  maker.  But  these  last  cases  throw 
no  light  upon  the  question  we  are  considering. 

These  are  the  principal,  perhaps  all  the  exceptions  to  the  general 
rule  stated  above,  that  no  defense  is  available  against  an  innocent 
indorsee,  for  value  paid  before  due.^  But  where  the  contract  was 
illegal,  being  prohibited  by  law,  or  the  consideration  was  illegal,  as 
usury,  wagers,  compounding  a  felony,  restraint  of  trade  or  of  mar- 
riage, etc.,  or  where  there  was  a  want  or  failure  of  consideration, 
and  even  where  the  note  has  been  paid,  —  all  these  defenses,-  and 
many  more,  cannot  be  made  against  the  note  in  the  hands  of  such  a 
holder.  And  the  quL-slion  here  raised  is,  whether,  in  case  of  duress, 
or  fraud,  whcic  tlicrc  is  mala  fides,  but  it  is  all  on  one  side,  and  the 
other  party  to  the  note  has  been  induced  to  sign  it  by  force  or  by 
fraud,  and  is  in  every  respect  an  innocent  party,  such  defense  shall ' 
avail  him  as  against  such  a  holder,  for  value,  etc.,  who  seeks  to  col- 
lect it. 

And  we  think  -ufh  a  defense  cannot  avail  the  maker  against  such 
nn  indorsee  of  the  note.  The  authorities  favor  this  view.  *  *  ♦ 
Suppose  an  individual,  tliiMi,  wore  about  to  purchase  a  note  pay- 
able to  bearer,  before  it  was  due,  and  pay  a  fair  e(|uivalent  for  it,  with 
a  view  of  collecting  it  of  the  maker,  and  where  he  is  to  have  no 
indorser  to  rely  upon,  —  what  would  be  bis  duty  in  order  to  proceed 
safely?  First,  he  must  assure  himself  of  the  genuineness  of  the 
signature,  or,   if  it  purported   to   be  signed   by   an   agent,   he   must 


1  To  thpsp  should  ho  a<](I.<l  tlir-  oxtinpnishment  of  the  instrnment  by  cancel- 
lation or  alteration.  Sj-c  No^.  Inst.  L..  §§  204-200.  post.  The  onsp'nf  wnnt 
of  delivery,  or  want  <if  delivery  uh  and  for  a  ne^otial)!..  inHtrument,  calls  for 
Hpeeial  roninient  and  may  or  may  not  he  an  ahsolute  defense  aecordinR  as  the 
maker  is  or  is  not  estopped  to  sft  up  the  defense.  K.-e  1  Daniel  on  Nee  Inst 
8§  847-8.1.1.     Se«'  poJ«^  pp.  :j.S7-;J'I1>.  —  M. 

2The.se  defensen  are  known  as  personal,  conditional,  or  "  ecpiitahle "  de- 
fenses. See  HifTcdow,  Hills,  Notes  and  Checks  (Students'  ed.).  pp.  172.  20fi. 
These  defenses  are  frand.  dur.^s.  illr^ality.  want  or  failure  of' consideration! 
release  or  payment,  di-char.je  of  party  primarily  liahle.  etc.  Whether  a  rijjht 
of  set-off  exiHtinp  at  the  time  of  the  transfer  is  an  "equity"  is  in  dispute. 
2  Daniel  on  Ne^.  Inst..  SS  I4.'<.''ki-I4;J7.  In  New  York  it  is  an  e(|uity  in  case  of 
the  transfer  of  an  overdue  note.  N.  Y.  Code  Civ.  Proc,  §  502.  —  H.  [On  thig 
last  point,  see  ante,  pp.  321-322.  —  C. 


374  UKMITS  OK    IIOLDKR.  [aRT.    V. 

assure  himself  lliaf  (Ik  :ii,'tMil  was  duly  authorized  to  hind  his  prin- 
eipal  in  tliat  partieular;  seeondly,  he  must  make  sueh  inquiries,  which, 
ordinarily,  he  may  easily  do,  as  to  ascertain  that  the  signer  is  not 
an  infant,  a  married  woman,  an  alien  enemy,  an  insane  person,  etc., — 
that  he  does  not  helonjT  to  a  class  of  persons  who  are  always  pre- 
sumed hy  the  law  to  he  incompetent  to  contract;  and  thirdly,  he 
might  need,  for  his  own  safety,  to  inquire  whether  the  signer  of  the 
note  had  heen  trusteed,  or  whether  any  other  special  statute  could 
aflFect  his  claim  to  it.  When  he  has  satisfied  himself  upon  these 
points,  if  he  lt>arns  oT  no  other  defects,  and  tlie  signer  is  of  sufficient 
ability  to  respond,  he  may  purchase;  and  there  is  generally  very 
little  trouble  in  ascertaining  these  facts.  They  are  usually  matters 
of  public  notoriety,  about  which  there  can  he  little  room  for  mistake. 

But,  suppose  that  after  being  satisfied  upon  all  these  points,  and 
having  purchased  the  note,  it  should  prove  that  it  was  an  illegal 
contract,  or  was  for  an  illegal  consideration, —  who  shall  suffer?  —  the 
maker  or  the  indorsee?  This  is  settled  on  the  best  of  authority. 
The  original  parties  stood  upon  equal  ground,  both  being  in  fault, 
and  could  neither  of  them  enforce  the  contract;  yet  neither  shall  be 
allowed  to  take  advantage  of  his  own  wrong  as  against  an  innocent 
indorsee. 

And  suppose  it  should  turn  out  tliat  his  note  was  obtained  of  the 
maker  by  fraud  or  by  duress,  a  case  in  which  the  maker  was  in  no 
fault,  —  what  rule  shall  be  applied  here?  —  the  long  established  one, 
that  where  one  of  two  innocent  persons  must  suffer,  the  loss  should 
fall  upon  him  who  has  suffered  a  negotiable  security,  with  his  name 
attached  to  it,  to  get  into  circulation,  and  thereby  mislead  the  in- 
dorsee.    Such  rules,  and  such  an  application  of  them,  are  necessary  to 

give  security  to  negotiable  paper. 

************ 

The  exception  to  the  ruling  of  the  court  upon  this  point  must  be 
sustained ;  but  we  shall  find  that  the  numerous  authorities  which  bear 
upon  the  next  question  to  be  considered  have  also  a  direct  bearing 
upon  this  point. 

§98  II.  Next  let  us  inquire,  upon  whom  is  the  burden  of  proof 
after  duress,  or  fraud,  or  illegality  of  consideration  is  proved?  Must 
the  defendant  not  only  prove  that  he  had  a  perfect  defense  to  the 
note  originally,  but  also  show  that  the  indorsee  had  notice  of  the 
defect,  or  that  he  paid  no  consideration  for  it,  or  that  he  is  not  in 
some  way  the  bona  fide  holder  of  the  note?  Or  must  the  plaintiff, 
after  such  defense  to  the  original  contract  is  proved,  assume  the 
burden  of  proving  that  he  is  a  hona  fide  holder,  for  a  valuable  con- 
sideration, without  notice  of  any  defect,  and  tliat  it  came  seasonably 
into  his  hands? 

|'.\fter  discussincT  various  authorities.] 

The  same  doctrines  very  generally  prevail  in  this  country,  wherever 


III.]  DEFENCES.  376 

tlie  sul)ject  has  received  judicial  consideration.     (Mvnroe  v.  Cooper; 

5  Pick.  412;  Woodhul  v.  Holmes,  in  Jolms.  231;  VaUeit  v.  Parl-er, 

6  "Wend.  G15;  Small  v.  <S'm////,  1  Den.  583;  ]Yorcester  Co.  Bank  v.  D. 
&  M.  Bo nl,  10  Cush.  488;  Wyer  v.  D.  &  M.  Bank,  11  Cush.  52; 
Rod'ivell  V.  Charles,  2  Hill,  499;  Z^/sse//  v.  Morgan,  11  Cush.  198; 
Cros6i/  V.  Grojj/.  36  N.  H.  273.)  So  in  Smith  on  Cont.  (3d  Am.  ed. 
277),  in  a  note  by  Rawle,  it  is  said  that  in  New  York  it  has  been 
held  that,  as  soon  as  the  defendant  shows  there  has  been  usury 
between  the  prior  parties,  he  casts  on  the  plaintiff  the  burden  of 
proving  that  he  is  a  holder  for  value,  —  as  is  the  case  in  every  in- 
stance where  fraud,  duress,  or  illegality  is  shown  between  the  prior 
parties. 

These  authorities  would  seem  conclusive,  that  the  plaintiff's  excep- 
tion, —  that  the  evidence  offered  would  have  been  no  defense  unless 
it  were  proved  that  he  was  not  the  bona  fide  holder,  —  must  be  over- 
ruled. When  the  defendant  had  proved  the  duress,  he  had  made  a 
good  defense  as  against  the  original  party;  and  because  of  the  legal 
presumption  that  in  such  cases  the  payee,  being  guilty  of  such  il- 
legality, would  dispose  of  the  note  and  place  it  in  the  hands  of  some 
other  person  to  sue  upon  it  (Bailey  v  Bidwell,  ante),  he  had  thereby 
( ast  a  suspicion  on  tlie  plaintiff's  title,  which  threw  the  burden  upon 
him  of  showing  affirmatively  that  he  was  a  bona  fide  holder  for  value. 
N'or  can  we  see  that  the  fact  tiiat  this  evidence  was  offered  under  the 
general  issue  alters  the  position  of  tlic  parties  or  the  state  of  the 
case. 

These  authoritips  also  bear  directly  upon  the  first  point  taken  by 
the  defendant,  that  duress  is  a  defense  against  any  holder,  however 
innocent  he  may  be,  and  however  valuable  a  consideration  he  may 
have  paid  for  the  note;  and  if  other  authorities  on  this  point  were 
nepded.  thev  are  not  wanting.  Tn  Powers  v.  Ball  (27  Vt.  002),  Red- 
fipld.  C.  J.,  says,  "  Illegality,  duress,  fraud,  and  want  or  failure  of 
consideration,  are  no  defense  as  against  a  bona  fide  holder  for  value." 
(See,  also,  .S7.  Albavs  Hank  v.  Dillon,  30  Yt.  122;  Ellirott  v.  Martin, 
6  Md.  509;  Minell  v.  Heed.  20  Ala.  730;  Norris  v.  Langlcy,  19  N.  H. 
423;  Kniqht  v.   I'inih ,   \   Watts  k  Serg.  415.) 

The  verdirt  must  be  set  aside,  and  a  new  trial  granted. 


^96        r,V.{)]\{]V.  AT.KXANDEH  AND  CO.  v.  HAZKLHIOO. 
123  Kkntucky.  677.  —  1900. 

Action  on  notf.  Thf  answer  set  up  as  one  defense  tlint  the  note 
was  exeeuted  "  in  pnvineiit  of  ;i  bet  or  wiiger  *  *  *  ;,,|,|  ||,,.  con- 
sideration     *      *      *      under  the   liiw   of    Kentucky   is   vi<ioii.'^,   illegal, 


376  UKillTS  OF   IIOI.DKU.  [art.    V. 

and  void."  PlaiiitifT's  deinurn'r  lo  this  dcfonso  was  overruled,  and  as 
ho  declined  to  jileaii  furtiier,  jud<:;iueiil  was  rendered  against  him,  and 
he  appealed. 

NUNN,  J.      *      *     * 

Tlie  real  question  to  he  determined  is  whether  a  negotiable  note 
executed  for  money  lost  on  a  bet  or  wager  can  be  successfully  de- 
fended, when  owned  and  held  by  an  innocent  purchaser  for  value  with- 
out notice  of  the  infirmity  or  illegal  consideration  of  the  note.  As 
we  understand  the  appellant's  petition,  he  concedes  that  prior  to  the 
passage  and  the  taking  cfTcct  of  the  Negotiable  Instruments  Act,  re- 
ferred to,  such  a  note  could  be  successfully  defended  in  the  hands  of 
an  innocent  purchaser;  but  since  that  act  took  effect  he  contends  that 
all  laws  inconsistent  with  that  act  stood  repealed.  He  claims  that 
under  section  57^  the  question  of  consideration  cannot  be  inquired 
into  as  against  the  holder  in  due  course.  He  takes  the  paper  free 
from  defenses.  And  in  support  of  this  position  we  are  referred  to  the 
case  of  Wirt  v.  Stubblefield,  17  App.  D.  C.  283.  In  that  case  it  was 
held  that  the  section,  the  same  as  section  57  referred  to  above,  changed 
the  law  of  the  District  of  Columbia  as  to  a  note  given  for  a  gambling 
debt  in  the  hands  of  a  holder  in  due  course ;  the  court  saying :  "  We 
know,  moreover,  that  the  great  and  leading  object  of  the  act,  not  only 
with  Congress,  but  with  the  larger  number  of  the  principal  states  of 
the  Union  that  have  adopted  it,  has  been  to  establish  a  uniform  system 
of  law  to  govern  negotiable  instruments  wlierever  they  might  circulate 
or  be  negotiated.  It  was  not  only  uniformity  of  rules  and  principles 
that  was  designed,  but  to  embody  in  a  codified  form,  as  fully  as  pos- 
sible, all  the  law  upon  the  subject,  to  avoid  conflict  of  decisions,  and 
the  effect  of  mere  local  laws  and  usages  that  have  hitherto  prevailed. 
The  great  object  sought  to  be  accomplished  by  the  enactment  of  the 
statute  is  to  free  the  negotiable  instrument  as  far  as  possible  from 
all  latent  local  infirmities  that  would  otherwise  inhere  in  it  to  the 
prejudice  and  disappointment  of  innocent  holders  as  against  all  the 
parties  to  the  instrument  professedly  bound  thereby.  This  clearly 
could  not  be  effected  so  long  as  the  instrument  was  rendered  abso- 
lutely null  and  void  by  local  statute." 

It  has  been  the  policy  of  this  state  to  suppress  gaming,  and  the 
statutes  making  gaming  contracts  void  are  founded  upon  what  the 
Legislature  has  for  many  years  deemed  to  be  sound  public  policy.  It 
is  inconceivable  that  the  General  Assembly,  in  the  passage  of  the  Act 
of  1904  for  the  protection  of  innocent  holders  of  negotiable  instru- 
ments, intended  to  or  did  repeal  section  1955,  Ky.  St.  1903,  which 
declares  all  gaming  contracts  void.*     In  our  opinion,  tlie  disappoint- 

»N.  Y.,  §  96. —  C. 

*  Similarly,  it  was  held  in  Laimon  v.  First  Nat.  Bank  of  Fulton,  102  R.  W. 
(Ky.)    324,  that  Ky.   St.    1903,  §   4223,  making  void   a  pedler's  note   unleai 


HI.]  DEFENCES.  377 

ment  now  and  then  of  an  innocent  holder  of  a  negotiable  instrument 
would  not  be  as  hurtful  and  injurious  to  the  best  interests  of  the 
state  as  the  removal  of  the  ban  from  gaming  contracts.  Mr.  Daniel 
in  his  work  on  Ts^gotiable  Instruments  (section  197)  says:  "The 
bona  fide  holder  for  vahie,  who  has  received  the  paper  in  the  usual 
course  of  business,  is  unaffected  by  the  fact  that  it  originated  in  an 
illegal  consideration,  without  any  distinction  between  cases  of  ille- 
gahty  founded  in  moral  crime  or  turpitude,  which  are  terms  mala  in  se, 
and  those  founded  in  positive  statutory  prohibition,  which  are  termed 
mala  prohibita.  The  law  extends  this  peculiar  protection  to  nego- 
tiable instruments,  because  it  would  seriously  embarrass  mercantile 
transactions  to  expose  the  trader  to  the  consequences  of  having  a  bill 
or  note  passed  to  him  impeached  for  some  covert  defect.  There  is, 
however,  one  exception  to  this  rule  —  that  when  a  statute,  expressly 
or  by  necessary  implication,  declares  the  instrument  absolutely  void, 
it  gathers  no  vitality  by  its  circulation  in  respect  to  the  parties  exe- 
cuting it."  In  the  case  of  Sondheim  v.  Gilbert,  117  Ind.  71,  the 
court  said :  "  In  order,  therefore,  to  uphold  a  judgment  which  in- 
validates commercial  paper  in  the  hands  of  innocent  holders,  such  as 
plaintiffs  are  conceded  to  be,  it  is  essential  that  a  statute  should  be 
shown  governing  the  case,  which  in  direct  terms  declares  that  transac- 
tions such  as  those  here  involved  are  unlawful,  and  that  notes  given 
under  circumstances  exhibited  by  the  facts  in  tliis  case  are  absolutely 
void.  The  principle  may  be  considered  as  well  established  that  when 
a  statute  in  express  terms  pronounces  contracts,  bills,  securities,  and 
the  like,  resulting  from  or  growing  out  of  wagering  or  gambling 
transactions,  which  are  prohibited  by  statute,  absolutely  void,  no  re- 
covery can  be  had  thereon  ;  and  the  doctrine  that  transactions  which 
a  statute  in  direct  terms  declares  to  be  unlawful  cannot  acquire  validity 
by  the  transfer  of  commcrrial  paper  based  thereon,  which  is  also  under 
direct  legislative  denunciation,  is  fully  supported  by  authorities." 
And  the  authorities  are  referred  to,  and  the  court  continues:     "In 


indorspd  with  thp  word's  "  Ppdlpr's  notp  "  ia  not  rpppjilod  by  implipntion  hy 
the  Npprotiahlf  InstnimpntB  Law.  Sppakinjj  of  this  lattpr  .statiitp  thp  court 
said:  "The  whole  wofH-  of  it  in  hIiowfi  to  be  the  dealing  witii  commercial 
paper,  so  as  to  protpct  innocent  purchasers  of  such  «f,'ainHt  mere  defenses 
available  as  between  the  original  fiarfies.  It  pivps  such  paper  currency,  free 
from  original  defenses.  But  it  applies  only  to  paper  that  might  havp  bppr 
obligatory  Utwepn  the  f)artiPH.  But,  where  the  parties  wprp  never  t>ound 
because  the  law  made  the  nofp  void,  as  contrary  to  public  policy  as  pxprpsspd 
in  the  stntTites.  the  Negf)tinble  Instruments  .Act  does  not  api)ly.  and  ought  not 
to.  The  prpvention  of  crime  is  of  more  importnnce  than  the  fostering  of  com- 
mprcp.  Thp  latter  act  shotdd  Ik-  read  in  view  of  its  purposp,  and  not  as 
intending  to  rpppal  otlipr  statutes  passed  in  the  exercise  of  the  police  power  of 
the  state  to  suppress  crime  and   fraud." 

See  also   the  extract    from    the   opinion   of   f'tTi.f.Kr*.   C.  J.,   in   Schlesingrr  T, 
Gilhnoly,  189  N.  Y.   1,  given  in  note  on  p.  379.  —  C. 


3T8  RICHTS  OF    UOLOKR.  [ART.    V. 

siii'li  ii  laso,  tho  note  will  be  declared  void  in  the  hands  of  an  innocent 
holder."  In  the  case  of  Bohon's  Assignees  v.  nroirii.  etc,  101  Ky. 
nriTi,  the  court  said:  "In  the  case  of  Cochran  v.  Gernidu  Insurance 
PanJr.  0  Ky.  Law  Kep.  1!M»,  the  Superior  Court  hild  lliat  'a  hill  or 
note  based  npon  a  jxamblinj::  eonsideration  is  absolutely  void,  and  the 
drawer  or  niaker  is  not  bound  to  even  an  innocent  bolder.'  And  in 
the  case  of  Farmers'  i(-  Drovers'  Bank  of  Louisville  v.  linger,  13  Ky. 
Law  Rep.  ':^^^\  the  court  says:  'The  whole  current  of  authority  is 
that  the  obligor  may  insist  upon  the  illegality  of  the  contract  or  con- 
sideration, notwithstanding  the  note  is  in  the  hands  of  an  innocent 
holder  for  value,  in  all  tliose  cases  in  which  he  can  point  to  an  express 
declaration  of  the  Legislature  that  such  an  illegality  makes  the  con- 
tract void.'  " 

For  these  reasons,  the  judgment  of  the  lower  court  is  affirmed.^ 


§  96  SCHLESINGER  v.  LEHMAIER. 

191  New  York,  69.  —  1908. 

Haight,  J.  This  action  was  brought  by  the  receiver  of  the  Federal 
Bank,  a  domestic  corporation  engaged  in  the  banking  business  in  the 
city  of  New  York,  to  recover  the  amount  of  two  promissory  notes 
made  by  the  defendant  for  $500  and  $454.-50,  respectively,  each  made 
payable  to  the  order  of  the  maker  and  indorsed  by  him.  The  com- 
plaint alleges  that  before  maturity  the  notes  were  discounted  by  the 
Federal  Bank,  and  that  the  plaintiff  as  receiver  now  holds  them.  The 
answer,  in  substance,  alleges  that  the  notes  described  in  the  complaint 
were  made  bv  the  defendant  and  delivered  to  the  Globe  Security  Com- 
pany in  payment  for  another  note  of  the  defendant  held  by  that  com- 
pany and  for  the  sum  of  $135.50  interest,  which  sum  was  far  in  excess 
of  interest  at  the  Icija!  rate  and  was.  therefore,  usurious,  and  that  the 
Federal  Bank  subsequently  discounted  the  notes  and  received  them, 
with  full  knowledge  of  the  payment  of  such  usurious  rate  of  interest. 
Upon  the  trial  the  City  Court  awarded  judgment  for  the  plaintiff, 
holding  that  the  facts  alleged  and  set  forth  in  the  answer  did  not  in 
law  constitute  a  defense  to  the  action. 

We  are  again  called  upon  to  construe  the  provisions  of  the  National 
Banking  Act,  so  called,  and  our  own  Banking  Law,  based  thereon, 
which  is  as  follows:  "  Every  bank  and  private  and  individual  banker 
doing  business  in  this  state  "may  take,  receive,  reserve  and  charge  on 
every  loan  and  discount  made,  or  upon  any  note,  hill  of  exchange  or 
other  evidence  of  debt,  interest  at  the  rate  of  six  per  centum  per 
annum  ;  and  such  interest  may  be  taken  in  advance,  reckoning  the  days 

0  See  exhaustive  note  in  119  Am.  St.  Rep.  172,  entitled  "Defenses  to  notet. 
and  other  obligations  given  for  gambling  debts."  —  C. 


III.]  DEFENCES.  379 

for  which  tlie  note,  bill  or  evidence  of  debt  has  to  run.  The  knowingly 
taking,  receiving,  reserving  or  charging  a  greater  rate  of  interest  stiall 
be  held  an<l  adjudged  a  forfeiture  of  the  entire  interest  which  the  note, 
bill  or  evidence  of  debt  carries  with  it,  or  which  has  been  agreed 
to  be  paid  thereon.  If  a  greater  rate  of  interest  has  been  paid,  the 
person  paying  the  same  or  his  legal  representatives  may  recover  hack 
twice  the  amount  of  the  interest  thus  paid,  from  the  bank  and  private 
or  individual  banker  taking  or  receiving  the  same,  if  such  action  is 
brought  within  two  years  from  the  time  the  excess  of  interest  is  taken. 
*  *  *  The  true  intent  and  meaning  of  this  section  is  to  place  and 
continue  banks,  and  private  and  individual  hankers  on  an  equality  in 
the  particulars  herein  referred-to  with  the  national  banks  organized 
under  the  act  of  Congress  entitled  'An  act  to  provide  a  national  cur- 
rency secured  by  pledges  of  United  States  bonds,  and  to  provide  for 
the  circulation  and  redemption,  thereof,'  approved  June  the  third, 
eighteen  hundred  and  sixty-four."  (L.  1870,  eh.  163;  L.  1803,  ch, 
689,  §  55,  as  amended  by  L.  1900,  ch.  310,  §  1.) 

The  general  statutes  of  our  state  forbid  the  taking  of  interest  upon 
the  loan  of  money  in  excess  of  the  rate  prescribed  by  law,  and  also 
render  void  all  bonrls,  notes  and  other  contracts  given  to  secure  a  loan 
made  in  violation  thereof.  (2  E.  S.  7T2,  §§  2,  5;  L.  1837,  ch.  430, 
§  1.)  These  statutes  still  remain  in  full  force  as  to  individuals"  and 
corporations  except  in  so  far  as  they  have  been  modified  or  superseded 
by  the  Banking  Law  enacted  for  the  benefit  of  banking  corporations 
and  private  and  individual  banknrs,  but  the  precise  extent  of  such 
modifiration  is  a  question  involving  some  difficulty  in  its  solution  and 
has  already  been  the  subject  of  discussion  in  this  court.  In  the  case 
of  Scklesitiffer  v.  Gilhonly  (189  N.  Y.  1)  the  construction  of  the 
National  Banking  Act  and  of  our  state  Banking  Law  was  discussed 
in  two  opinions,  one  written  by  Cullen,  Ch.  J.,  and  the  other  by 
Vann,  J.,  in  which  the  chief  judge  reached  the  conclusion  that  the 
statutes  referred  to  only  applied  to  cases  where  the  banks  had  been 
paid  an  unlawful  rate  of  interest  and  that  they  had  no  application  to 
negotiable  paper  purchased  by  the  banks  which  had  previously  been 
tainted  with  usury;  while  Vann,  J.,  reached  the  conclusion  (hat  these 
statutes  extenfled  to  and  covered  negotiahle  paper  purchased  hv  the 
bank  before  maturity  in  good  faith  without  knowledge  of  its  jirevious 
taint.  Two  of  my  associates  concurred  with  the  chief  judijc  and  (wo 
concurred  with  .Tudgn  Vann.  Willard  Bardett,  J.,  concurred  with 
Judge  Vann  in  the  result,  upon  the  ground  that,  under  the  \c',ro(i;d)le 
Instruments  Law,  a  hnnn  frh  purchaser  takes  a  no(e  free  from  the 
defense  of  ustiry.^     The  judgment  was.  therefore,  afTimied,  thus  hold- 

•  But  spe  pxtraot  from  hinr  v.  I\<mhuh\  fiS  Mi.sc.  ( N.  Y.)  HM),  in  note  7 
on  p.  .ISO.  —  r. 

Tin  Srhlr.iinqrr  V.  fnJhr.rJ,,,  I  sf)  \.  Y.  1.  .13.  (iir.KN.  (".  .?..  Haid:  "I  Rhall 
not  discuM  at  any  length  the  effect  of  the  Negotiable  Instruments  Law.     .     . 


3S0  RIGHTS  OF  HOLDER.  [AET.    V. 

in*;  that,  wlierc  a  bank  has  in  good  faith  discounted  negotiable  paper 
for  valno  before  maturity  without  notice  that  it  was  already  void  for 
usurv,  the  defense  of  usury  is  not  available,  and  that  must  now  be 
regarded  as  the  law  of  this  state. 

The  question  we  now  have  jiresented  was  not  disposed  of  in  the 
former  case,  and  is  quite  different.  It  is  now  contended  that  the  bank 
may  purchase  void  paper  of  the  holder,  with  full  knowledge  that  the 
maker  has  been  compelled  to  pay  a  usurious  rate  of  interest,  and  that 
by  such  jiurchase  the  paper  becomes  validated,  and  in  the  hands  of  the 
bank  may  be  collected  of  the  maker,  if  such  an  interpretation  is 
adopted,  then  it  practically  nullifies  our  usury  laws,  for  any  person 
who  lias  exacted  usury  for  the  loan  of  money  may  take  his  paper  into 
a  bank  and  arrange  for  its  prosecution  and  thus  evade  the  defense  of 
usury.  The  decision  of  our  court  in  the  case  of  Schlesinger  v.  Gil- 
houlif  (supra)  has  already  eliminated  from  our  usury  statutes  their 
most  drastic  features,  so  far  as  banks  are  concerned,  and  no  longer 
can  a  person  put  in  circulation  negotiable  paper  void  for  usury,  which 
may  be  transferred  to  innocent  banks  who  purchase  in  good  faith  with- 
out knowledge  of  its  taint,  and  thus  be  deprived  of  the  right  to  collect 
it  from  the  maker. 


T  think  that  under  well  settled  principles  of  statutory  construction  we  cannot 
construe  its  general  language  as  repealing  the  provisions  of  the  usury,  gaming 
and  lottery  laws,  whieh  render  obligations  given  on  such  considerations  abso- 
lutely void.  The  Negotiable  Instruments  Law  applies  only  to  commercial 
paper,  and  the  effect  of  the  usury  and  gaming  statutes,  like  that  relating  to 
patent  rights,  is  to  withdraw  notes  given  on  such  considerations  from  the 
domain  of  negotiable  instruments.      {Eastman  v.  f^hain,  fi5  N.  Y.  522.)" 

But  see  the  following  extract  from  the  case  of  Klar  v.  Kostiuk,  65  Misc. 
(N.  Y.  Sup.  Ct.,  App.  T.)  199,  decided  in  November,  1909,  where  the  court  took 
the  contrary  view  of  the  effect  of  the  Negotiable  Instruments  Law: 

"  Gii.DERSLEEVE,  J.  .  .  .  Until  the  enactment  of  section  90  of  the  Nego- 
tiable Instruments  Law,  in  respect  to  notes  having  a  usurious  inception,  and 
the  decisions  in  Hchlesin<]er  v.  Gilhooly,  189  N.  Y.  1 ;  Schlesinger  v.  Lehmaier, 
191  id.  09,  and  Schlesinger  v.  Kelly,  114  App.  Div.  540,  there  was  no  uncer- 
tainty about  the  law  in  this  state  in  respect  to  notes  usuriously  given.  It  was 
plainly  declared  in  flaflin  v.  Bnnrum,  122  N.  Y.  .385.  The  court  said:  '  A  note 
void  in  its  inception  for  usury  continues  void  forever,  whatever  its  subsequent 
history  may  be.'  Section  96  of  the  Negotiable  Instruments  Law  provides  as 
follows:  'A  holder  in  due  course  holds  the  instrument  free  from  any  defect 
of  title  of  prior  parties  and  free  from  defenses  available  to  prior  parties  among 
themselves  and  may  enforce  payment  of  the  instrument  for  the  full  amount 
thereof  against  all  parties  liable  thereon.' 

"We  think  it  was  the  purpose  of  the  legislature  in  enacting  this  provision 
to  makp  a  radical  change  in  the  law  of  this  state  affecting  negotiable  paper, 
and  that  the  law  now  is  that  d  bona  fide  holder  in  due  course  holds  the  note 
free  from  any  taint  of  usury.  The  Schlesinger  cases,  .inprn,  unmistakably  and 
specifically  declare  the  law  to  be  that  a  bank  acquiring  in  good  faith,  for  value, 
commercial  paper,  void  between  tlie  parties  for  usury,  may  recover  thereon. 
We  see  no  reason  why  the  provision  under  consideration  does  not  apply  to,  and 
may  not  be  invoked  i)y,  individuals  as  well  as  banks.     In  Wirt  v.  Stubhlefield, 


III.]  DEFENCES.  381 

Until  a  recent  amendment  of  section  378  of  the  Penal  Code  the 
acceptance  of  an  unlawful  rate  of  interest  for  the  use  or  loan  of  money 
was  a  misdemeanor  and  punishable  criminally.  The  taking  of  usury 
is  still  a  wrong  and  against  the  public  policy  of  the  state.  If  the 
statutes  are  to  receive  the  construction  contended  for,  then  the  officers 
of  a  bank  may  become  parties  to  a  wrong  and,  against  the  policy  of 
the  state,  aid  the  wrongdoers  in  their  receipt  of  usury  by  the  taking  of 
such  paper  and  practically  collecting  it  for  them.  Assuming,  for  the 
purposes  of  the  argument,  that  national  and  state  banks  are  govern- 
mental agencies,  and  that  among  the  powers  given  to  banks,  cither 
state  or  federal,  is  that  of  purchasing  negotiable  paper,  and  that  in 
the  discliarge  of  such  powers  they  are  entitled  to  protection,  evidently 
such  protection  was  only  intended  to  apply  in  so  far  as  the  officers  of 
such  banks  acted  in  good  faith  in  accordance  with  the  law,  and  not 
where  they  departed  therefrom  and  knowingly  and  intentionally  Joined 
with  wrongdoers  in  an  attempt  to  evade  the  laws. 

The  learned  Appellate  Division  appears  to  have  entertained  the 
view  that  the  purchase  of  commercial  paper  with  knowledge  that  it 
was  void  for  usury  did  not  place  the  bank  in  a  worse  position  than  it 
would  have  been  in  had  it  taken  usurious  interest  itself.  The  answer 
to  this  is  that  the  statute  makes  it  different.     The  usury  laws,  as 


17  App.  D.  C.  283,  the  court,  in  construinp  the  same  provision  enacted  by 
CongH'ss  for  the  District  of  Columbia  as  the  Nepotiablo  Instruments  Law, 
took  the  view  that  we  have  adopted  and  made  no  distinction  between  indi- 
viduals and  banks. 

"  We  think  Mr.  . Justice  Lait.hlin.  in  f^rhlesinger  v.  Krlh/,  supra,  correctly 
stated  the  law  of  this  state,  when  he  said:  '  Tlie  ustiry  laws  remain  in  full 
force,  but  to  facilitate  the  free  circulation  of  nepotiable  paper  by  protectinp 
holders  thereof  in  due  coiirse  for  value  in  their  ripht  to  enforce  the  same,  the 
usury  laws  are  to  that  extent  superseded  by  the  provisions  of  section  OG  of 
the   Ne{;otiab!e   Instruments  Law.'     .     . 

"  Skaih  RV,  .T.  fconcurrinfr).  T  concur  in  the  opinion  of  ]\fr.  .Justice  HiLnER- 
8rj!:F:\K  in  so  far  as  that  opinion  holds  that  the  enactment  of  section  00  of  the 
Nepotiable  Instruments  Law  changed  the  existing  law,  and  that  under  the 
provisions  of  the  Nepotiable  In-truments  Law  the  defense  of  usury  cannot  be 
B«»t  up  apainst  a  hfina  fulr  holder.  I  think  that  the  correct  interpretation  of 
that  I;iw  was  first  piven  by  Mr.  .Tustice  Lauphlin  in  Srhlminprr  v.  KrUy,  lU 
App.  Div.  .54f5.  It  seems  to  me  that  Srhlcsinfirr  v.  Gilhonhf,  iSft  N.  Y.  1,  left 
this  question  imdetermined,  and  that  we  are  now  at  liberty  to  adopt  the  views 
expressed  by  Mr.  Justice  Lauphlin  in  the  Kelly  case  and  by  .Tudpc  Willnrd 
Bartlett   in   Nrhlrsinrirr  v.   fUlhonlif.  niiprn." 

T^KiiMAN.  .T..  wrote  a  flisHentinp  fifiinion. 

Tt  must  be  ob-crved.  however,  that  the  decision  in  Klfir  v.  Kontiuk,  supra, 
is  that  of  an  inferior  appellate  court,  and  in  the  face  of  the  contrary  doctrine 
maintained  by  the  N.  Y.  f'ourt  of  Appeals  prior  to  the  enactment  of  the 
Nepotiabln  Instruments  T>aw.  and  the  dicta  in  the  opinions  of  that  court  in 
the  Flrhlrsinrjrr  cases  in  180  N.  Y.  1,  and  101  N.  Y.  (10  (reported  herein  at 
p.  378),  subsefpient  to  the  enactment  of  that  statute,  it  is  doubt fnl  whether 
that  decision  will  be  followed  by  the  latter  court  wherj  the  question  coip^s 
■quarely  beforp  it        t* 


382  RIGHTS  OF  HOLDER.  |  ART.    V. 

between  individuals,  have  not  been  rhaiigod,  and  as  between  the  maker 
and  llio  holder,  ii'  usury  is  e.\acted,  the  paper  is  still  void  and  no 
recovery  can  hv  had  thereon. ^^  Not  so,  however,  with  banks  which  have 
received  unlawful  interest;  the  paper  is  not  allected  or  rendered  void, 
hut  the  hank  is  suhjec-tod  to  a  forfeiture  of  all  interest  and  to  penalties 
for  that  which  it  has  received.  In  Cnponigri  v.  Al fieri  (KiT)  N.  Y. 
25,5)  we  held  that  the  penalties  could  l)e  collected  in  an  action  hroii^dit 
for  that  purpose,  but  how  could  such  an  action  he  maintained  against 
the  Federal  Rank  upon  the  paper  in  question?  It  has  received  no 
unlawful  rate  of  interest.  Tt  has  not  violated  any  statute  in  this 
regard.  The  unlawful  interest  was  collected  by  the  Globe  Company 
before  the  bank  had  become  the  purchaser  of  the  paper.  That  com- 
pany was  not  a  banking  corporation,  and  consequently  is  not  liable  for 
the  penalties  provided  by  the  Banking  Law.  True,  it  forfeits  its  right 
to  collect  the  balance  remaining  due  upon  the  paper,  and  it  may  be 
liable  for  the  interest  received  in  excess  of  the  legal  rate ;  but,  under 
the  view  of  the  Appellate  Division,  the  maker  would  be  deprived  of 
his  defense  of  usury,  and  also  of  his  right  to  maintain  an  action  for 
the  penalties  provided  by  the  Banking  Law.  To  my  mind,  the  legis- 
lature never  intended  such  an  interpretation  of  the  act.  It  pertaijis 
to  negotiable  instruments,  and  should  be  construed  in  connection 
with  the  other  legislation  upon  the  same  subject.  Tn  the  Negotiable 
Instruments  Law  it  is  expressly  firovided  that  a  holder,  who  becomes 
such  before  maturity  in  good  faith  and  for  value  without  notice  of 
any  infirmity,  holds  the  same  "  free  from  any  defect  of  title  of  prior 
parties  and  free  from  defenses  available  to  prior  parties  among  tliein- 
selves,  and  may  enforce  the  payment  of  the  instrument  for  the  full 
amount  thereof  against  all  parties  liable  thereon."  TTere  we  have  the 
legislative  intent  expressed  in  clear  and  unmistakal)le  language.  It 
establishes  a  just  and  proper  rule  which  protects  the  bank  in  making 
purchases  of  commercial  paper  in  good  faith  before  maturity,  for  value 
and  without  notice  of  infirmity.  But  where  it  purchases  with  actual 
knowledge  of  the  infirmity  or  defect,  or  knowledge  of  such  facts  that 
its  action  in  taking  the  instrument  amounted  to  barl  faith,  it  is  not 
protected. 

I  am,  therefore,  of  the  opinion  that  the  matter  set  forth  in  the 
answer  is  sufficient  in  law  to  constitute  a  defense  and  that,  conse- 
quently, the  judgment  of  the  Ap|)ellate  Division  should  be  reversed 
and  the  order  of  the  Appellate  Term  adirmed,  with  costs  to  appellant 
in  the  Appellate  Division  and  this  court. 

CuLLEN,  Ch.  J.  T  concur  in  the  opinion  of  my  ])rothor  Hatght 
for  reversal,  but  deem  it  proper  to  add  a  woi'd  explanatory  of  my 
position.    Tn  the  case  of  Schlesinfjer  v.  Gilhooly  (189  N.  Y.  1)  I  dis- 

»  But  Rpc  pxtrart  from  Klnr  v.  Kostmk,  B.'j  Misc.  (N.  Y.)  190,  in  note  7 
on  p.  380.  —  C. 


Ill,]  DEFENCES.  383 

sented  from  the  decision  in  an  opinion.  While  I  retain  the  views  then 
expressed,  I  recognize  lully  the  effect  of  the  decision  there  made  and 
accept  it  as  a  binding  authority  declaring  the  law  to  be  that  a  bank 
acquiring,  in  good  faith  for  value,  commercial  paper  void  between  the 
parties  for  usury,  may  recover  thereon.  In  that  case,  however,  the 
recovery  was  sought  to  be  upheld  on  two  separate  grounds,  the  Banking 
Laws,  state  and  national,  and  the  Negotiable  Instruments  Law.  Had 
a  majority  of  the  court  placed  their  decision  on  either  ground  I  should 
have  felt  the  decision  binding  not  only  as  to  the  point  actually  decided, 
but  as  to  the  propositions  on  whicli  the  decision  was  founded.  I  under- 
stand, however,  that  while  my  opinion  in  its  entirety  commanded  the 
assent  of  two  only  of  my  associates,  the  member  of  the  majority  who 
based  his  decision  on  the  effect  of  the  Negotiable  Instruments  Law 
expressed  his  approval  in  that  part  which  dealt  with  tlio  effect  of  the 
Banking  Laws,  thougli  it  nuiy  be  that  approval  was  obiter,  his  action 
proceeding  on  a  different  question.  Therefore,  for  the  reasons  stated 
in  my  former  opinion  as  well  as  for  those  stated  in  the  opinion  of  my 
brother  Haight,  now  rendered,  I  concur  in  the  reversal  of  the  judg- 
ment appealed  from. 

WiLLARD  Bartlett,  J.  I  concur  in  the  opinion  of  Haight,  J.,  for 
reversal  —  having  concurred  with  the  opinion  of  the  chief  judge  in 
Schlrainf/fi-  v.  Gilhonly  (189  N.  Y.  1),  except  as  to  the  effect  of  the 
Negotiable  Instruments  Law,  although  the  statement  of  such  con- 
currence was  inadvertently  omitted  from  the  report  of  that  case. 

Werner  and  Hiscock,  J  J.,  concur  with  Haight,  J.,  and  Cullen, 
Ch.  J.,  and  Willard  Bartlett,  J.,  also  concur  in  memoranda  with 
Haight,  J.;  Gray  and  Chase,  JJ.,  dissent. 

Judgment  accordingly.' 


§96  AT?ND  V.  S.IOBLOM. 

l.TI  Wisconsin,  642.  —  1907. 

Suit  on  promissory  note  I'liiintiff  gave  ovirlence  thai  he  was  an 
innocent  purchaser  for  value  bcfftrc  due  witli  no  notice  of  any  defense 
or  invaliflity.  It  was  stipuhitecl  that  the  note  was  in  fact  given  in 
payment  for  lightning  rofls  erected  .ipon  defendant's  huildings  in 
accordance  with  a  y>rior  written  eontraet  made  by  the  defendant,  where- 
upon, on  motion  of  defendant,  judgmenl  of  iKinsnil  was  entered  dis- 
missing the  action,  from  whi<li  the  phiintilf  appeals. 

DoDfJE,  J.  'FMie  const  it  ntinnality  of  cli.  \'.W,  Laws  of  ]'JO'.i,  as  ap- 
plied tf>  notes  given   for  lightning  rods,  is  settlefl  liy  Qnigglp,  v.  Ifrr- 


•  ThiH  case  in  rpport*"*!  with  a  note  in  16  L.  N.  8.  626,  and  thp  (lilhooly  case, 
180  N.  Y.  1.  is  roporfpfl  with  a  nf>tc  in  12  A.  *  E.  Ann.  Cnn.  1138.  For  a  dis- 
ciutHion  of  thrse  two  cbhi-h,  Hcn  IS  CaHe  and  (-'oninicnt,  130.  —  C 


384  RiOHT.s  OK  iioi,i)i:i{.  [art.  v. 

mnn,  \'.U  Wis.  ;?7!),  inarkin<;  iho  (listinction  from  its  application  to 
patont  ri-^'lits  considered  in  ,/.  //.  Clarl,-  (Jo.  v.  Rice,  127  Wis. 
451.'      *     *     * 

Conceding,  for  tlio  purposes  of  the  discussion,  that  hocausc  the  giv- 
ing of  a  note  for  liglitning  rods  without  rod-ink  deehiration  of  its 
consideration  u])on  its  fac-e  is  in  defiance  of  ch.  43S,  Jjaws  of  1903,  it 
is  thereby  rendered  invalid,  as  we  have  decided  is  a  note  executed  on 
Sunday  {Howe  v.  Ballard,  113  W'is.  375,  and  Brown  v.  Gates,  120 
Wis.  349),  does  it  necessarily  follow  that  an  innocent  holder  for  value 
cannot  recover  thereon  ?  It  was  early  decided  hy  this  court  that  a 
negotiable  note,  invalid  between  the  original  parties  because  given  in 
defiance  of  a  statutory  prohibition  accompanied  by  a  penalty  —  t.  e. 
one  given  on  Sunday,  but  dated  on  Saturday, —  would  be  enforced  in 
the  hands  of  an  innocent  holder  having  no  knowledge  of  the  illegal 
fact  upon  the  ground  of  estoppel  against  the  maker  to  assert  such 
fact.  Knox  v.  Clifford,  3H  Wis.  651.  The  same  principle  has  been 
invoked  to  support  a  usurious  negotiable  note  in  the  hands  of  an 
innocent  holder,  although  the  statute  declared  it  "  void."  Sage  v. 
McLaughlin,  34  Wis.  550,  556.  The  general  grounds  upon  which 
estoppel  in  pais  rests  are  described  in  Marling  v.  Nommensen,  127 
Wis.  363,  369.  Hardly  anything  is  more  to  be  anticipated  than  that 
a  negotiable  note  will  be  negotiated  upon  the  faith  of  what  appears 
upon  its  face  (Loizeaux  v.  Fremder,  123  Wis.  193,  198)  ;  and  the  very 
issue  of  such  paper  without  suggestion  of  any  facts  affecting  its 
validity  must  be  expected  by  every  reasonable  person  to  lead  any 
purchaser  to  assume  their  nonexistence.  The  doctrine  of  Knox  v. 
Clifford,  supra,  has  been  acted  on  by  numerous  other  courts.  Cranson 
V.  Goss,  107  Mass.  439;  Vinton  v.  Peclf,  14  Mich.  287;  Hall  v.  Parker, 
37  Mich.  590,  594;  Johns  v.  Bailey,  45  Iowa,  241,  245;  Leightman  v. 
Kadetska,  58  Iowa,  676;  New  v.  Walker,  108  Ind.  365,— the  last  case 
being  decided  under  substantially  the  same  statute  as  the  one  now 

1  Chapter  4.38,  Laws  of  infl3.  is  now  to  be  found  in  the  following  sections 
of  the  Wisconsin  Negotialile  Instruments  Law: 

"Section  1675-la.  All  promissory  notes  and  other  evidences  of  indebtedness, 
taken  or  given  for  any  lightninj;  rod,  patent,  patent  right,  stallion  or  interest 
therein,  as  the  case  may  be,  shall  have  written  or  printed  thereon  in  red  ink 
the  words:  'The  consideration  of  this  note  is  the  sale  of  a  lightning  rod, 
patent,  patent  right,  stallion,  or  interest  therein,  as  the  case  may  be.* 

"Section  lfi(.5-Ib.  Any  person  who  shall  sell  a  lightning  rod,  patent,  patent 
right  or  stallion,  or  any  interest  in  a  lightning  rod.  patent,  patent  right,  or 
stallion,  who  shall  take  a  promissory  note  or  other  evidence  of  indebtedness 
for  the  whf)le  or  any  part  of  the  consideration  thereof,  and  who  shall  fail  to 
state  the  consideration  for  said  note  as  provided  by  section  1  of  this  act,  or  in 
words  of  similar  import,  shall  he  liable  to  a  penalty  equal  to  the  face  of  the 
note  so  taken. 

"  Section  lfi7.5-lc.  All  notes  or  other  evidences  of  indebtedness  taken  as  the 
whole  or  a  part  of  the  consideration  for  any  lightning  rod,  patent,  patent 
right,   stallion,  or   interest  therein,  which   shall   express  upon   their  face   the 


III.]  DEFENCES.  385 

invoked.  Other  decisions  aflfirming  the  validity  of  commercial  paper 
in  hands  of  innocent  holder,  notwithstanding  illegality  and  consequent 
original  invalidity,  are  Union  T.  Co.  v.  Preston  Nat.  Bank,  136  Mich. 
460;  2  Traders'  Bank  v.  Alsop,  64  Iowa,  97;  Johnson  v.  Meeker,  1  Wis. 
436,  441 ;  Mack  v.  Prang,  104  AVis.  1 ;  Keller  v.  Schmidt,  104  Wis. 
596,  602.  We  feel  no  doubt  that  the  principle  of  Knox  v.  Clifford  is 
sound  and  supports  the  right  of  this  appellant  to  recover  upon  the 
facts  as  they  appeared  at  the  time  of  the  nonsuit. 

consideration  for  which  they  are  taken,  as  required  by  section  1  of  this  act, 
shall  he  non-negotiable,  and  be  subject  to  all  the  defenses  in  the  hands  of  an 
innocent  holder  that  the  same  would  have  if  not  transferred." 

The  above  statute  was  held  unconstitutional  so  far  as  it  relates  to  patents 
and  patent  rit;hts  in  ■/.  //.  Clarke  Co.  v.  Rice,  127  Wis.  4rA  ;  but  oon^titiitioiril 
as  to  the  provision  relating  to  stallions  in  Quifigle  v.  Herman,  131  Wis.  379. 
and  a.s  to  the  provision  relating  to  lightning  rods  in  the  case  to  which  this  is 
a  note. 

Several  states  have  provisions  of  a  similar  nature  relative  to  negotiable 
instruments  given  for  patent  rights  either  incorporated  in  their  Negotiable 
Instruments  Acts  (as,  for  example,  N.  Y.,  §  330)  or  found  in  independent 
statutes.  The  Arkansas  statute  (Kirby's  Dig.,  §§  513-510)  was  held  consti- 
tutional in  Woodft  v.  Carl,  203  I'.  S.  358,  affirming  75  Ark.  328.  and  in  Ozan 
Lumber  Co.  v.  Vnicn  Co.  nank,  207  U.  S.  251,  reversing  145  Fed.  344.  The 
New  York  Act  (now  Neg.  Inst.  Law,  §  330)  was  held  constitutional  in  Tlerdic 
V.  Roen.tler,  109  N.  Y.  127.  For  decisions  on  the  constitutionality  of  similar 
acts  in  other  states,  see  the  cases  in  the  note  to  Woods  v.  Carl,  75  Ark.  328, 
in  5  A.  A  E.  Ann.  Cas.  426.  —  C. 

2  In  Union  Trunt  Co.  v.  Pre.ttnn  A'«/.  Bank.  13fl  i\Iich.  400,  it  was  held  that 
certain  sections  of  the  Afichigan  Banking  Law  forbidding  and  making  it  a 
crime  for  a  bank  officer  or  employee  to  certify  a  check  when  the  amount 
thereof  does  not  stand  to  the  credit  of  the  drawer  on  the  books  of  the  bank, 
do  not  make  a  check  so  certified  invalid  in  the  hands  of  a  bona  fide  holder  for 
value.  Tarpkntkr.  .T.,  said:  "It  by  no  means  follows,  however,  because  a 
contract  made  in  violation  of  law,  common  or  statutory,  is  void  between  the 
original  parties,  that,  if  given  the  form  of  negotiable  paper,  it  is  void  in  the 
hands  of  a  bona  fide  holder.  Indeed,  it  is  the  distinguishing  characteristic 
of  the  law  of  nrgotiable  pa|)er  that,  when  a  contract  takes  that  form,  it  is  not, 
in  tlie  hands  of  a  honn  Ode  hf)lder,  subject  to  the  defense  which  avoid«'d  it  in 
the  hands  of  the  original  parties.  Negotiable  jiajjer  in  the  hands  of  a  boyia 
fide,  holder  is  not  open  to  the  defense  that  the  contract  from  which  it  arose 
was  illegal  or  forbidden  by  the  princijiles  of  the  conuuon  law.  .  .  .  Nothing 
le^s  than  a  statutory  enactment  will  subject  negotiable  paper  in  the  hands  of 
a  bona  fide  holder  to  the  tjefense  of  illegality  in  its  inception.  What,  then,  is 
the  eflTect  of  a  statute  which  merely  prohibits  the  making  of  a  particular  con- 
tract, and  |>unishes  its  making  as  a  crime?  |  P.  4(i!>.]  We  corichide, 
thereff)re,  that,  though  the  making  «>f  a  contract  is  proliibited  and  niiide  a 
crime  by  statute,  yet  that  contract,  if  it  takes  the  form  of  negotiable  paper, 
is  valid  in  the  hands  of  a  bona  fide  h(dder  for  value."  V.  470.  Se«'  this  case 
reported  in  4  A.  &  E.  Ann.  (hh.  347,  with  note  entitled  "Validity  in  hands 
of  buna  fide  )ir)lder  of  negf)tiable  contract  voiti  by  statute  between  original 
parties." 

In   (hnu  v.   lUii/le.  55   Wash.   57H.  it    was  held   that    (ipiofing  the  headnotc)  : 
"  f-awM   I'td.l.  p.   .'i73,   f)rohiliititig   insurance  rebates  does   not   invalidate  a   note 
^i\KU  for  the  premiums  in  viol.iljnn  of  the  statute,  as  against  a  holder  of  the 
NROOT.  INBTRCMBNTB  —  2S 


386  HIOHTS  OF   llOLDKR.  [aeT.    V. 

Further  tlian  tliis,  our  lU'goiialtlt'  iuslrunu'iiis  statute,  section 
U)7li-v^:,"'  Stats.  (Supp.  i;)0(i;  Laws  of  IS!)!),  eh.  :]r)Ci),  provides: 

"A  holder  in  due  course  holds  the  instrument  free  from  any  defect 
of  title  of  prior  parties,  and  free  from  defenses  available  to  prior 
parties  among  themselves,  and  may  enforce  payment  of  the  instrument 
for  the  full  amount  tluMvof  against  all  parties  liable  thereon  except  as 
provided  in  sections  1!)44  and  l!)4r)  of  these  statutes,  relating  to  insur- 
ance premiums,  and  also  in  cases  where  the  title  of  the  person  negotiat- 
ing such  instrument  is  void  under  the  provisions  of  section  1676-25 
of  this  act." 

Section  1676-25  ■•  applies  only  to  the  case  where  the  signer  did  not 
know  the  nature  of  the  instrument  and  could  not  have  obtained  such 
knowledge  by  the  use  of  ordinary  care.  Sections  1944,  1945,  refer  to 
a  note  given  for  an  insurance  premium,  which  by  said  sections  is 
required  to  bear  upon  its  face  a  declaration  of  its  consideration,  and 
omission  thereof  is  penalized.  But  for  these  express  exceptions  the 
provision  is  general  that  the  innocent  holder  may  enforce  payment 
for  the  full  amount  free  from  defenses  available  between  the  original 
parties.  Such  specific  exceptions  strongly  indicate  that  no  others  were 
intended.  We  cannot  escape  the  conclusion  that  this  statute  supports 
plaintiff's  right  of  recovery.^ 

note  in  due  course;  since  it  is  not  the  policy  of  the  law  to  render  negotiable 
paper  void  in  the  hands  of  innocent  holders  where  the  statute  has  not  so 
expressly  declared." 

Similarly,  it  was  held  in  Citizens'  St.  Bank  v.  Nore,  67  Neb.  69,  that  (quot- 
ing the  headnote):  ''In  this  state  a  statute  will  not  be  construed  so  as  to 
make  a  negotiable  instrument  void  in  the  hands  of  a  bona  fide  purchaser 
unless  the  act  specifically  so  declares.  A  note  given  for  medical  services  by  an 
unlicensed  practitioner  may  be  recovered  on  by  a  hona  fide  purchaser,  not- 
withstanding the  provisions  of  chapter  55  of  the  Compiled  Statutes,  prohibit- 
ing the  practice  of  medicine  without  a  license."  —  C. 

s  This  section  is  the  same  as  section  96  of  the  N.  Y.  Neg.  Inst.  Law  through 
the  words  "against  all  parties  liable  thereon;"  the  balance  of  the  section  is 
found  only  in  the  Wisconsin  statute.  —  C. 

♦  This  section  is  in  substance  the  same  as  section  94  of  the  N.  Y.  Neg.  Inst. 
Law  except  for  the  addition  of  the  following  words  found  only  in  the  Wis- 
consin statute:  "and  the  title  of  such  person  is  absolutely  void  when  such 
instrument  or  signature  was  so  prociired  from  a  person  who  did  not  know  the 
nature  of  the  instrviment  and  could  not  have  obtained  such  knowledge  by  the 
use  of  ordinary  care."  deferring  to  the.se  additional  words,  the  court,  in 
Aukland  v.  Arnold,  131  Wis.  64,  at  p.  67,  said:  "In  terms  it  expresses  the 
rule  of  law  recognized  in  the  decisions  of  this  court  when  it  was  enacted,  which 
was  to  the  effect  that,  when  a  signature  to  a  negotiable  instrument  is  ob- 
tained by  falsely  and  fraudulently  misrepresenting  its  character,  and  the  per- 
son signing  it  could  not  have  obtained  knowledge  of  the  falsity  and  fraud  by 
the  use  of  ordinary  care,  this  makes  the  title  to  the  instrument  absolutely 
void  as  to  such  signer.  Butler  v.  Cams,  37  Wis.  61 ;  Walker  v.  Ebert,  29  Wis. 
194  [reported  herein  at  p.  387];  Keller  v.  Huppold,  II.'')  Wis.  5:i(i;  Franklin 
▼.  Killilea,  126  Wis.  8«."  —  ('. 

»  A';  an  authority  in  othfr  -tates  upon  the  [)roper  construction  and  eflfect 
of  the   Negotiable   Instruments   Law,   this   decision  loses  much  of   its  value 


III.]  DEFENCES.  387 

By  the  Court.  —  Judgment  reversed,  and  cause  remanded  for  new 
trial. " 


§  94  WALKER  v.  EBERT. 

29  Wisconsin,  194.  — 1871. 

Action  against  maker  of  a  promissory  note,  by  a  holder  who  claims 
to  have  jrurc-hased  it  for  full  value,  before  maturity.  Defense :  that 
defendant  is  a  German  unable  to  read  and  write  the  English  language ; 
that  tlie  payees  fraudulently  induced  him  to  sign  an  instrument  repre- 
sented to  him  to  be  a  contract  of  agency,  but  which  in  fact  was  the 
promissory  note  in  question.  Evidence  to  establish  this  defense  ruled 
out,  and  judgment  given  for  plaintiff.     Defendant  appeals. 

Dixox,  V.  J.  —  The  defendant,  having  properly  alleged  the  same 
facts  ill  his  answer,  offered  evidence  and  proposed  to  prove  by  him- 
self as  a  witness  on  tlie  stand,  that  at  the  time  he  signed  the  supposed 
note  in  suit,  he  was  unable  to  read  or  write  the  English  language; 
that  when  he  signed  the  same,  it  was  represented  to  him  as,  and  he 
believed  it  was,  a  certain  contract  of  an  entirely  different  character, 
which  contract  he  also  offered  to  produce  in  evidence ;  that  the  con- 
tract offered  to  be  produced  was  a  contract  appointing  him,  defendant, 
agent  to  sell  a  certain  patent  right,  and  no  other  or  different  contract, 
and  not  the  note  in  question ;  and  that  the  supposed  note  was  never 
delivered  l»y  tlie  defendant  to  any  one.  It  was  at  the  same  time  stated 
that  the  defendant  did  not  claim  to  prove  that  the  plaintiff  did  not 
purchase  the  supposed  note  before  maturity  and  for  value.  To  this 
evidence  the  plaintiff  objected,  and  the  objection  was  sustained  by  the 
court,  and  the  evidence  excluded,  to  which  the  defendant  excepted; 
and  Ibis  j>rescnts  the  only  question. 

We  think  it  was  error  to  reject  the  testimony.  The  two  cases  cited 
by  coljiisclTor  the  defendant  (Foster  v.  McKinnon,  L.  R.  4  C.  P.  704, 
and  Whitney  v.  Snyder,  2  Lansing,  477)  are  very  clear  and  explicit 
upon  the  [)oint,  and  dciiioiislratc,  as  it  seems  to  us,  beyond  any  rational 
doubt,  tlie  invalidity  of  such  ])apcr,  even  in  tlie  bands  of  a  holder  for 
value,  before  maturity,  without  notice.  ^I'he  party  whose  signature 
to  such  paper  is  obtained  by  fraud  as  to  the  character  of  the  paper 
itself,  who  is  ignorant  of  such  character,  and  has  no  intention  of  sign- 
ing it,  and  who  is  j,niilty  of  no  negligenee  in  aflixing  his  signature,  or 
in  not  ascertaining  the  charaiter  of  the  instrument,  is  no  more  bound 
by  it  than  if  it  were  a  total  forgery,  the  signature  included. 

becaune  it  is  basrd,  at  leant  in  part,  upon  the  provisions  in  the  Wisconsin 
ftatute  TvffrTOi]  in  in  notes  3  and  4,  supra,  not  found  in  flu-  statiitrs  of  the 
other  statPH.  —  <'. 

•  This  case  Ih  reported  with  notes  in  10  L.  N.  S.  842,  and  in  11  A.  A,  E.  Ann. 
Cas.  1179,  continuing  note  in  4  .\.  &  V..  Ann.  (as.  353.  —  C. 


388  uUiiiTs  OK  iioi.DKK.  [art.  V. 

Tile  ronsoning  of  tho  uhovi'  i-ut^i'S  is  t'lilircly  salisfactory  and  cou- 
clusive  upon  this  point.  Tlie  iiuiuirv  in  snrli  cases  goes  back  of  all 
qiiostions  of  negotialiility,  or  of  tlie  transfer  of  the  supposed  paper  to 
a  purchaser  for  vahie,  before  maturity  and  without  notice.  It  obal- 
lenijes  the  origin  or  existence  of  tlic  paper  itself ;  and  the  proposition 
is,  to  show  that  it  is  not  in  law  or  in  fact  what  it  purports  to  be, 
namely,  the  promissory  note  of  the  supposed  maker.  For  the  pur- 
pose of  setting  on  foot  or  pursuing  this  inquiry,  it  is  immaterial  that 
the  supposed  instrument  is  negotiable  in  form,  or  that  it  may  have 
passed  to  the  hands  of  a  bona  fide  holder  for  value.  Negotiability 
in 'such  cases  presupposes  the  existence  of  the  instrument  as  having 
been  made  by  the  party  whose  name  is  subscribed  ;  for,  until  it  has 
been  so  made  and  has  such  actual  legal  existence,  it  is  absurd  to 
talk  about  a  negotiation,  or  transfer,  or  bona  fide  holder  of  it,  within 
the  meaning  of  the  law  merchant.  That  w^hich,  in  contemplation  of 
law,  never  existed  as  a  negotiable  instrument,  cannot  be  held  to  be 
Buch;  and  to  say  that  it  is,  and  has  the  qualities  of  negotiability, 
because  it  assumes  the  form  of  that  kind  of  paper,  and  tlms  to  shut 
out  all  inquiry  into  its  existence,  or  whether  it  is  really  and  truly 
what  it  i)urports  to  be,  is  petUio  principii  —  begging  the  question 
altogether.  It  is,  to  use  a  homely  phrase,  putting  the  cart  before 
the  horse,  and  reversing  the  true  order  of  reasoning,  or  rather  pre- 
venting all  correct  reasoning  and  investigation,  by  assuming  the 
truth  of  the  conclusion,  and  so  precluding  any  inquiry  into  the  ante- 
cedent fact  or  premise,  which  is  the  first  point  to  be  inquired  of  and 
ascertained.  For  the  jmrposes  of  tliis  first  inquiry,  which  must  be 
always  open  when  tlie  objection  is  raised,  it  is  immaterial  what  may 
be  the  nature  of  the  supposed  instrument,  whether  negotiable  or  not, 
or  whether  transferred  or  negotiated,  or  to  whom  or  in  what  man- 
ner, or  for  what  consideration  or  value  paid  by  the  holder.  It  must 
always  l>e  competent  for  the  party  proposed  to  be  charged  upon  any 
written  instrument,  to  show  that  it  is  not  his  instrument  or  obliga- 
tion. The  principle  is  the  same  as  where  instruments  are  made  by 
persons  having  no  capacity  to  make  binding  contracts;  as,  by  infants, 
married  women,  or  insane  persons;  or  where  they  are  void  for  other 
cause,  as,  for  usury;  or  where  they  are  executed  as  by  an  agent,  but 
without  authority  to  bind  the  supposed  principal.  In  these  and  all 
like  cases,  no  additional  validity  is  given  to  the  instruments  by  putting 
them  in  the  form  of  negotiable  paper.  (See  Veeder  v.  Town  of 
Lima,  10  Wis.  2f)7  to  209,  and  authorities  there  cited.  See  also 
Thomas  v.  Watkins.  10  Wis.  540.) 

And  identical  in  principle,  also,  are  those  cases  under  the  registry 
laws,  where  the  bona  fide  purchaser  for  value  of  land  has  been  held 
not  to  be  protected  when  the  recorded  deed  under  which  lie  purchased 
and  claims,  turns  out  to  have  been  procured  by  fraud  as  to  the  signa- 
ture, or  purloined  or  stolen,  or  was  a  forgery,  and  the  like.      (See 


in.]  DEFENCES.  389 

Everts  v.  Agnes,  4  Wis.  343,  and  the  remarks  of  this  court,  pp.  351- 
353,  inclusive.) 

In  the  case  first  above  cited  {Foster  v.  McKinnon),  the  defendant 
was  induced  to  put  his  name  on  the  back  of  a  bill  of  exchange  by 
the  fraudulent  representation  of  the  acceptor,  that  he  was  signing  a 
guaranty.  In  an  action  against  him  as  indorser,  at  the  suit  of  a 
bona  fide  holder  for  value,  the  Lord  Chief  Justice,  Boville,  directed 
the  jury  that,  ''  If  the  defendant's  signature  to  the  document  was 
obtained  upon  a  fraudulent  representation  that  it  was  a  guaranty, 
and  the  defendant  signed  it  without  knowing  that  it  was  a  hill,  and 
under  the  belief  that  it  was  a  guaranty,  and  if  he  was  not  guilty  of 
any  negligence  in  so  signing  the  paper,  he  was  entitled  to  the  ver- 
dict;" and  this  direction  was  held  proper.  In  delivering  the  judg- 
ment of  the  court  upon  a  rule  nisi  for  a  new  trial,  Byles,  J.,  said : 

"  The  case  presented  by  the  defendant  is,  that  he  never  made  the 
contract  declared  on ;  that  he  never  saw  the  face  of  the  bill ;  that  the 
purport  of  the  contract  was  fraudulently  misdescribed  to  him;  that 
when  he  signed  one  thing,  he  was  told  and  believed  he  was  signing 
another  and  an  entirely  different  thing;  and  that  his  mind  never  went 
with  his  act.  It  seems  plain  on  principle  and  on  authority,  that  if 
a  blind  man,  or  a  man  who  cannot  read,  or  for  some  reason  (not 
implying  negligence),  forbears  to  read,  has  a  written  contract  falsely 
read  over  to  him,  the  reader  misreading  to  such  a  degree  that  the 
written  contract  is  of  a  nature  altogether  different  froin  the  contract 
pretended  to  be  read  from  the  paper,  which  the  blind  or  illiterate 
man  afterward  signs,  then,  at  least  if  there  be  no  negligence,  the 
signature  so  obtained  is  of  no  force;  and  it  is  invalid,  not  merely  on 
the  ground  of  fraud,  where  fraud  exists,  but  on  the  ground  that  the 
mind  of  the  signer  did  not  accompany  the  signature;  in  other  words, 
that  he  never  intended  to  sign,  and  therefore,  in  contemplation  of 
law,  never  did  sign  the  contract  to  which  his  name  is  appended." 

And  again,  after  remarking  the  distinction  between  the  case  under 
consideration  and  those  where  a  parly  has  written  his  name  upon  a 
blank  piece  of  paper,  intending  that  it  should  afterwards  be  fiiled  up, 
and  it  is  improperly  so  filled,  or  for  a  larger  sum,  or  where  he  has 
written  his  name  upon  the  back  or  across  the  back  or  across  the  face 
of  a  blank  bill  stamp,  as  indorser  or  acceptor,  and  that  has  been 
fraudulently  or  improperly  filled,  or  in  short,  where,  under  any  cir- 
cumstances, the  jmrty  has  voluntarily  affixed  his  signature  to  com- 
mercial paper,  knowing  v^hat  he  was  doing,  and  intending  the  same  to 
he  put  in  circulation  as  a  negotiable  security,  and  after  also  showing 
that  in  all  surh  cases  the  party  so  signing  will  be  liable  for  the  full 
amount  of  the  note  or  bill,  when  it  has  onee  f>assed  into  the  hands 
of  an  innocent  indorsee  or  holder,  for  value  before  maturity,  and 
that  such  is  the  limit  of  the  protection  afforded  to  such  an  indorsee 
or  holdrr,  the  learned  judge  proceeded:  — 


390  HliillTS   OF    llOLDKK.  [akT.    V. 

**  Put,  in  tho  ortso  now  uiulor  consideratiDn,  tlio  defendant,  aeeord- 
ing  to  the  evideneo,  if  helii'ved,  and  the  fuuling  of  the  jury,  never 
intended  to  indorse  a  bill  of  exrhanjre  at  all,  hut  intended  to  sign  a 
contraet  of  an  entirely  ditl'erent  natuie.  It  was  not  his  design,  and, 
if  he  were  guilty  of  no  negligence,  it  was  not  even  his  fault,  that  the 
instrument  lie  signed  turned  out  to  be  a  hill  of  exchange.  It  was 
as  if  he  had  written  his  name  on  a  sheet  of  paper  for  the  purpose  of 
franking  a  letter,  nr  in  a  lady's  allnitn,  or  an  order  for  admission  to 
Temple  Church,  or  on  the  fly-leaf  of  a  book,  and  there  had  already 
been,  without  his  knowledge,  a  bill  of  exchange  or  a  promissory  note 
payable  to  order  inscribed  on  the  other  side  of  the  ])a])er.  To  make 
the  case  clearer,  suppose  the  bill  or  note  on  the  other  side  of  the 
paper  in  each  of  these  eases  to  be  written  at  a  time  subsequent  to  the 
signature,  then  the  fraudulent  misapplication  of  that  genuine  signa- 
ture to  a  ditferent  ])urpose  would  have  been  a  counterfeit  alteration 
of  a  writing  with  intent  to  defraud,  and  would  therefore  have 
amounted  to  a  forgery.  In  that  case  the  signer  would  not  have  been 
bound  by  his  signature,  for  two  reasons  —  first,  that  he  never  in  fact 
signed  tlie  writing  declared  on,  and,  secondly,  that  he  never  intended 
to  sign  any  such  contract." 

"  In  the  present  case,  the  first  reason  does  not  apply,  but  the 
second  does  apply.  The  defendant  never  intended  to  sign  that  con- 
tract, or  any  such  contract.  He  never  intended  to  put  his  name  to 
any  instrument  that  then  was  or  thereafter  might  become  negotiable. 
He  was  deceived,  not  merely  as  to  the  legal  effect,  but  as  to  the 
actual  contents  of  the  instrument." 

The  other  case  first  above  cited  (Whitney  v.  Snyder) ^  was  in  all 
respects  like  the  present,  a  suit  upon  a  promissory  note  by  the  pur- 
chaser before  maturity,  for  value,  against  the  maker;  and  the  facts 
offered  to  be  proved  in  defense  were  the  same  as  here;  and  it  was 
held  that  the  evidence  should  have  been  admitted. 

In  Nance  v.  Larey  (5  Ala.  370),  it  was  held  that  where  one  writes 
his  name  on  a  blank  piece  of  paper,  of  which  another  takes  posses- 
sion without  authority  therefor,  and  writes  a  promissory  note  above 
the  signature,  which  he  negotiates  to  a  third  person,  who  is  ignorant 
of  the  circumstances,  the  former  is  not  liable  as  the  maker  of  the 
note  to  the  holder.  In  that  case  the  note  was  written  over  the  signa- 
ture by  one  Langford,  and  by  him  negotiated  to  tiie  plaintiff  in  the 
action,  who  sued  the  defendant  as  maker.    Collier,  C.  J.,  said :  — 

"  The  making  of  the  note  by  Langford  was  not  a  mere  fraud  upon 
the  defendant ;  it  was  something  more.  It  was  quite  as  much  a 
forgery  as  if  he  had  found  the  blank,  or  purloined  it  from  the  de- 
fendant's possession.  If  a  recovery  were  allowed  upon  such  a  state 
of  facts,  then  every  one  who  ever  indulges  in  the  idle  habit  of  writing 
his  name  for  mere  pastime,  or  leaves  sufficient  space  between  a  title 
and  his  subscription,  might  be  made  a  bankrupt  by  having  promises 


III.]  DEFENCE^.  391 

to  pay  money  written  over  his  signature.  Such  a  decision  would  be 
alarming  to  the  community,  has  no  warrant  in  law,  and  cannot  re- 
ceive our  sanction." 

And  in  Putnam  v.  Sullivan  (4  Mass.  54),  Chief  Justice  Parsons 
said :  — 

"  The  counsel  for  the  defendants  agree  that,  generally,  an  indorse- 
ment obtained  by  fraud  will  hold  the  indorsers  according  to  the 
terms  of  it,  but  they  make  a  distinction  between  the  cases  where  the 
indorser,  througli  fraudulent  pretenses,  has  been  induced  to  indorse 
the  note  he  is  called  on  to  pay,  and  where  he  never  intended  to  in- 
dorse a  note  of  that  description,  but  a  different  note  and  for  a  different 
purpose.  Perhaps  there  may  be  cases  in  which  this  distinction  ought 
to  prevail.  As,  if  a  blind  man  had  a  note  falsely  and  fraudulently  read 
to  him,  and  he  indorsed  it,  supposing  it  to  be  the  note  read  to  him.  But 
we  are  satisfied  that  an  indorser  cannot  avail  himself  of  this  dis- 
tinction, but  in  cases  where  he  is  not  chargeable  with  any  laches  or 
neglect,  or  misplaced  confidence  in  others."  (See  also  1  Parsons  on 
Notes  and  Bills,  110  to  114,  and  cases  cited  in  notes.) 

The  judgment  below  must  be  reversed,  and  a  venire  de  novo 
awarded.^ 

By  the  Court. —  It  is  so  ordered.' 


^  94  CHAPMAN  v.  ROSE. 

56  New  Yobk,  137.  —  1874. 

This  action  was  upon  a  promissory  note  of  $270,  signed  by  de- 
fendant, payable  to  E.  A.  Miller  or  bearer. 

Defendant  entered  into  a  contract  with  Miller  to  act  as  agent  for 
the  sale  of  a  patent  hay  fork  and  pulley.  A  contract  was  filled  out 
by  Miller  and  signed  by  both;  also  an  order,  which  was  signed  by 
defendant,  for  one  of  the  hay  forks  and  two  pulleys,  for  which,  by 
the  order,  defendant  agreed  to  pay  nine  dollars.  These  were  delivered 
to  defer)darit.  Another  paper  was  then  presented  to  defendant  fur  his 
signature,  which  Miller  represented  to  be  but  a  duplicate  of  the  order. 

'  Accord:  (libhx  v.  IAnn\>ury,  22  Midi.  479;  Dr  Camp  v.  Hamma,  29  Oh.  St, 
467;    I'uffrr  v.  Smith.  r,7   III.  .')27  ;   dnm  v.   Ui7A;te.  !t8   Iowa.  74.  —  H. 

[To  the  Hiinic  cfTcct,  s«'«'  llomr  S'ut.  Haul:  v.  Hill.  lO.')  Ind.  220,  »nd  Yakima 
Vailrtf  Hank  v.  MrMlintrr,  .17  Wasli.  .lOO.  In  a  note  to  the  latter  cnso  in  I  L. 
N.  S.  107.'i,  it  JH  xftid :  "There  arc  n  few  cascx,  however,  winch  hold  that,  if 
the  si(/natiire  was  actually  affixed  hy  the  maker  with  the  intention  of  siting 
sf)nie  kind  of  a  paper,  the  mere  fact  that  he  was  defrauded  as  to  what  he  was 
actually  sifjnintr  would  he  no  defense  to  a  note  in  the  hands  of  a  hnna  fide 
holder.  Firnt  \nl.  Rank  v.  Johns.  22  W.  Va.  r)2n.  46  .Am.  Rep.  .')06;  Phrlan 
V.  MoHH.  67  Pa.  M.  5  .\m.  Rep.  4f»2;  HattlrH  v.  LaudimMagt-r,  K4  Pa.  446; 
LoftmiH  V.  Metralf.  30  Iowa.  3H2. "  —  (".] 

"The  [)rinci|de  of  this  decision  has  heen  codifnil  in  section  1676  25  of  the 
Wisconiin  Negotiable  Instruoieats  Law.     See  note  4,  ante,  p.  386.  —  C. 


392  uUiiiTs  OK  uoLDEU.  [art.  v. 

Doft'iidant  witliout  roadin-;  or  examining  it,  signed  it  and  delivered 
it  to  Miller;  the  jiaper  so  signed  was  the  note  in  suit.  PhiintitT  pur- 
chased in  good  faith  before  maturity,  paying  therefor  $245. 

The  court  charged  the  jury:  "If  you  find  that  this  paper  was 
never  delivered  as  a  note,  plaintiff  fails  in  his  action ;  if  you  find  that 
it  was  delivered  but  this  plaintiff  failed  or  neglected  to  make  the 
proper  inquiry,  then  he  is  not  entitled  to  recover  for  he  fails  as  a 
bona  fide  holder." 

Plaintiff  excepted  generally  to  the  whole  of  the  charge. 
Plaintiff  retpiested  the  court  to  charge:  — 

First.  That   if  the  signature  upon  the  note  is  the  genuine  hand- 
writing of  defendant,  circumstances  of  fraud  in  its  inception  consti- 
tute no  defense  to  the  note  in  the  hands  of  an  innocent  purchaser. 
The  court  refused  to  so  charge. 

Second.  That  if  the  plaintiff  purchased  said  note  in  good  faith  and 
for  a  valuable  consideration,  the  plaintiff  is  entitled  to  judgment  for 
the  full  amount  thereof. 

Third.  That  if  defendant  negligently  and  without  sufficient  care 
and  precaution  put  his  name  to  the  paper  and  delivered  it  to  Miller, 
he  is  liable  for  its  amount  as  a  promissory  note. 

Fourth.  That  there  are  no  circumstances  in  this  case  indicating  a 
fraud  in  the  inception,  and  which  were  calculated  to  put  the  plaintiff 
on  his  guard,  and  therefore  he  is  a  purchaser  in  good  faith. 
The  court  declined  to  charge  either  of  these  propositions. 
Verdict  and  judgment  for  plaintiff  (defendant?) 
Johnson,  J. —  The  judge  charged  the  jury  that  if  the  paper  sued 
upon  was  never  delivered  as  a  note,  the  plaintiff  must  fail  in  the 
action ;  and  that  even  if  it  was  delivered,  and  the  plaintiff  neglected 
to  make  proper  inquiry  as  to  its  origin,  he  was  not  a  bona  fide  holder 
and  could  not  recover.    The  exception  to  the  charge  was  general,  but 
if  both   propositions  were  erroneous  the  error  can   be   reached   and 
corrected;  especially  as  the  attention  of  the  judge  appears  to  have 
been  called,  by  requests  to  charge,  to  the  precise  grounds  on  which 
the  charge  is  now  claimed  to  be  erroneous. 

The  latter  branch  of  the  charge  presents  the  question  of  notice  to 
put  a  party  on  inquiry,  as  affecting  his  right  to  be  regarded  as  a  bona 
fide  holder.  It  is  now,  however,  the  settled  law  that  mere  negligence, 
however  gro.ss,  is  not  sufficient  to  deprive  a  party  of  the  character 
of  a  bona  fide  bolder.  There  must  be  proof  of  bad  faith.  That  alone 
will  deprive  him  of  that  character.  (Welch  v.  Sage,  47  N.  Y.  143; 
Seybel  v.  National  Currency  Bank,  Commission  of  Appeals,  54  N.  Y. 
288;  Murray  v.  Lardner,  2  Wall.  110;  Goodman  v.  Simonds,  20  How. 
452.)  This  part  of  the  charge,  therefore,  cannot  be  sustained.  If, 
then,  the  appellant  can  maintain  the  position  that  the  other  branch 
of  the  eharge  is  also  erroneous,  he  will  be  entitled  to  the  reversal 
of  the  judgment,  notwithstanding  the  generality  of  the  exception. 


Ill,]  DEFENCES.  393 

The  evidence  tended  very  strongly  to  show  that  the  signature  of  the 
defendant  to  the  note  sued  upon,  was  obtained  from  liim  through  a 
very  gross  and  fraudulent  representation  perpetrated  upon  him  by  one 
Miller.  That  when  he  signed  it,  he  supposed  he  was  signing  a  paper 
of  a  very  different  character,  and  not  an  engagement  to  pay  money 
absolutely.  He  had,  just  before,  signed  an  order  for  the  delivery  to 
himself  of  a  hay  fork  and  two  grappling  pulleys,  amounting  together 
in  price  to  nine  dollars,  for  which  he  engaged  to  pay;  and  this  paper 
now  in  suit  was  presented  to  him  as  a  duplicate  of  that  order,  and 
was  signed  as  such  without  examination  or  reading  it,  upon  the 
statement  of  Miller,  with  whom  he  was  dealing,  that  such  was  its 
character.  There  does  not  appear  to  have  been  any  physical  obstacle 
to  the  defendant's  reading  the  paper  before  he  signed  it.  He  under- 
stood that  he  was  signing  a  paper  by  which  he  was  about  to  incur  an 
obligation  of  some  sort,  and  he  abstained  from  reading  it.  He  had 
the  power  to  know  with  certainty  the  exact  obligation  he  was  assum- 
ing, and  chose  to  trust  the  integrity  of  the  person  with  whom  he 
was  dealing,  instead  of  exercising  his  own  power  to  protect  himself. 
It  turns  out  that  he  signed  a  promissory  note,  and  that  it  is  now  in 
the  hands  of  a  holder  in  good  faith,  for  value.  The  question  which 
arises  on  the  branch  of  the  charge  now  under  consideration  is, 
whether  it  is  enough,  as  against  a  bona  fide  holder,  to  show  that  he 
did  not  know  or  suj)pose  that  he  was  signing  a  note,  unless  it  also 
appears  that  he  was  guilty  of  no  laches  or  negligence  in  signing  the 
instrument.  To  that  inquiry  the  attention  of  the  judge,  at  the  trial, 
was  distinctly  called  ;  and  the  instruction  which  he  gave  and  which 
was  excepted  to,  did  not  «ubmit,  but  excluded  the  consideration  of 
it  from  the  jury.  H  is  quite  plain  that  if  the  law  is  that  no  such 
inquiry  is  admissible,  a  serious  blow  will  have  fallen  upon  the  nego- 
tiability of  paper.  If  will  be  a  premium  offered  to  negligence.  To 
insure  irresponsiliillty  only  tlic  iifinost  carelessness,  coupled  with  a 
little  friendly  fraud,  will  be  essential.  Paper  in  abundance  will  be 
found  afloat,  the  makers  of  which  will  have  had  no  idea  they  were 
signing  notes,  ami  will  have  trusted  readily  to  the  assurance  of  who- 
ever procured  it  that  it  created  no  obligation.  To  avoid  such  evils 
it  is  necessary,  at  least,  to  hold  (irmly  to  the  doctrine  that  he  who,  by 
his  carelessness  or  undue  confidence,  has  enabled  another  to  obtain 
the  money  of  an  innocent  person,  shall  answer  the  loss.  If  it  be 
objected  that  there  must  be  a  duty  f)f  care,  in  order  to  found  an 
allegation  of  negligence  upon  the  neglect  of  it,  il  must  he  answered 
that  every  man  is  bo\md  to  know  that  he  may  he  deceived  in  respect 
to  the  contents  of  a  paper  which  he  signs  without  reading.  When 
he  signs  an  obligation  without  ascertaining  its  character  and  extent, 
which  he  has  the  means  to  do,  upon  the  representation  of  another, 
he  puts  confidence  in  that  person  :  and  if  injurv  ensues  to  an  innocent 
third  person  by  reason  of  that  confidence,  his  act  is  the  means  of  the 
injiiry,  and  he  ought  to  answer  to  it. 


3JM  KUiiris  OK  iioi,I)i;r.  [aht,  v. 

(After  disi'ussing  Foster  v.  Murh'iiinon,  L.  R.  4  C.  P.  704;  Whitneij 
V.  >;(//(/(;•.  'J  Lans.  477;  I'lilunin  v.  Sullivan,  \)  Mass.  15,  and  Douglas 
V.  MiiUing.  '2\)  Iowa,  4I)iS,  tlii"  lourt  lontimies:] 

In  all  these  eases,  the  real  groiuul  of  deeision  is  not  that  the  party 
meant  to  make  a  promissory  note,  hut  that  meaning  to  make  an  ohli- 
gation  in  writing,  and  whicli  was  ])ut  in  writing  that  it  might  of  itself 
import  hoth  the  faet  and  the  form  and  tlie  measure  of  the  obliga- 
tion, he  trusted  another  to  fix  that  form  and  measure,  without  exer- 
eising  that  supervision  whieh  was  in  his  power  and  by  which  perfect 
protection  was  possible.  In  sucli  cases,  tlie  rule  is,  that  he  is  bound 
by  the  act  of  him  who  has  been  trusted  in  favor  of  a  holder  in  good 
faith. 

The  judgment  must  be  reversed  and  a  new  trial  granted,  costs  to 
abide  the  event. 

All  concur.     Judgment  reversed." 


§  94  LEWIS  V.  CLAY. 

42  SoLiciTOBS'  Journal  (Jan.  1,  1898)    151,  67  L.  J.  Q.  B.  224. 

Action  by  payee  against  defendant  as  one  of  two  makers  of  two 
joint  and  several  promissory  notes,  for  £3,113,  15s.,  and  £8,000, 
respectively.  It  is  admitted  that  defendant's  signatures  are  genuine 
and  that  his  signatures  to  two  letters  authorizing  plaintiff  to  pay  the 
proceeds  to  Lord  William  Nevill,  the  other  maker,  are  also  genuine. 
Plaintiff  gave  value  in  good  faith  for  the  notes.  Defendant's  signa- 
tures to  the  notes  and  letters  were  procured  by  Lord  William  Nevill 
in  this  wise :  The  latter  came  to  defendant  and  asked  him  to  witness 
some  documents,  producing  a  roll  of  papers  covered  by  blotting  or 
other  paper  in  which  there  were  four  openings;  defendant  asked 
wliat  the  documents  were  and  was  answered  that  they  concerned 
private  family  matters,  that  defendant  could  see  them  if  he  insisted, 
biit  it  was  preferrcfl  tlint  be  should  not;  defendant  did  not  insist  and 

«  "  Th«»  law  of  thp  Rtatp  is,  that  whprp  a  party  is  induced  to  sigjn  a  nej^otiable 
instrument  by  reason  of  fraud,  artifice  or  deception  practiced  upon  him  by 
another  as  to  tlie  nature  of  the  in.strument,  and  the  maker  sifins  the  same  inno- 
cently and  under  the  iH-lief  that  it  was  a  contract  of  a  difffrent  character,  then 
therp  can  be  no  rocovory  upon  the  note,  althouf;]i  the  holder  may  b"  an  inno- 
cent purchaser  for  value  before  maturity,  unless  the  maker  was  guilty  of 
laches  or  carelessness  in  omitting  to  read  the  same,  or  by  some  other  means 
ascertaining  the  true  nature  and  imf)ort  of  the  instrument.  (National  Ex. 
Bk.  V.  Vrnrman.  43  TTun.  241,  cited  with  approval  in  Pnqr  v.  Krrkry,  1,37  N. 
Y.  ,313)."— /7i//*-off  V.  Mojr.  20  Misc.  (N.  Y.)  032  (1897).  Neglirjence  on 
the  part  of  the  one  signing  renders  him  liable  to  a  holder  in  due  course.  Skirts 
V.  Over  John.  00  Mo.  30.5;  Citizens'  Nat.  Bank  v.  Smith,  .'ir)  N.  II.  r)93;  Kellogg 
V.  Curtin.  fi.5  Me.  59;  Ncbekcr  v,  Cutsinger,  48  Tnd.  436;  Ort  v.  Fowler,  31 
Kans.  478.  —  H, 


III.]  DEFENCES.  395 

signed  his  name  four  times  through  the  openings.  Lord  William 
Nevill  also  signed,  and  defendant  believed  he  was  signing  as  witness 
to  the  former's  signatures.  Defendant  had  just  come  of  age,  had 
known  Lord  William  Nevill  intimately  for  some  years,  and  had  no 
reason  to  doubt  his  honor. 

The  following  questions  were  put  to  the  jury,  who  gave  the  answer 
appended  to  each: —  (1)  Did  the  plaintiflF  take  the  promissory  notes 
in  good  faith?  [It  is  admitted  he  took  them  for  value.]  Answer. — 
Yes.  (2)  Is  the  defendant's  account  of  the  circumstances  under 
which  he  signed  his  name  substantially  true  ?  Answer. —  Yes.  (3)  Was 
the  defendant,  in  signing  his  name  as  he  did,  recklessly  careless,  and 
did  he  thereby  enable  Lord  William  Nevill  to  perpetrate  the  fraud? 
Answer. —  No;  not  under  the  circumstances.  (4)  Were  the  signa- 
tures to  the  documents  given  by  the  defendant  in  misplaced  confi- 
dence in  the  statements  of  Lord  William  Nevill  as  to  their  nature? 
Answer. —  Yes.  (5)  Did  the  defendant  sign  his  name  to  be  used  by 
Lord  William  Nevill  for  any  purpose  he  chose?  Answer. —  No. 
(6)  Did  the  defendant  attach  his  signature  to  the  documents  without 
due  care  ?    Answer. —  No ;  not  under  the  circumstances. 

On  these  findings  the  case  was  reserved  by  the  Lord  Chief  Justice 
for  further  consideration. 

Lord  Russell  of  Killowen,  C.  J. —  I  have  now  to  consider  in  the 
light  of  these  findings  which  of  the  parties  is  entitled  to  judgment. 
It  is  clear  that  the  proof  of  the  signature  of  the  defendant  to  the 
promissory  notes,  coupled  with  proof  of  their  delivery  to  the  plaintiff 
under  the  apparent  authority  of  the  defendant,  makes  out  a  prima 
facie  case  for  the  plaintifT.  Is  it  a  conclusive  case?  Here  two  ques- 
tion? arise —  (1)  Is  the  clefendant  prfchulod  or  estopped  from  setting 
up  the  true  circumstances  under  wliicti  his  naino  ciiine  to  appear  on 
the  documents  in  question?  (2)  If  nol,  do  iliosc  true  circumstances 
afTonI  an  answer  in  y)oiiit  of  l;i\v  to  the  plaint ifT's  claim? 

I.  As  to  the  first  question  the  defendant  is  not,  in  my  judgment, 
estopped  or  precluded  from  setting  up  the  actual  facts  upon  any 
principle  of  law.  Apart  from  statute  such  preclusion  or  estoppel 
can  only  arise  (in  cireunistanees  like  the  present)  where  the  defendant 
had  so  coridueted  liiiuself  that  it  would  be  contrary  to  natural  justice 
to  permit  liim  to  assume  a  position  inconsistent  with  that  which 
he  had  ostensibly  occupied,  or  which  he  lefl  others  to  believe  he 
occupied,  and  upon  whic-h  others  liarl,  misled  by  his  conduct,  been 
suffered  to  act.  In  the  present  case  the  suggestion  on  the  part  of 
the  plaintiff  is  that  the  defendant  lia<l  not  used  due  care  in  signing 
his  name,  and  that  be  had  signed  in  misplaced  confidence  in  TiOrd 
William  Nevill.  The  jury  have  found  that  there  was,  in  fact,  no 
want  of  due  care  in  the  circumstances  in  signing  his  name  as  be  did  ; 
but  it  was  ur^ed  that  the  flndine  a<  to  nii'^placed  confidence  was 
sufficient,  and  the  authority  of  a  distinguished  American  judge  in  the 


396  uKiHTs  OK  iioldkr.  [art.  v. 

case  of  rii(tmm  v.  Sullivan  (1  Mass.  45)  was  cited.  What  does  mis- 
phuvd  cuntidciue  mean?  J I  may  meau  conlidence  placed  where  you 
know  or  ought  to  know  it  i8  not  safe,  or  confidence  placed  where 
you  have  every  right  to  hdieve  it  is  safe,  hut  where  it  is  afterwards 
betrayed.  The  former,  I  think,  is  the  case  the  learned  judge  had  in 
his  mind,  and  the  facts  there  may  afford  evidence  of  want  of  due 
care;  but  that  clearly  is  not  here  the  meaning  attributed  by  the  jury 
to  misplaced  confidence,  for  they  have  found  that  there  was  in  the 
circumstances  no  want  of  diie  care  on  the  part  of  the  defendant. 
Taking  the  findings  together  they  amount  to  this  —  that  the  defendant 
was  in  the  circumstances  guilty  of  no  want  of  due  care  in  placing 
confidence  in  the  statement  made  by  Lord  William  Nevill,  and 
accordingly  in  signing  his  name  as  he  did  ;  and  T  decline  to  hold  that 
the  placing  of  confidence  as  here  shown,  which  is  afterwards  betrayed, 
where  it  is  not  recklessly  or  negligently  so  placed,  in  any  way  pre- 
cludes the  defendant  from  setting  up  the  true  facts  as  a  defense.  I 
conclude,  therefore,  the  defendant  is  not,  upon  any  principle  of  law, 
estopped  or  precluded  from  setting  up  the  true  facts. 

How,  then,  is  the  plaintiff's  case  put?  It  was  argued  that  what- 
ever was  the  law  before  or  apart  from  the  Bills  of  Exchange  Act,  1882 
the  facts  here  did  not  under  that  x\.ct  afford  a  defense  as  against  a 
"  holder  in  due  course,"  which,  it  was  said,  the  plaintiff  was  within 
section  29,  and  that  the  question  must  be  determined  by  reference 
to  that  Act  alone.  T  think  this  argument  involves  a  misconception 
both  of  the  plaintiff's  position  and  of  the  scope  and  effect  of  the  Act 
of  1882.  Tt  will  bo  apparent  from  a  consideration  of  the  facts  of  the 
case  that  the  plaintiff  was  not  a  "holder  in  due  course"  at  all,  but 
that  he  was,  in  fact,  simply  the  named  payee  of  two  promissory  notes. 
Further,  an  examination  of  sections  20,  21,  29,  30,  and  38,  relating 
expressly  to  bills,  and  sections  83,  84,  88,  and  89,  relating  to  promis- 
gorv  notes,  will  make  it  quite  clear  that  "a  holder  in  dne  course"  is 
a  person  to  whom,  af.ter  its  completion  by  and  as  between  the  imme- 
diate parties,  the  bill  or  note  has  been  negotiated.  Tn  the  present 
case  the  plaintiff  is  named  as  payee  on  the  face  of  the  promissory 
note,  and  therefore  is  one  of  the  immediate  parties.  The  promis- 
sory notes  have,  in  fact,  never  been  negotiated  within  the  meaning 
of  the  act.' 

I  desire  to  say  here  that,  even  if  the  plaintiff  were  "  holder  in  due 
course,"  it  would,  in  my  judgment,  make  no  difference  in  the  result. 

But  is  the  contention  riglit  tliat  the  Act  of  1882  must  alone  be 
looked  to?     I  tliink  not.     That  act  was  intended  to  be  mainly  a  codi- 


1  On  the  point  discusspd  in  this  paragraph,  see  Boston  Fiteel  d  Iron  Co.  v, 
Bteuer,  183  Mass.  140,  ante,  p.  174;  Vander  Ploep  v.  r«n  7jUuIc,  1.3.5  Iowa, 
350,  nntp.  p.  179;  Lloyd's  Bank,  Limited,  v,  Cooke,  [1907]  1  K.  B.  794, 
ante,  p.  1^5. —  C, 


III.]  DEFENCES.  397 

fication  of  the  existing  law,  but  it  is  not  merely  a  codification  act, 
for  some  alterations  of  the  law  are  clearly  effected  by  it  and  it  does 
not  purport  to  be  exhaustive,  for,  by  section  97,  the  rules  of  the 
Common  Law  (including  the  Law  Merchant),  save  in  so  far  as  they 
are  inconsistent  with  the  express  provisions  of  the  act,  continue  to 
apply.  But  I  agree  that  in  determining  questions  of  liability  on  bills 
or  notes  it  is  proper  to  examine  the  act  before  turning  to  the  cases 
declaratory  of  the  Common  Law  decided  before  that  act. 

It  is  unnecessary  to  set  out  tlie  provisions  of  the  act  and  to  com- 
ment in  detail  upon  them.  It  is  enough  to  say  that  there  is  nothing 
in  the  act  which  prevents  the  defendant  from  setting  up  the  defense 
that  he  never  made  the  promissory  notes  in  question  —  which  is  the 
real  defense  here.  It  would,  indeed,  be  strange  if  it  did.  For  the 
purposes  of  the  present  case  the  question  is  precisely  the  same  as  if 
any  other  contract  than  one  by  promissory  note  had  been  written  oa 
the  documents  to  which  the  defendant  was  induced  to  sign  his  name 
—  for  instance,  if  it  had  been  a  contract  of  guarantee  or  suretyship. 
Then  the  question  would  have  been  —  Did  the  defendant  make  the 
contract  of  guarantee  or  suretyship?  Here  it  is  —  Did  he  make  the 
promissory  notes  sued  upon? 

II.  The  question,  then,  is,  on  the  facts  as  they  are  now  found  to 
be  —  Did  the  defendant  make  the  promissory  notes  in  question?  If 
he  did  not,  then  the  finding  of  tlie  jury  that  tlie  defendant  was  not 
guilty  of  any  want  of  due  care  establishes  that  he  is  not  prechuled 
from  saying  so.  That  there  is  a  prima  facie  case  on  the  plaintiff's 
evidence  that  he  did,  I  have  already  said  ;  but  is  that  prima  facie  case 
rebutted  and  displaced  by  the  defendant's  evidence?  According  to 
that  evidence  it  must,  after  the  findings  of  the  jury,  be  taken  to  be 
the  fact  that  he  was  witnessing  a  deed  or  document ;  that  he  was  so 
told ;  that  he  had  no  idea  of  signing,  and  was  not  asked  to  sign,  any 
bill  or  promissory  note,  or  to  undertake  any  contractual  obligation 
of  any  kind.  A  promissory  note  is  a  contract  by  the  maker  to  pay 
the  payee.  Can  it  be  said  that  in  this  case  the  defendant  contracted 
to  pay  the  plaintiff?  His  mind  never  went  with  such  a  transaction; 
for  all  that  appears,  he  had  never  heard  of  the  plaintiff,  and  his 
mind  was  fraudulently  directed  into  a  different  channel  by  the  state- 
ment that  he  was  merely  witnessing  a  deed  or  other  document.  Tie 
had  no  contracting  mind,  arul  his  signature  obtained,  by  untrue 
statements  fraudulently  made,  to  a  document  of  the  existence  of 
which  he  had  no  knowledge,  cannot  bind  liim.  Tt  is  as  if  he  had 
written  his  name  for  an  autograph  collector,  or  in  an  album.  The 
case  differs  in  no  material  respect  from  one  in  which  a  genuine  signa- 
ture is  deftly  transferred  by  delicate  contrivance  from  one  document 
to  another,  and  so  skillfully  as  to  escape  notice  under  ordinary 
examination.  Or,  again,  if  the  body  of  the  promissory  notes  had 
been   fraudulently  written   above,  and   after   his  signature  had   been 


39S  RIGHTS  OF  TIOLDER.  [ART.    V. 

made,  it  woiiKl  have  boon  for^^M-y,  and  in  suoh  case  it  is  clear  no 
recourse  could  be  had  upon  it.  Can  it  make  any  difTerence  as  to 
resultinj;  contractual  oblij^ation  that  the  body  of  the  note  was,  with- 
out liis  knowlcdirc.  tilled  up  before  he  was  fraudulently  induced  to 
put  his  name  in  the  belief  that  it  was  sometliing  wholly  different? 
1  think  not.  In  plain  reason  it  must  be  said  that  the  use  to  whi'^h 
the  defendant's  signature  was  applied  was  in  substance  and  effect 
forszerv,  whether  or  not  it  amounted  to  the  criminal  offense  of 
foriiery. 

i  think  it  well  to  point  out  that  cases  like  the  present  differ  widely 
from  those  in  which  the  party  sought  to  be  charged  has  agreed  and 
intended  to  enter  into  contractual  obligation  by  bill  or  note,  but  has 
been  defrauded  into  agreeing,  or  been  defrauded  in  the  manner  in 
which  the  bill  or  note  has  been  dealt  with.  In  such  cases  he  is  liable 
on  principle  and  authority,  to  any  one  who  has  dealt  with  the  bill  or 
note  in  good  faith  and  for  value. 

It  was  in  argument  admitted  that  the  case  of  Foster  v.  Mackinnon 
(IT  W.  R.  1105,  4  Ij.  K.  C.  p.  704),  is  in  point,  and  is  an  authority 
binding  on  me  if  the  Hills  of  Exchange  Act  of  1882  has  not  altered 
the  law  as  there  declared.  I  find  that  the  law  has  not  been  so 
altered.  I  see  nothing  in  the  act  to  warrant  the  suggestion  that  it 
has  been  altered,  and  it  is  noteworthy  that  all  the  text-writers  deal- 
ing with  the  Rills  of  Exchange  Act,  1882  (including,  indeed,  the 
draftsman  of  the  act),  treat  that  case  as  an  existing  authority.  The 
facts  in  Foster  v.  Mackinnon  were,  that  an  old  man  of  feeble  sight 
was  induced  —  without,  as  the  jury  found,  any  negligence  on  his 
part  —  to  sign  his  name  on  the  back  of  a  bill  by  the  fraudulent  state- 
ment that  it  was  a  guarantee  which,  in  fact,  he  had  undertaken  to 
sign.  The  Court  of  Common  Pleas  (consisting  of  Bovill,  C.  J.,  and 
Byles,  Keating,  and  Montagu  Smith,  JJ.),  held  that  he  was  not 
liable,  and  this  in  an  action  by  what  was  then  called  a  bona  fide 
holder  for  value  and  without  notice,  of  which  ''  holder  in  due  course  " 
is  now  the  legal  equivalent. 

In  these  islands,  cases  in  litigation  of  frauds  such  as  that  here  prac- 
ticed are  of  rare  occurrence,  partly  because  of  the  existence  and 
character  of  our  stamp  laws,  but  in  the  United  States  of  America, 
where  no  such  laws  exist,  there  are  many  authorities  dealing  with 
points  similar  to  that  in  the  present  case.  {Douglas  v.  Matting,  4 
Am.  Rep.  2.38  [20  Iowa,  498];  Taylor  v.  Atchison,  5  Am.  Rep.  118 
[54  111.  196];  Whitney  v.  Snyder,  2  Lans.  477;  Walker  v.  Ehert,  9 
Am.  Rep.  548  [29  Wis.  194]";  Griffifhs  v.  Kplloqq,  20  Am.  Rep.  48 
[39  Wis.  290] ).  The  great  weight  of  United  States  authorities  sup- 
ports the  view  of  the  common  law  expressed  by  the  English  judges. 

I  have  thought  it  right  to  say  so  much,  but  in  truth  these  authori- 
ties are  not  necessary  for  the  purposes  of  this  case.  They  are  all 
cases  where  the  bills  or  notes  had   been  jiegotiated  to  persons  now 


III.]  DEFENCES,  399 

called  "  holders  in  due  course."  It  follows,  if  such  a  holder  cannot  in 
a  case  like  the  present  recover,  a  fortiori  that  the  plaintiff  —  who,  as 
named  payee,  is  one  of  the  immediate  parties  —  cannot  recover. 

In  the  result,  therefore,  my  judgment  must  be  for  the  defendant, 
and  the  plaintiff  must  be  enjoined  from  in  any  way  dealing  with  the 
notes,  and  the  same  must  be  canceled  so  far  as  they  purport  to  be 
the  notes  of  the  defendant. 


ARTICLE  VI. 

LiAitii.iiY  oi'   Paktiks. 
[.  Maker:  absolute,  primary  liability;  admissions. 

1.  Preskntmkxt  von  Paymknt  Unnecessary. 

Sec  Ncg.  Inst.  Law.  §  130,  post,  ])p.  477-480. 

2.  Liability  on  Lost  ou  Destroy kd  Tnstuument. 

§110  McCREGORY  v.  McCREGORY. 

107  Massachusetts,  543.  —  1871. 

Action  against  makers  on  notes  alleged  to  be  lost.  Verdict  for 
plaintiff,  who  filed  a  bond  for  protection  of  defendants  from  liability 
on  lost  notes,  to  the  a})i)roval  of  the  judge. 

Gray,  J.^ — Destruction  liy  fire  is  one  mode  by  wliicli  property 
may  he  lost,  and  an  allegation  that  a  note  has  been  lost  is  fully  sup- 
ported by  proof  that  it  has  been  destroyed  by  fire. 

It  is  well  settled  in  tliis  coniinonwenUh,  that  an  action  at  law  may 
be  maintained  on  a  lost  promissory  note,  whenever  a  bond  of  in- 
demnity will  afford  complete  protection  to  the  defendant;  and  that 
such  an  action  may  be  maintained  again.st  the  maker  of  such  a  note, 
upon  filing  a  suflficient  bond  of  indemnity.  All  the  makers  of  the 
notes  described  in  IIk-sc  tliree  counts  are  defendants  in  this  action; 
anfl  thev  do  not  stand  like  an  indorscr  of  a  promissory  note,  who  is 
entitled,  upon  taking  it  up  to  the  possession  thereof,  in  order  that 
he  may  have  his  recourse  over  against  the  maker,  or  negotiate  it  again ; 
or  like  the  acceptor  of  a  bill  of  exchange,  who  may  need  it  as  a  voucher 
in  settling  his  account  with  the  drawer.  (Fales  v.  Russell,  16  Pick. 
315;  Almy  v.  Reed,  10  Cush.  421  ;  Boston  Lead  Co.  v.  McGuirk,  15 
Gray,  87 ;  Tower  v.  Appleton  Bank,  3  Allen,  387 ;  Tutlle  v.  Standish, 
4  Allen,  481;  Savannah  National  BanJc  v.  TIasJdns,-  101  Mass.  370.) 
Ji.dgment  on  the  verdict  for  the  plaintilf.^ 

1  Omittinjr  other  (pipstions.  —  TT. 

2  Holds  ,ifop[)tor  of  lost  bill  liablo  only  in  equity.  Accord:  Pierson  v.  Hutch- 
inson. 2  ramp.  211.  —  H. 

3  If  a  note  or  bill  is  shown  actually  to  have  been  destroyed,  most  courts 
allow  an  action  at  law.  Drs  Arts  v.  Lepgett,  10  N.  Y.  .582;  Dean  v.  Speakman, 
7  Blatchf.  (Tnd.)  317.  But  not  if  it  is  voluntarily  destroyed  by  the  holder. 
Blade  v.  yolnnrl.  12  Wend.  (N.  Y.)  173.  Some  courts  make  a  distinction 
between  instruments  lost  before  maturity  and  those  lost  after  maturity,  allow- 
ing an  action  at  law  on  the  latter.     Thayer  v.  King.  15  Oliio,  242;  Mowery  v. 

[400J 


£.J  MAKEE.  401 

3.  Admission  of  Existence  and  Capacity  of  Payee. 

§  110  McMANN  V.  WALKER. 

31  Colorado,  2G1.  — 1903. 

The  defendant  in  eri-or  executed  and  delivered  his  promissory  note, 
in  the  city  of  Denver,  payable  to  tlie  Sprague  Collection  Agency.  The 
payee  was  a  foreign  corporation,  and  at  the  time  of  this  transaction 
had  nut,  iiur  has  it  since,  complied  with  the  law^  requiring  sucli  cor- 
porations to  jjay  certain  fees  before  engaging  in  business  in  this  state. 
(Scss.  Laws,  l(St)7,  p.  l.'»7,  c.  51.)  Before  maturity,  the  plaintilTs  in 
error,  for  value,  and  without  notice  that  the  payee  had  not  complied 
with  the  law  ix'lative  to  foreign  corporations,  purchased  the  note  from 
the  j)ayee  in  tlie  city  of  Denver.  In  an  action  by  the  purchasers  against 
the  maker  to  enforce  its  collection,  the  trial  court  held  that  the  note 
was  void,  and  rendered  judgment  for  the  defendant.  The  plaintiffs 
bring  the  case  here  for  review  on  error. 

Gakhf^ht,  J.  [after  stating  the  facts.]  — The  only  question  neces- 
sary to  detcrn'iiic  is  whether  or  not  a  negotiable  promissory  note  in 
the  hands  of  parties  obtaining  it  for  value,  in  good  faith,  before 
maturity,  from  a  foreign  corporation  in  this  state,  to  which 
it  was  given  in  this  state,  is  invalid  as  against  tlio  maker 
because  such  corpoiation,  at  the  time  of  tlie  execution  and 
delivery  of  such  note  or  subsequently,  had  not  complied  with  the 
laws  relative  to  the  conditions  which  would  authorize  it  to  engage  in 
business  within  the  state.  The  (|uestion  is  one  which  has  been  dis- 
cussed by  the  courts  of  several  states,  with  the  resull  that  the  decisions 
on  the  subject  arc  not  altogether  harmonious.  Whether  or  not  the  note 
in  (piestion  be  invalid  as  between  the  maker  and  payee  is  a  question 
upon  which  wo  express  no  opiniftn,  because  that  in-oposition  is  not  in- 
volved, and  does  not  in  any  manner  affect  the  rights  of  the  parlies  to 
this  action.  The  statute  which  the  maker  invokes  does  not  provide 
that  a  note  given  a  foreign  corporation  in  the  circumstances  narrated 
shall  be  invalid  in  the  hands  of  third  parties,  nnd  it  should  not  be  given 
a  ronstruftion,  unl('>'s  unavoidable,  which  would  I'csiilf  in  visiting  upon 
innocent  third  parties  a  penalty  for  its  violation  by  another.  In  this 
.<late  the  irencral  rule  of  law  prevails  that  negotiable  commercial  paper, 
althouL'b  invalid  as  between  the  immediate  parties,  is  valid  as  fo  third 
I>ersons  obtaining  it  for  value  before  maturity,  and  without  nf)tice  of 
its   infirmities,  unless  so  declared   by  statute.      ( ndiii/lnicr  v.    Mn/rr. 


Mnxt,  14  Xch.  .'510.  V>\\\  ntlior  courts  deny  the  vnlirlity  of  this  flistinotion. 
Maarn  v.  Trirr.  21  fJrift.  f\',T.)  ."iSn.  Srp  in  frrifral  on  If»«<  or  dcstroypfl 
bills  an<l  nofrs.  ?  Oiiniol  on  Nf".  Fnst..  8iS   1«7.')-148.'). 

Tltr  ni.ittor  i-  ^ov«riiriI  ly    tilulc  in  New  ^ork.     Code  Civ.  I'roc.  §  I'.'IT. — U 
NKGOT.  INBTntlMKNTfl  —  26 


i02  MABILITV    Ok"    PAUTIKS.  [aHT.    Vl. 

5  Colo.  71.)      See,  also,  ^Sundheun  v.  Gilbert,  117  liiii.  71,  where  the 
subject  is  quite  fully  discussed  aud  many  authorities  cited.* 

Tlie  defoiulanl,  by  {^iviii-j;  a  note  which  is  not  the  subject  of  statu- 
tory enactnicnt,  thereby  conclusively  admitted  as  to  third  parties 
purchasing  before  maturity,  and  in  good  faith,  the  legal  existence  of 
the  payee,  and  its  authority  to  take  such  note,  and  to  negotiate  and 
transfer  it  by  indorsement.  Section  60,''  Negotiable  Instruments  Act 
(Sess.  Laws  1897,  p.  22:\,  c.  64)  ;  ^  Enf-  T.aw  (2d  Ed.)  -174,  475; 
Wolk-e  V.  Kuhne,  100  Tnd.  313;  1  Edwards'  Bills  and  Notes  (3d  Ed.) 
§  363  ;  Bigelow  on  Estoppel  (4th  Ed.)  512. 

The  plaintifTs  were  in  no  manner  connected  with  the  original  trans- 
ftction,  and  they  violated  no  law  in  purchasing  the  note  from  the  payee. 
They  purchased  it  in  good  faith,  before  maturity ;  it  was  negotiable  in 
form;  and  the  maker  cannot  be  heard  to  say,  as  against  them,  in 
these  circumstances,  in  the  absence  of  a  statute  to  the  contrary,  that 
the  payee  committed  an  illegal  act  in  taking,  or  had  no  authority  to 
dispose  of,  it,  in  the  usual  course  of  business,  because  by  its  execution 
and  delivery  he  is  precluded  from  raising  any  of  these  questions  as 
against  the  purchasers,  who  obtained  it  for  value,  before  maturity, 
without  notice  of  the  fact  upon  which  he  relies  to  defeat  it.  The  courts 
cannot  undertake  to  render  the  statute  relied  upon  by  defendant 
effective  by  imposing  penalties  which  it  has  not  provided,  or  placing 
them  where  they  do  not  belong.  If  defective  because  no  sufBcient  pro- 
vision is  made  for  its  enforcement,  that  is  a  matter  for  the  Legisla- 
ture to  remedy.  According  to  the  undisputed  facts,  the  plaintiffs  were 
entitled  to  a  recovery  on  the  note.  The  judgment  of  the  County  Court 
is  therefore  reversed,  and  the  cause  remanded,  with  directions  to  ren- 
der judgment  in  favor  of  the  plaintiffs. 

Judgment  reversed.' 

<  Spe  also  Alexander  v.  Hazelrigg,  123  Ky.  677,  ante,  p.  375,  and  Arnd  v. 
Sjoblovi,  131   Wis.  642,  ante,  p.  383.  —  C. 

bN.  Y.,  §  110. —  C. 

•  Maker  of  a  note  payable  to  the  order  of  "A.  B.  Attorney-General  "  cannot 
dispute  his  right  to  transfer  it.  Wolke  v.  Kuhne,  109  Tnd.  313.  Maker  of  a 
note  payable  at  "A.  B."  cannot  deny  the  existence  of  such  a  place  when  the 
statute  requires  nejjotiable  instruments  to  be  payable  at  a  place  certain. 
Broicn  v.  First  .Y.  H.,  103  Ala.  123.  Contra,  where  the  statute  requires  it  to 
be  pavable  at  a  bank.     Parkinson  v.  Finch,  4.5  Tnd.   122.  — IT. 

[In  Castor  v.  Peterson.  2  Wash.  204,  it  was  held  that  the  maker  of  a  pro- 
missory note  payable  to  the  order  of  a  married  woman  guarantees  her  capacity 
to  indorse  and  transfer  tlie  same;  and  tiie  fact  tliat  tlio  note  is  community 
property  will  not  affect  the  title  of  a  hona  fide  indor.see  for  value  before 
maturity,  where  he  has  no  notice  that  the  note  is  community  property. 
HoYT.  .7..  said:  "The  maker  promised  to  pay  Mrs.  Eliza  E.  Pool,  or  order, 
and  in  making  the  note  so  payable  he  guaranteed,  to  every  person  taking  such 
note  in  good  faith,  her  ability  to  order  the  same  paid  to  another  —  that  is,  to 
indorse  it  —  and  as  to  every  s\ich  person  buying  in  good  faith  and  for  value 
such  guaranty  was  conclusive.    That  the  maker  of  negotiable  paper  thus  guar- 


1I.J  ACCEPTOE.  403 

§  110  FKAZIER  V.  MASSEY. 

[Reported  herein  at  p.  220.]  t 


n.  Acceptor:  absolute,  primary  liability;  admissions. 

1.  Presentment  for  Payment  Unnecessabt. 

See  Neg.  Inst.  Law,  §  130;  post,  pp.  477-480. 

2.  Admissions  as  to  Drawer  and  Payee. 

§  112        FIRST  NATIONAL  BANK  OF  LISBON  v.  BANK  OP 

WYNDMERE. 

15  NoBTH  Dakota,  299.  —  1906. 

Action  by  the  First  National  Bank  of  Lisbon  against  the  Bank  of 
Wyndmere.     Judgment  for  defendant,  and  plaintiff  appeals. 

Engerud,  J.  Tliis  is  an  appeal  from  an  order  sustaining  a  de- 
murrer to  the  complaint  on  the  ground  that  it  does  not  state  a  cause 
of  action.  The  complaint  states  the  following  facts:  The  plaintiff 
and  defendant  are  banking  corporations,  located,  respectively,  at  Lis- 
bon and  Wyndmere,  in  this  state.  On  July  1,  1905,  the  defendant 
caused  to  be  presented  to  plaintiff  for  payment  a  forged  check  pur- 
porting to  have  been  drawn  by  Bixby  &  Marsh  upon  the  plaintiff 
bank  in  favor  of  Theodore  Larson  for  $60.25,  dated  June  27,  1905, 
and  indorsed  in  blank  by  the  payee.  It  also  bore  the  indorsement  of 
the  defendant,  and  each  of  the  several  l)anks  through  whoso  hands 
it  had  passed  in  the  usual  course  of  transmission  from  defendant  to 
plaintiff.  Each  indorsing  bank  had  expressly  guaranteed  the  genuine- 
ness of  previous  indorsements.  Bixby  &  Marsh  were  depositors  in 
plaintiff  bank,  and  had  to  their  credit  sul)je(t  to  check  a  sufficient 
amount  to  pay  the  clieck  in  <|uestion.  The  plaintiff  bank  heli(>ving 
the  check  genuine,  paid  it  and  charged  it  to  the  account  of  Bixby  & 
Marsh.     The  name  of  this  firm  had  been  forged,  but  this  fact  was 

antees  the  capacity  of  the  payee  to  indorne  and  transfer  the  same  seems  to 
arise  from  the  ncrcssity  of  tJic  rnso,  and  tlie  rnlc  is  tlicreforc  f(iund<'d  upon 
reanon.  It  is  lik«'wise  abundantly  Hiipportod  by  niithority.  Sci'  Daniel.  Nep. 
Inst.,  §  9.'{,  and  cases  there  cited.  This  rule  has  ber-n  fre(|uenlly  apiilied  to 
noten  made  to  and  transferred  liy  infants.  See  section  227  of  the  authority 
above  citetJ.  Likewise  tf)  married  women  under  the  disabilities  of  the  common 
law."     P.  207.  — C.l 

T  In  like  manner  the  drawer  idrry  v.  Cooper.  .'<  l)ou<.'.  tl-').  pnxt.  \\.  41M).  and 
acceptor  (Taj/lnr  v.  Criikrr,  4  Ksp.  1 87;  SwUh  v.  Mdriarl,-.  0  f\  H.  180),  admit 
the  existence  .if  the  (lavee  and  his  then  cajuicity  to  contract.  See  two  following 
sections  of  Neg.  Inst.  Law.  —  H. 


•101  LlAiULlTV    OF    I'AUTllCS.  [aUT.    VI. 

not  disfovoivd  unlil  July  vOili,  wlicn  Hixhy  &  Marsh,  wlio  were  ranch- 
men living  more  than  'JO  miles  from  Lishoii,  lalled  at  the  hank  and 
examined  the  eaneeled  vouchers.  Bixhy  &  Marsh  declined  to  allow 
credit  to  plaintiff  for  the  spurious  voucher.  Immediately  on  that 
day,  the  plaintiff  notified  the  defendant  hank  of  the  forgery,  and  de- 
manded repayment;  at  the  same  time  returning  the  forged  check  to 
defendant.  The  defendant  refused  to  refund.  Judgment  is  demanded 
for  the  amount  of  the  check  and  interest. 

The  question  preseiited  hy  this  case  is  one  that  has  never  lieretofore 
come  before  this  couit.  It  will  be  noticed  that  the  complaint  does 
not  charge  the  defendant  with  any  had  faith  or  neglect  of  duty  in 
indorsing  and  putting  in  circulation  the  forged  check,  and  we  must 
therefore  assume  that  the  defendant  indorsed,  and  caused  the  check 
to  be  presented  for  payment  in  good  faith  in  the  mistaken  belief  that 
it  was  genuine.  The  ])laintiff  upon  whom  the  check  was  drawn, 
accepted  and  paid  the  cheik  under  the  same  mistaken  belief  that  the 
drawer's  signature  was  genuine.  If  we  had  not  read  the  numerous 
cases  which  have  been  cited  dealing  witli  this  question,  we  would  have 
thouglit  the  proposition  was  a  very  plain  one,  readily  solved  by  the 
application  of  fundamental  principles  of  law  and  common  sense.  The 
defendant  had  received  from  the  plaintiff  without  consideration  a 
sum  of  money  which  it  was  not  rightfully  entitled  to,  and  the  sole 
moving  clause  wliich  induced  the  exchange  of  money  for  the  spurious 
check  was  the  mutual  mistake  of  the  parties  to  tlie  transaction  with 
respect  to  the  genuineness  of  the  writing.  In  the  absence  of  any 
showing  that  the  defendant  had  been  misled  or  prejudiced  by  the 
plaintiff's  mistake  so  as  to  render  it  inequitable  to  compel  repayment, 
the  defendant  ought  to  refund  the  money  had  and  received.  Un- 
fortunately, however,  this  just  and  simple  solution  of  what  seems  to 
us  a  plain  proposition,  has  not  generally  prevailed.  A  number  of 
courts  have  laid  down  the  unqualified  rule  that  where  the  drawee  of  a 
check  to  which  the  name  of  the  drawer  has  been  forged,  pays  it  to  a 
bona  fide  holder,  he  is  bound  by  the  act,  and  cannot  recover  the  pay- 
ment.    National  Park  Bank  v.  Ninth  National  Bank,  46  N.  Y.  77.* 

*  I  This  case  was  reported  herein  in  the  first  edition  of  this  work  with  the 
following  note:  1 

In  the  ease  of  a  bill  payable  to  drawer's  order  the  acceptor  admits  the 
capacity  of  the  drawer  to  draw  and  to  indorse;  he  admits  the  pennineness  of 
the  sipnature  as  drawer,  but  it  seems  not  the  genuineness  of  the  signa- 
ture as  indorser.  liraithwaite  v.  Gardiner,  8  Q.  B.  473;  fimith  v. 
Marxark,  0  V.  R.  4Sfl,  18  L.  J.  C.  P.  65;  Halifax  v.  Ijyle,  .3  Exch.  440;  Ticcman 
V.  Duck.  11  M.  &  \V.  251  ;  Garland  v.  Jncnmh,  L.  R.  8  Exch.  210.  See  Bills  of 
Exchange  Act,  §  54,  subsec.  2(6).  Tn  like  manner  he  admits  the  authority  of 
an  agent  to  draw,  but  not  his  authority  to  indorse.  Robinson  v.  Yarrow,  7 
Taunt.  455. 

The  acceptor  does  not  ndniit  tlie  genuineness  of  the  body  <>f  the  bill.  Tlence 
if  it  has  been  raised  he  is  not  bound  on  his  acceptance,  and  if  he  has  paid  a 


II.]  ACCEPTOB.  405 

The  reason  generally  assigned  to  justify  the  adoption  of  this  rule  is 
stated  in  Gennania  Bank  v.  Buutell,  60  Minn.  189,  as  follows:  "The 
money  of  the  coniniereial  world  is  no  longer  coin.  The  exchanges  of 
commerce  are  now  made  almost  entirely  by  means  of  drafts  and 
cheeks.  It  was  largely  in  deference  to  this  fact  that  the  recovery  of 
money  paid  on  paper  of  this  kind  to  which  the  drawer's  signature 
was  forged,  was  made  an  exee])tion  to  the  general  rule  as  to  the 
recovery  of  money  paid  under  a  mistake  of  fact.  In  view  of  the  use 
of  this  class  of  paper  as  money,  it  was  considered  that  public  policy 
required  that  as  lietween  the  drawee  and  good-faith  holders,  the 
drawee  bank  should  be  deemed  the  place  of  final  settlcniciit,  where 
all  prior  mistakes  and  forgeries  should  he  corrected  and  soltlod  once 
for  all,  and  if  not  then  corrected,  payment  should  be  treated  as  final ; 
that  there  must  be  a  fixed  and  definite  time  and  place  to  adjust  and 
end  these  things  as  to  innocent  holders;  and  tliat  time  and  place 
should  be  the  paying  bank  and  the  date  of  payment  and  that  if  not 
done  then,  the  failure  to  do  so  must  be  deemed  the  oonsti'uctive  fault 
of  the  payee  bank,  which  must  take  the  consequences."®  According 
to  this  line  of  cases  the  whole  <luty  and  risk  of  determining  the 
genuineness  of  a  draft  or  check  rests  upon  the  drawee,  and  as  Lord 
Mansfield  is  reported  to  have  said  in  Price  v.  Need,  3  Burr.  1354,  the 
holder  "  need  not  inquire  into  it,"  provided  he  acquired  the  paper 
for  value  in  good  faith.  Bank  of  St.  Albans  v.  Farmers'  cC  Mechanics' 
Bank,  10  Vt.  141;  Neal  v.  Cohurn,  92  Me.  139;  Deposit  Bank  v. 
Faijette  National  Bank,  90  Ky.  10;  Bernheimer  v.  Marsliall,  2  Minn. 
7H  (Gi\.  61).  Of  tills  cxtroTue  view  it  is  well  said  in  2  ^forse  on 
Banking  (4th  FA.)   §  464:     "This  doctrine  is  fast  fading  into  the 


raised  bill  or  chpcl<,  lie  may  rocovor  tlio  monoy.  Marine  N.  B.  v.  l^^at.  City 
ni-.,  59  \.  Y.  fi7:  WhUr  v.  Conlinrninl  /?/.-.,  f.4  N.  Y.  310;  Redinploti  v.  Woods, 
45  ("al.  400.  Hut  see  Ward  v.  AUni.  2  Mot.  (Mnss.)  .'5.3.  TTc  i«  not  iindor  a 
duty  to  take  precautions  against  subsequent  fraudulent  alterations;  it  is  the 
drawer  who  lias  control  over  its  form.  Kcholfirlil  v.  I.onilislxtrouiih.  ISitO, 
A.  r.  514.  — H. 

•  Tn  another  |i;irt  nf  this  c.-iwe  MiTrni:i,i„  .1..  saiil:  "  I'Vom  wh;it  exuminntinn 
we  have  been  able  to  make  of  the  authorities,  we  have  arrive<I  at  the  con- 
elusion  that  there  are  \i-r\  few  well-coiisiilered  eases  which  go  furthi-r  than  to 
hf)l(l  that  the  bank  may  recover  back  money  jiaid  on  a  check  to  which  the 
siffnature  of  f»ne  of  its  customers  was  for(j;e<l,  when  there  was  a  lack  oT  good 
faith  on  the  part  of  the  payee  towards  the  bank,  as  when  he  knew  the  check 
was  forf;ed,  or  knew  of  circumstances  casting  suspicirm  on  its  genuineness  not 
known  to  the  bank,  and  which  he  did  not  conimunicate  to  it.  or  where  the 
holder  was  negligent  in  not  making  due  impiiry  as  to  the  validity  of  tin-  check 
before  he  took  it,  and  the  drawee,  having  a  right  to  presiiinc  that  he  hnd  ma<|p 
fluch  inrjuiry,  was  itself  thereby  excused  from  making  in<|uiry  before  paying  it. 
In  the  first  case  the  hrddcr  is  really  n  party  to  the  fraud,  arul  is  not  a  good 
faith  holder.  Tn  the  second  ca«e.  he  has,  by  his  ni'gli'_'ence,  contributed  to 
the  conaummntion  of  the  mi«tnke  on  the  jiart  of  the  dr.iwee  b\'  misleading 
him."    OU  Minn.,  at  p.  194.  —  C 


40G  LIAIULITV    OF    I'AHTIES.  [aUT.    VI. 

misty  past,  where  it  belongs.  It  is  almost  dead,  the  fuucral  notices 
are  ready,  and  no  tears  will  be  shed,  for  it  is  founded  in  misconception 
of  the  fundaiiuMital  prini.i{)los  of  law  and  common  sense." 

Most  of  the  courts  now  agree  that  one  who  purchases  a  check  or 
draft  is  bound  to  satisfy  himself  that  the  paper  is  genuine;  and  that 
by  indorsing  it  or  presenting  it  for  payment  or  putting  it  into  circula- 
tion before  presentation  he  impliedly  asserts  that  he  has  performed 
this  duty.     Consecpiently  it  is  held  that  if  it  appears  that  he  has 
neglected  this  duty,  the  drawee,  who  has,  without  actual  negligence 
on  his  part,  paid  the  forged  demand,  may  recover  the  money  paid 
from  such  negligent  purchaser.     The  recovery  is  permitted  in  such 
cases,  because,  although  the  drawee  was  constructively  negligent  in 
failing  to  detect  the  forgery,  yet  if  the  purchaser  had  performed  his 
duty,  the  forgery  would,  in  all  probability,  have  been  detected  and 
the  fraud  defeated.     Gloucester  Bank  v.  Salem  Bavk,   17  Mass.  33; 
Bank  of  U.  S.  v.  Bank  of  Georgia,  10  Wheat.  333;  National  Bank 
of  America  v.  Bqngs,  106  Mass.  441;  First  National  Bank  of  Danvers 
V.   First  National   Bank   of   Salem,   151    Mass.    280;   First   National 
Bank  v.  Ricker,  71  111.  439;  liouvant  v.  Bank,  63  Tex.  610;  Bank  v. 
Bank,  30  Md.  11;  People's  Bank  v.  Franklyn  Bank,  88  Tenn.  299; 
Ellis  d-  Morton  v.  Trust  Co.,  4  Ohio  St.  628 ;  Bank  v.  Bank,  58  Ohio 
St.  207;  Bank  v.  Bank,  22  Neb.  769;  Canadian  Bank  v.  Bingham,  30 
Wash.  484.     While  all  these  authorities  agree  that  negligence  on  the 
part  of  the  purchaser  in  taking  a  forged  check  subjects  him  to  lia- 
bility for  the  loss,  they  are  not  in  accord  as  to  what  constitutes  s.uch 
negligence.     These  authorities,  it  seems  to  us,  have  luid  the  effect  of 
substituting  uncertainty  and   confusion  for  a   rule  wliich,   although 
manifestly  arbitrary  and  unjust,  had  at  least  the  merit  of  simplicity 
and  clearness.     It  must  be  conceded  that  the  majority  of  the  courts 
that  have  passed  on  the  question  are  committed  to  the  doctrine  that 
the  drawee  who  has  paid  a  spurious  check  can  recover  the  payment 
from  a  good-faith  holder  only  when  the  latter  has  been  negligent. 
If  the  law  of  this  state  is  to  be  determined  by  the  mere  weight  of 
authority  alone,  as  evidenced  by  the  decisions  in  other  states,  then  we 
should  be  constrained  to  hold  that  this  complaint  shows  no  liability 
on  defendant's  part,  because  it  does  not  show  that  the  defendant  has 
been  in  any  degree  negligent. 

However  valuable  the  decisions  of  courts  in  other  jurisdictions  may 
be  as  guides  to  aid  us  in  coming  to  a  correct  decision,  it  cannot  be 
admitted  that  such  decisions,  however  numerous  and  uniform,  con- 
clusively establish  the  law  for  this  jurisdiction.  They  are,  after  all, 
only  arguments  in  support  of  the  views  entertained  by  the  judges  who 
uttered  them.  Unless  the  doctrines  advocated  by  them  have  become 
part  of  the  law  of  this  state  by  the  adoption  of  them  by  positive  law 
or  general  usage  and  opinion,  they  must  be  received  and  considered 
by  us  merely  as  arguments  to  be  weighed,  and  adopted  or  rejected 


n.]  acceptob.  407 

according  as  we  deem  them  sound  or  unsound.  If,  in  our  opinion,  a 
doctrine  advocated  by  the  courts  of  other  states  is  an  unwarranted 
departure  from  the  fundamental  principles  of  law,  it  is  our  duty  to 
reject  it,  unless  the  rule  so  advocated,  even  though  fundamentally 
erroneous,  has  become  part  of  our  common  law  by  general  usage  and 
custom;  or  has  been  expressly  or  impliedly  made  part  of  our  law  by 
statute.  There  has  been  no  statutory  adoption  of  such  a  rule,  and  we 
have  no  hesitation  in  saying  that  there  is  no  general  usage  or  custom 
prevailing  ii>  this  state  that  the  checks  and  drafts  of  individuals  shall 
circulate,  and  be  treated  and  dealt  with  as  bank  or  government  cur- 
rency. Yet,  as  indicated  by  the  language  quoted  from  the  Minnesota 
decision  (Germania  Bank  v.  Boutell,  supra),  the  rule  that  the  drawee 
must,  save  in  exceptional  cases,  bear  the  consequences  of  his  mistake 
in  honoring  a  spurious  check,  was  adopted  in  deference  to  such  a 
supposed  usage.  The  fact  that  the  cases  advocating  this  doctrine  all 
cite  as  authority  Bank  of  U.  S.  v.  Bank  of  Georgia,  10  Wheat.  333, 
and  Gloucester  Bank  v.  Salem  Bank,  17  Mass.  33,  which  involve  forged 
bank  notes,  shows  tliat  the  rule  rests  on  the  assuniption  that  the 
checks  and  drafts  of  individuals  are  to  be  placed  in  the  same  class 
with  bank  bills  which  are  issued  and  intended  to  circulate  as  money. 
There  is  no  statute  or  business  usage  in  this  state  to  warrant  that 
assumption.  The  decisions  which  advocate  the  rule  that  a  drawee 
may  recover  in  case  of  negligence  on  the  part  of  the  holder  who  pre- 
sents and  receives  payment  of  a  spurious  check,  all  recognize  the 
fallacy  of  those  decisions  which  apply  the  same  rule  to  checks  and 
drafts  as  is  r.j  plicable  to  bank  notes  which  circulate  as  money.  Yet, 
strange  to  rr  ',  yearly  all  of  them  expressly  or  im])liedly  accept  as 
true  the  pro;  o  it  ion  t'lat  a  drawee  of  a  check  or  draft  should  be  ex- 
cepted from  t!:c  operation  of  that  fundamental  rul(>  which  permits  one 
who  part-!  \v\V.\  n  onoy  by  mistake  to  recover  it  from  one  who  in  e(]nity 
and  goo<l  conscience  ought  not  to  retain  it.  They  simply  hold  that 
this  exception  should  not  apply  in  cases  where  the  purchaser  or  i'l- 
dorsee  was  nc^^ligcut  in  not  taking  proper  precautions  to  guard  against 
forgery.  It  is  evident  at  a  glance  that  this  proposition,  which  these 
cases  thus  accept  as  proper,  has  no  otlier  foundalion  than  the  same 
premise  wiricli  tliey  very  pr()[)erly  hold  to  i)e  fallacious — -namely,  that 
checks  and  diafts  on  hanks  or  individuals  should  be  governed  by  the 
same  rules  as  apply  to  l)ank  notes  which  circulate  as  money.  If  it  is 
conducive  to  the  best  interests  of  the  business  world  to  put  cliecks  and 
drafts  on  tlie  same  footing  as  bank  currency,  and  if  it  wouhl  tend 
to  make  checks  and  drafts  a  more  safe  and  convenient  circulating 
medium  of  exchange,  to  shift  the  whole  risk  of  loss  by  forgery  upon 
the  drawee  instead  of  letting  it  rest  upon  those  who  are  credulous 
enough  to  assume  the  risks  of  parting  with  value  for  such  paper,  the 
legislative  branch  of  the  goverjinienf  can  lie  frnsted  to  establish  that 
rule,  if  such  a  radical  departure  from  fundamental  principles  of  law 
is  deemed  wise.    The  court  has  no  power  to  do  so. 


40S  LiAHii.irv   OK   rAUiiKS.  [akt.   VI. 

Being  I'oiiviiui'il,  as  uu  arc,  tliat  tliis  doi^lriiu!  udvocattHl  by  the 
great  niaJDiity  of  tlu'  rases  which  have  come  to  our  attention,  to  the 
effect  that  a  drawee  of  a  i-heck  slioukl  be  excei)teil  from  the  ordinary 
rules  rehiting  lu  the  right  to  recover  money  })ai(l  by  mistake,  is  un- 
sound and  has  never  been  a(K)i)l('(l  in  this  slate  by  usage  or  statute, 
it  would  be  nothing  less  than  usiir|);ilion  of  legislative  power  by  this 
court  to  declare  that  rule  to  lie  the  hiw  of  this  state  because  courts  in 
other  states  have  so  held.  Tiiat  tlic  I'ulc  in  (|ii('sti(>n  is  uiisonnd  in 
princi])le  and  unjust,  is  almost  universally  admitted,  and  the  courts 
are  showing  an  increasing  tendency  to  discard  it.  We  tliiid';,  therefore. 
that  we  are  showing  no  disrespect  to  precedent  in  taking  the  stand 
towards  which  the  modern  decisions  are  unmistakably  tending,  and 
from  which  it  is  generally  conceded  there  should  have  never  been  any 
departure.  We,  therefore,  reject  as  unsound  the  doctrine  that  a 
drawee  of  a  check  should  be  excepted  from  the  general  rule  in  relation 
to  the  recovery  of  money  paid  by  mistake.  The  drawee  is  presumed 
to  know  the  signature  of  the  drawer  of  the  chec'ir~or  clratt ;  and  the 
holder  of  SinHi  check  or  draft  wHio  Tias  actjuiTed'TrTir  good  faith  has 
the  right  to  act  in  reliance  on  that  prosum|)tion,  ])rovided  he  himself 
has  omitted  no  duty,  the  performance  of  which  would  have  prevented 
the  success  of  the  fraud.  Conse(|uontly,  if  the  drawee  pronounces  the 
check  genuine  by  paying  it  or  otherwise  honoring  it,  the  holder  who 
has  acted  in  good  faith  and  without  negligence,  may  safely  rely  upon 
the  judgment  of  the  drawee,  and  act  accordingly.  The  drawee  cannot, 
under  such  circumstances,  recall  his  acceptance  or  payment  to  the 
detriment  of  the  party  who  has  rightfully  relied  upon  his  decision. 
In  such  a  case  the  party  who  received  the  money  has  the  superior 
equity,  and  he  may  justly  retain  the  money  although  he  was  not 
originally  entitled  to  receive  it. 

But,  as  is  usually  the  case,  when  the  party  who  has  coUectetl  the 
check  had  previously  cashed  it  or  taken  it  in  exchange  for  commodities, 
there  is  no  reason  why  he  should  not  refund.  Every  one  with  even  the 
least  experience  in  business  knows  that  no  business  man  would  accept 
a  check  in  exchange  for  money  or  goods  unless  he  is  satisfied  that  the 
check  is  genuine.  Tie  accepts  it  only  because  he  has  proof  that  it  is 
genuine,  or  because  he  has  sufficient  confidence  in  the  honesty  and 
financial  responsibility  of  the  ])erson  who  vouches  for  it.  If  he  is 
deceived  he  has  suffered  a  loss  of  his  cash  or  goods  thiough  his  own 
mistake.  His  own  credulity  or  recklessness,  or  misplaced  confidence 
was  the  sole  cause  of  tlie  loss.  Why  should  he  he  ])erniitle(l  to  shift 
the  loss  due  to  his  own  fault  in  assuming  the  risk,  upon  the  drawee, 
simply  becau.se  of  the  accidental  circumstance  that  the  drawee  after- 
wards failed  to  detect  the  forgery  when  the  check  was  presented? 
Our  views  find  much  support  in  many  of  the  crisec  v.'hieh  still  cling 
more  or  less  tenaciously  to  the  v""']\iov.c('  rule,  i-olalilv  the  followinsr: 
Bank  v.  Bank,  151  Mass.  280;  Ellis  d-  Morton  v.  Trust  Co.,  4  Ohio  St. 


n,]  ACCEPTOR.  409 

628;  Bank  v.  Banh,  88  Tenn.  299;  Bank  v.  Bingham,  30  Wash.  484; 
Bank  v.  Ba?ik,  22  Xeb.  769;  Bank  v.  Ba«A-,  4  Ind.  App.  355.  The 
case  of  McKleroy  &  Bradford  v.  Southern  Bank,  14  La.  Ann.  458,  74 
Am.  Dec.  438,  directly  supports  our  views,  and  we  are  gratified  to 
note  that  our  views  are  in  accord  with  those  generally  advocated  by 
the  text-writers.  We,  therefore,  hold  that  drawees  of  checks  and 
drafts  are  not  to  be  excepted  from  the  general  rule  which  permits  the 
recovery  of  money  paid  by  mistake.  We  hold  that  a  drawee  wlio  has 
by  mistake  paid  a  spurious  check  or  draft  may  recover  the  money 
paid  unless  the  party  receiving  the  money  has  been  misled  to  his 
prejudice  by  the  drawee's  mistake.  If  any  such  facts  exist,  they  are 
best  known  to  the  defendant,  and  it  is  his  duty  to  prove  them.  The 
complaint  discloses  prima  facie  cause  of  action  by  alleging  the  pay- 
ment by  mistake. 

The  order  appealed  from  must  be  reversed,  and  the  demurrer  overj. 
ruled.    All  concur.^  ~x 


§112      STATE   BANK   OF   CTTTrAOO   r.   FTT?ST   NATION'AL 

BAXK    OF   OMATTA. 

127  Northwestern  (Nebraska)  244.  —  1010. 

Root,  J.  Thi.s  is  an  action  hy  the  drawee  of  a  forged  draft  to 
recover  from  a  holder  thereof  money  paid  to  satisfy  that  instrutnent. 
The  plaint iir  j)rcvail('(l  upon  the  defendant's  demurrer  to  the  })etition. 
The  ilefendant  ajjpcals.    — - 

The  j)laintin'  alleges  in  its  petition  that  the  defendant,  through  its 
agent,  the  Continental  Xational  Bank  of  Chicago,  on  November  29, 
1907,  caused  to  be  presented  to  the  plaintiff,  through  the  Chicago 
Clearing  IIou.se,  a  certain  draft  of  which  the  following  is  a  copy: 

fSOO.  THE  GERMAN  RANK.  No.  9,638. 

Ei'RKKA,  South  Dakota,  Nov.  23.  1007. 

Pay   to  tho  ordfT  of  Ch.Ts.   Vitorna,  ."fHOO.OO,  pipht  hnndrod    ciollara. 

E.  Mooo,  .4.  Cashier. 
To  the  State  I'.aiik  of  Cliifa^io,  (iiica-;!),  111. 

The  instrument  was  indorsed:  "('has.  Viterna.  Pay  to  the  order 
of  Continental  National  Hank,  Chicago,  III.,  First  National  Rank, 
Omaha,  Nebr.     L.  L.  Kountze,  Cashier." 

The  [(laintifT  further  alleges  that,  believing  the  instrument  to  bo 
the  genuine  draft  of  said  1'^.  Moog,  it  accepted  the  same  and  paid 
it  to  the  defendant  through  the  Cf)ntin(!ntal  .National  Baid< ;  "that 
the  defendant,  prior  to  the  presentation,  aceej)tance  and  payment  of 
said  draft  as  hereinbefore  alleged,  paid  to  Charles  Viterna  named  in 
said  draft  as  payee,  knowing  him  to  be  said  Viterna,  eight  hundred 


'  'Ihis   ra'<c»    in   roportorl    in    in   ],.    N.    S.    40.   with    exhaust ive    noto   ontitled 
'  Right  of  drawp«!  of  forged  check  or  draft  to  recover  money  paid  thereon." —  C. 


110  LIAIUMTY    OK    rAKTIKS.  [aRT.    VI. 

dollars  ($S00),  the  amount  named  in  said  draft,  without  any  knowl- 
edge or  information  as  to  whether  said  draft  would  be  accepted  or 
paid  bv  the  plaintiff,  and  without  taking  any  steps  to  ascertain 
whether  or  not  said  draft  was  a  genuine  draft  of  the  above-named 
E.  Moog,  assistant  eashi(>r  of  the  German  Bank  of  Eureka,  South 
Dakota."  Tlie  plaintiff  also  alleges  the  draft  was  forged,  but  its  true 
character  did  not  become  known  until  December  12,  1907.  Imme- 
diately thereafter  the  plaintiff  advised  the  defendant  of  said  fact  and 
demanded  repayment  of  the  $800,  which  demand  was  refused.  Counsel 
for  the  respective  litigants  stated  at  the  bar  that  the  negotiable  instru- 
ments statute  does  not  control  this  case,  and  we  shall  treat  their 
statement  as  correct  for  the  purposes  of  this  case.^ 

2  Hut  see  Xalional  Bank  of  Rolla  v.  First  National  Bank  of  Salem,  125 
Soiitliwestern    (Sprinjifield  Ct.  A\)\k,  Mo.)    513.     At  page  516.  Gkay,  J.,  said: 

"  From  a  review  of  these  authorities,  we  are  satisfied  that  leaving  out  of 
view  our  Negotiable  Instrument  Act  of  1905  (Laws  1905,  p.  243  (Ann.  St. 
1906,  §§  463 — 1  to  463 — 197]),  the  great  weight  of  the  modern  cases  sus- 
tains the  theory  that  the  payee  [drawee?]  cannot  recover  from  the  purchaser 
without  basing  liis  action  upon  the  negligence  of  the  latter.  In  Gcrmania  Bank 
V.  linutrU.  sitpra.  the  demurrer  to  the  petition  was  sustained  because  there  was 
no  allegation  of  negligence  on  the  part  of  the  defendant.     .     .     . 

"  In  addition  to  the  autliorities,  the  Negotiable  Instrument  Act  of  1905  con- 
tains the  following  sections: 

"'Section  62.  [N.  V.,  §  112.]  The  acceptor,  by  accepting  the  instrument 
engages  that  he  will  pay  it  according  to  the  tenor  of  its  acceptance;  and 
admits:  The  existence  of  the  drawer,  the  genuineness  of  his  signature,  and 
his  capacity  and  authority  to  draw  the  instrument;  and  the  existence  of  the 
payee  and  his  capacity  to  indorse.' 

"  '  Section  188.  [N.  Y.,  §  324.]  Where  the  holder  of  a  check  procures  it  to 
be  accepted  or  certified,  the  drawer  and  all  indorsers  are  discharged  from 
liability  thereon.' 

"Judge  Broaddls,  in  Bank  v.  Bank,  109  Mo.  App.  665,  supra,  in  answer  to 
the  argument  that  absolute  payment  was  not  an  acceptance,  said:  'An  accept- 
ance binds  the  acceptor  to  pay  the  bill,  and  he  cannot  be  heard  to  deny  that 
he  has  f\inds  in  his  hands  for  the  purpose.  A  payment  of  the  bill  is  more  than 
an  acceptance,  for  the  one  is  an  obligation  to  pay;  the  other  a  discharge  of  the 
indebtedness  represented  by  such  bill.  If  the  one  concludes  the  drawee  it  is 
ineonceivable  why  the  other  would  not.'  We  fully  concur  in  the  views  of 
.ludge  Broaddus.  as  quoted  above.  If  a  mere  promise  to  pay  a  check  is  binding 
on  the  bank,  why  should  the  absolute  payment  of  the  check  not  have  the  same 
effect?  The  adoption  in  this  and  other  states  of  our  Negotiable  Instrument 
Law  was  for  the  purpose  of  liaving  in  the  statutory  Inws  of  the  states  a 
uniform  law  in  regard  to  commercial  paper.  A  confusion  was  known  to  exist 
on  many  of  the  everyday  transactions  concerning  such  paper,  and  it  may  be 
said  that  there  was  no  question  upon  which  the  courts  were  more  in  conflict 
than  upon  the  question  involved  in  this  case.  After  a  careful  examination  of 
the  new  law.  we  are  inclined  to  believe  that  it  was  intended  to  adopt  the  law 
as  declared  in  Prirc  v.  Ncnl.  aupra." 

Followed  in  Sational  Bank  of  Commerce  v.  Afechanics'  Am.  Nat.  Bank,  127 
Southwestern    (St.   Louis   (  t.    App.,  Mo.)    429. 

These  two  cases  are  criticised  in  70  Central  Law  Journal  (June  10,  1910) 
417-418 


n.]  ACCEPTOR.  411 

1.  The  great  weight  of  authority  sustains  the  proposition  that  as 
between  the  drawee  and  a  good  faith  holder  of  a  draft,  the  drawee 
bank  is  to  be  deemed  the  place  of  final  settlement,  where  all  prior 
mistakes  and  forgeries  shall  be  corrected  and  settled  once  for  all ;  and 
if  not  noticed  and  payment  is  made,  the  money  cannot  be  recovered 
back.  Price  v.  Neal,  3  Burrows,  1355.  Germania  Bank  v.  Bontell, 
60  Minn.  189.  The  cases  are  annotated  in  a  note  to  First  National 
Bank  v.  Ban],-  of  Wi/ndmere,  15  N.  D.  290,  10  L.  R.  A.  (N.  S.)  49, 
125  Am.  St.  Rep.  5<S8  [reported  herein  at  p.  403.]  Courts  and  text- 
writers  generally  recognize  that  the  preponderance  of  authority  is  in 
favor  of  the  rule,  but  it  seems  to  conflict  with  a  well-established 
principle  of  law  that  money  paid  by  mistake  may  be  recovered  back, 
and  has  not  been  accepted  without  qualification  by  all  of  the  Ameri- 
can courts.  North  Dakota  refuses  to  follow  Price  v.  Neal,  supra,  and 
has  held  that  the  principles  of  equity  should  control  a  transaction 


The  court  in  A^c^  Bank  of  Rolla  v.  First  Nat.  Bank  of  Salem,  supra,  stated 
that  "  In  support  of  our  views,  we  are  sustained  by  the  late  case  of  Title 
Guarantee  rf  Trust  Co.  v.  Haven,  126  App.  Div.  (N.  Y.)  802."  While  this 
latter  case  was  reversed  in  196  N.  Y.  487,  nevertheless  the  N.  Y.  Court  of 
Appeals,  in  a  diotum.  also  expressed  the  opinion  that  section  112  of  the  N.  Y. 
Nepotiablc  Instruments  Law  codified  the  rule  enunciated  in  Price  v.  Neal. 
Wii.i.ARi)  Karti.ett.  J.,  at  p.  492,  said: 

"  Both  the  referee  and  the  judr;e  who  wrote  the  prevailing  opinion  below 
thoupht  that  the  case  was  controlled  by  section  112  of  the  Nefjotiable  Instru 
ment^  Law  which  provides  that  the  acceptor  of  a  negotiable  instrument  admits 
'  the  existence  of  a  drawer,  the  genuineness  of  his  signature,  and  his  capacity 
and  authority  to  draw  the  instrument.'  This  enactment  is  merely  declaratory 
of  the  common  law.  The  leading  English  case  in  which  it  is  enunciated  is 
I'rire  v.  Neal  (3  Burrow,  1354),  decided  by  Lord  Man.sftfi.d  in  1762.  The 
leading  New  York  case  to  the  same  effect  is  National  Park  Bank  v.  Ninth 
National  Bank  (46  N.  Y.  77).  But  the  doctrine  of  these  decisions,  now  found 
in  the  rule  formulated  by  section  112  of  the  Negotiable  Instruments  Law, 
applies  only  in  favor  of  one  who  is  a  holder  for  valiw  of  the  instrument  which 
turns  otit  to  have  been  forged.  Thus,  Lord  MANSFiKin  in  Price  v.  Neal 
(nupra)  dwelt  iipon  the  fact  that  the  bill  of  exchange  there  in  (piestion  had 
been  indorsed  to  the  defendant  '  for  a  fair  and  valuable  consideratioti  which 
he  had  bona  fulr  paid;'  antl  in  the  leading  New  ^'ork  case  (Nntionnl  Park 
Bank  v.  Ninth  Nntinnal  Bank,  .tiiprn)  it  appeared  that  the  draft  had  been  dis- 
counted by  the  Livingston  National  Hank  and  indorsed  to  the  defendant  which 
was  a  bona  pdr  holder.  The  rule,  therefore,  that  he  who  accei)ts  a  negotiable. 
in»trunirnt  to  wbirli  the  drawer's  nam**  i**  forged  is  bound  by  the  act  and  c.in 
neither  repiuliate  the  acreptance  nor  recover  the  money  paid,  has  no  applica- 
tion in  iK'hnlf  of  rmo  who  has  acquired  the  paper  in  the  absence  of  any  eon- 
sideration  whatever  therefor  either  present  or  past.  Such  was  the  ease  here 
according  to  the  finding  f)f  the  referee.  So  far  as  appears,  the  check  of  the 
Oreen  estate,  which  provfd  in  be  forged,  was  not  given  in  paymrnt  of  any 
existing  or  nnteendont  inrlebtedness  either  on  the  part  of  that  estate  or  even 
of  the  forger.  Vnr  these  reasons  we  agree  with  the  learned  judge  who  wrote 
for  the  minority  in  the  Appellate  Division,  saying:  'Section  112  of  the 
Negotiablo  In'-tnimrnts  Law  upon  which  the  referee  based  his  decision  has 
nothing  to  do  with  the  question.'  "  —  C, 


112  LIABILITY    OK    rAKTIKS.  [aUT.    VI. 

Uotwoen  tlio  ilrawoo  aiul  a  hoklcr  of  a  forged  ilieck  or  draft.  I'^irsi 
yational  Ihinli  v.  Jiaiili-  of  Wi/iKlnwrc,  suiira.  The  position  assumed 
1)V  Xortli  Dakota  is  in  liannony  \vitl>  su.i^iJit'stioiis  niado  by  many  text- 
writers  l)ut,  so  far  as  we  are  aOvised,  is  not  sustained  by  the  opinion 
of  any  other  court.  Intci-iiK-diate  the  cases  adhering  to  tlie  ancient 
rule,  and  Fin^i  .Xdlional  Hnn/r  v.  Haul,-  of  Wi/ndinerc,  one  may  find 
eases  (]ualifyinii  th(>  lu'oad  rule  pronnilgated  in  Price  v.  Neal,  supra. 
The  Massachusetts  Supreme  Court  holds  that  the  failure  of  the 
drawee  to  detect  the  foi-gery  at  the  time  the  draft  is  presented  and 
])aid  will  not  preclude  it  from  recovering  the  money  from  a  holder 
"  who  took  the  check  under  circumstances  of  suspicion  without  proper 
])recaution,  or  whose  conduct  has  been  such  as  to  mislead  the  drawee 
or  induce  him  to  pay  the  check  without  the  usual  security  against 
fraud."  Danvers  Bank  v.  Salem  Bank,  151  Mass.  380,  283.  In  the 
cited  case  the  cashing  bank  received  a  check  from  an  unknown  person 
]>ayable  to  bearer  and  without  requiring  him  to  identify  himself, 
although  there  was  a  local  custom  requiring  identification  in  such 
cases.  It  was  held  that  the  negligence  of  the  cashing  bank  lulled  the 
drawee  into  a  false  sense  of  security,  and  the  latter  could  recover  back 
the  money  paid.  In  National  Bank  of  North  America  v.  Bangs,  106 
^lass.  441,  444,  the  court  holds  the  drawee  should  be  permitted  to 
recover  if  the  party  receiving  the  money  in  any  manner  contributed 
to  the  success  of  the  fraud,  or  to  the  mistake  of  fact  under  which  the 
payment  was  made. 

The  plaintiff  relies  upon  our  decision  in  First  National  Bank  of 
Orleans  v.  Stale  Bank  of  Alma,  22  Xeb.  769.  That  case  was  decided 
upon  a  statement  of  facts  to  the  effect  that  B.  R.  Claypool  main- 
tained a  deposit  in  each  of  said  banks.  A  stranger  presented  to  the 
Orleans  bank  a  check  upon  the  Alma  bank  bearing  the  name  of 
Claypool  as  drawer,  and  payable  to  A.  J.  Oype,  or  bearer.  The 
Orleans  cashier  compared  the  signature  to  the  check  with  Claypool's 
genuine  signature  upon  the  bank's  book  and  without  requiring  the 
holder  to  identify  himself  or  to  account  for  the  manner  in  which  he 
secured  possession  of  the  check,  paid  it.  In  due  course,  through  a 
bank  wherein  the  litigants  each  maintained  a  deposit,  the  check  was 
paid  and  charged  to  the  account  of  the  Alma  bank  and  later  was  de- 
livered to  Claypool,  who  denounced  the  instrument  as  a  forgery.  We 
held  that  the  drawee  should  recover  the  money  paid.  Some  remarks 
in  the  argument  of  our  late  Chief  Justice,  taken  apart  from  the  facts 
in  the  case,  lend  color  to  the  plaintiff's  argument  in  the  instant  one. 
At  the  bar  it  was  argued  that  since  the  check  on  the  Alma  hank  was 
pavable  to  bearer,  identification  of  the  holder  was  an  immaterial  fact, 
and  the  entire  argument  in  the  opinion  should  be  considered  with 
relation  to  the  obligation  of  the  cashing  bank  to  ascertain  at  its  peril 
that  the  check  was  a  genuine  instrument.  The  principle  underlying 
the  opinion  is  that  the  cashing  bank  was  negligent  in  not  availing 


n.]  ACCEPTOR.  413 

itself  of  all  means  at  its  command  to  ascertain  whether  the  check  was 
genuine.  Business  men  and  courts  alike  recognize  that  ordinary  pru- 
dence forbids  the  purchase  of  a  check  from  a  stranger,  regardless  of 
whether  the  paper  was  payable  to  order  or  bearer.  The  instrument 
considered  in  the  Alma  case  was  an  ordinary  check  not  designed  for 
circulation  but  for  immediate  presentment.  First  National  Bank  of 
Wymore  v.  Miller,  37  Neb.  500.  As  stated  by  Judge  Maxwell,  the 
Alma  bank  did  not  know  but  that  Claypool  had  been  present  when  the 
check  was  presented  by  the  holder  to  the  Orleans  bank,  and  had  the 
cashing  bank  made  inquiries  concerning  the  identity  of  the  holder  or 
the  manner  in  which  he  became  possessed  of  the  instrument,  the 
probabilities  are  that  he  would  not  have  withstood  the  ordeal,  but  the 
fraud  would  have  been  discovered.  Tn  Germania  Bank  v.  Boutell, 
supra,  the  duty  of  the  cashing  bank  to  require  the  holder  to  identify 
himself  is  recognized.  The  rule  stated  in  the  Orleans  case  has  been 
adopted  in  Massachusetts,  in  People's  Bank  v.  Franhlin  Bank,  88 
Tenn.  299;  Canadian  Bank  of  Commerce  v.  Bingham,  30  Wash.  484, 
and  has  been  recognized  in  First  National  Bank  of  MarshaUtown  v. 
Marshnlltown  State  Bank,  107  Iowa,  327. 

In  Ellis  V.  Ohio,  L.  I.  cO  T.  Co.,  A  Ohio  St.  628,  64  Am.  Dec.  610,  a 
local  custom  obtained  among  the  banks  of  Cincinnati  requiring  the 
cashing  bank,  l)efare  purchasing  a  check  presented  by  a  stranger  and 
drawn  upon  another  bank,  to  make  careful  in(juiry  concerning  his 
identity  and  to  ascertain  whether  the  paper  was  genuine  and  the 
holder  was  the  owner  thereof.  The  opinion  turns  upon  the  holder's 
negligence  in  failing  to  comply  with  this  local  custom. 

In  the  case  at  l)ar,  Viterna  was  payee  of  the  forged  draft  and  was 
known  to  the  defendant  at  the  time  it  purchased  the  bill.  The  draft 
purports  to  be  a  foreign  l)ill  of  exchange,  an  instrument  that  for  many 
purposes  is  intended  to  circulate  as  money  for  a  limited  period  of  time; 
tbo  forgery  consisted  in  forging  tho  name  of  the  drawer  and  luit  in 
raising  the  amount  of  a  genuine  bill,  and  the  drawer  maintains  its 
place  of  business  in  a  neighboring  state.  The  plainlilT  does  not 
plead  that  any  suspicious  circumstances  '^iirroiifKlcd  ll)e  purchase  of 
the  bill  by  the  defendant,  that  X'iterna  was  tiol  a  rn.in  of  f;iir  char- 
acter or  so  situated  that  the  possession  and  presentation  hv  him  of  a 
fliaft  for  .$S(i()  would  excite  suspicion  in  the  mind  of  any  [)rudent 
banker,  nor  does  the  [daintitT  charge  that  at  any  time  prior  to  the 
presentation  of  said  instrument,  the  defj-ndanl  ac(|iiircd  Jiny  knowl- 
edge or  entertained  a  susj)ici(>n  concerning  (he  forgery  which  it  with- 
held from  the  plaintiff.  Th"  plainlilT  riocs  charge  that  the  defendant 
did  not  take  any  steps  to  ascertain  whether  the  draft  was  genuine  or 
would  be  paid,  but  the  statement,  admittcfl  by  the  demurrer  to  be 
true,  must  be  taken  into  consideration  in  connection  with  the  fact 
that  the  drawer  was  in  South  I)akf»ia,  the  drawee  in  Chicago,  and  the 
payee  was  known  to  the  defendant,  a  resident  of  Nebraska.     It  is  not 


414  MAllIMTY    OK    I'AHTIES.  [arT.    VI. 

pleadod  tliat  there  was  an  agret-niejit  hetAveen  the  litigants  that  drafts 
drawn  on  each  other  should  not  be  cashed  if  presented  for  sale  by  a 
payee  known  to  the  cashing  bank,  unless  it  first  made  inquiry  concern- 
ing the  instrument,  or  that  any  such  custom  obtained  in  Omaha  or 
Chicago,  or  that  the  defendant  liad  any  means  at  hand  whereby  it 
I'ould  have  ascertained  the  genuineness  of  Moog's  signature.  In  fact, 
so  skillfully  was  that  signature  forged  that  it  deceived  the  drawee  so 
that  had  Viterna  been  acquainted  with  the  paying  teller  or  other 
emy)loye  or  officer  charged  by  the  plaintiff  with  the  duty  of  identifying 
signatures  to  its  customers'  drafts,  it  is  more  than  probable  that  it 
would  have  cashed  the  draft  if  the  payee  had  presented  the  instru- 
ment for  payment. 

In  the  Orleans  case  the  cashing  bank  had  the  drawer's  genuine 
signature  to  compare  with  the  name  attached  to  the  check,  and  it  also 
had  the  power  to  demand  that  the  holder  should  identify  himself;  it 
availed  itself  of  but  one  safeguard  against  fraud  and  we  are  entirely 
satisfied  with  our  opinion  holding  that  under  the  circumstances  the 
Orleans  bank  was  guilty  of  negligence.  But  in  the  case  at  bar  it  is 
not  alleged  that  the  defendant  had  any  means  other  than  the  identity 
of  the  payee  to  prove  the  genuineness  of  the  draft.  Until  the  legis- 
lature shall  provide  that  a  bank  is  guilty  of  negligence  in  purchasing 
a  foreign  draft,  fair  on  its  face,  from  a  known  payee,  unless  it  first 
communicates  with  the  drawer  and  the  drawee  to  learn  whether  the 
draft  is  genuine,  we  do  not  feel  justified  in  extending  the  rule  an- 
nounced i-n  the  Orleans  case,  supra.  Drafts  aggregating  many  billions 
of  dollars  in  value  have  been  issued,  negotiated,  accepted,  and  paid  by 
merchants  and  bankers  in  reliance  upon  the  rule  announced  in  Price 
V.  NeaJ,  supra,  and  to  the  general  satisfaction  of  the  commercial 
world.  So  far  as  we  are  advised,  in  but  one  state  of  the  Union, 
Pennsylvania,  has  the  legislature  modified  that  rule.^  MercBants  and 
bankers  in  the  great  centers  of  the  English  speaking  world,  have  not 
moved  the  legislatures  to  modify  this  principle  of  the  law  merchant, 
and  the  courts  should  hesitate  before  substituting  the  philosophy  of 
logicians  for  a  practical  rule  evolved  from  the  necessities  of  commerce. 

The  plaintiff  also  cites  PHrst  National  Bank  of  Crawfordsville  v. 
Indiana  National  Bank,  4  Ind.  App.  355,  but  it  should  not  be  seriously 
considered  as  an  authority  in  the  case  at  bar  because  it  refers  to  a 
forged  school  order  which  the  learned  judge  writing  that  opinion 
states,  at  page  363  of  1  Ind.  App.,  is  not  negotiable  according  to  the 
law  merchant.  The  court  also  holds  the  indorsement  "  for  collection  " 
by  the  holder  of  the  order  tended  to  divert  scrutiny  by  the  drawee  of 
the  drawer's  signature,  because  such  an  indorsement  would  indicate 
the  instrument  was  not  circulating  as  negotiable  paper. 

3  For  thp  terms  of  this  statute  and  the  construction  placed  upon  it  by  the 
Pennsylvania  courts,  see  Iron  City  Nat.  Bank  v.  Fort  Pitt  Nat.  BoAik,  169 
Pa,  46. —  C. 


II.]  ACCEPTOR.  415 

The  plaintifi  further  cites  First  National  Bank  of  Chicago  v.  North- 
western, N.  B.  of  C,  40  111.  App.  640.  This  case  was  appealed  to 
the  Supreme  Court  of  that  state  and  is  reported  in  152  111.  296.  In 
that  case  checks  purporting  to  have  been  drawn  by  the  Central  Union 
Telephone  Company  upon  the  Northwestern  National  Bank  of  Chic- 
ago, payable  in  four  instances  to  "  F.  P.  Ross,  Manager  "  and  in  one 
case  to  "  C.  H.  Wilson,  A.  G.  Supt."  were  received  by  the  First  Na- 
tional Bank  through  the  clearing  house.  The  proof  established  that 
the  payees  were  employes  of  the  telephone  company  but  were  not  en- 
titled to  the  checks,  knew  nothing  about  them,  and  their  indorsements, 
as  well  as  the  signature  of  the  drawer,  had  been  forged.  The  court 
holds  that  while  the  drawee  by  paying  a  draft  is  estopped  from  there- 
after denying  the  drawer's  signature,  it  does  not  warrant  the  signa- 
ture of  any  indorser,  but  the  indorser  warrants  the  genuineness  of  all 
preceding  indorsements;  that  the  parties  stood  as  though  the  bills 
were  genuine  but  the  indorsements  of  the  payees  forged,  and  the 
drawee  for  that  reason  could  recover  the  money  paid  by  it  to  the 
holder  of  the  paper.  The  opinion  is  sound  but  has  no  application  to 
the  instant  case,  because  there  were  no  forged  indorsements  upon  the 
bill  in  question. 

Ford  V.  People's  Bank,  74  S.  C.  180,  is  cited  by  the  plaintiff.  In 
that  case  the  plaintiff's  drawee  paid  a  forged  draft  and  charged  in 
his  petition  to  recover  back  the  money :  *'  That  the  plaintiffs  paid 
the  said  draft  upon  presentation,  upon  the  faith  and  credit  of  the 
indorsement  of  the  said  defendant."  A  general  demurrer  to  the  peti- 
tion was  sustained  and  the  Supreme  Court  of  that  state  holds  that  » 
general  indorsement  of  a  forged  bill  by  the  holder  thereof  is  a 
representation  that  the  drawer's  signature  is  genuine  upon  which  the 
drawee  may  rely,  and,  in  case  the  instrument  is  forged,  may  recover 
back  money  paid  the  holder.*     The  opinion  is  against  the  weight  of 

<  In  the  case  just  rpfnrred  to,  Jones.  J.,  at  p.  1R4.  said:  "The  question 
whether  the  demurrer  was  properly  sustained  dei)enfis  upon  the  meaning  to  be 
attached  to  the  alleged  presentation  and  indorsement  of  the  draft  liy  the 
defenrlnnt.  Does  snrh  presentation  and  indorsement  to  the  drawee  represent 
that  the  signature  of  the  rirawer  is  genuine,  or  does  it  merely  represent  that 
the  instrument  is  genuine  as  it  purports  to  he  in  aP  respects,  except  as  (o  the 
signature  of  the  drawer,  wliich  the  drawee  is  presume*!  to  know?  Mr.  Daniel, 
in  his  work  on  negotiahle  instruments,  takes  the  view  that  an  indorse  .lent 
engages  that  the  hill  f)r  note  is  genuine.  Volume  1.  §§  €>T1.  073;  volume  2, 
5  1361.  The  case  of  drrmnvin  linnk  v.  ftnutrH.  fin  Minn.  180.  takes  the  view 
that  an  indorsement  hy  a  holder  other  than  the  original  ftayee  constitutes  no 
representation  f>r  guarantee  to  the  drawe<*  that  tiu'  sigiuiture  of  the  drawer 
in  genuine,  hut  wr  think  that  the  wc-ight  of  reason  and  authority  is  against  that 
view,  at  least  to  the  extent  that  an  tinrestricted  indorsement  is  calculahle  to 
minlead  the  drawee  into  a  helief  that  the  paper  was  what  it  purported  to  be. 
People'n  Bank  v.  Franklin  Rnnk.  HH  Tenn.  2!M» ;  Knnk  nf  Panvrrs  v.  Ifnnk  of 
ffalrm,  ]f>]  MasH.  2Kr, ;  f-'irst  Satifinnl  Hunk  v.  Firal  Sntinnnl  Hank.  4  Ind. 
App.  355;   Uoorfj*  rf  Malnnc  v.  Culonif  Bank.  114  fJa.  fi83.    The  rase  of  Nniional 


4U»  1-1  Miii.riY  ov  p\i!iii;s.  Iakt.  vi. 

nuthorily  and  is  not  siipportiMl  liy  any  of  the  cases  cited  by  that  court 
upon  this  ])oiul,  o\ioi)t  the  case  ol'  Woods  d'  M alone  v,  Colonij  Hank, 
111  Ga.  083,  ami  the  opinion  Jiled  in  the  hist-nanicd  case  ciics  Na- 
tional Hank  V.  Hangs,  supra,  in  siip])ort  oi'  llic  ])rin(dple  announced  l)y 
it  and  hitcr  by  tlio  South  Carolina  court. 

In  the  ^lassai'liusctts  case  the  cashini;  hank  was  nanicd  as  i)ayee 
in  a  forircd  check  payable  to  its  oi-ilci',  so  tlic  instrument  could  not 
become  current  except  by  the  bank's  in(h)rsement.  The  court  holds 
that  the  payee  was  ncfjlipfent  in  taking  the  check  from  a  stranger 
without  proof  of  his  identity,  and  by  indorsing  the  check,  gave  it 
currency  and  standing.  In  the  Ceorgia  ease  the  di-aft  was  payal)le 
to  bearer,  and  the  opinion  is  sound,  based  npon  the  negligence  of  the 
cashing  bank  in  not  requiring  the  party  from  whom  it  purchased  the 
instrument  to  identify  himself,  but  so  far  as  it  holds  u))on  the  re- 
ported facts,  that  the  indorsement  by  the  holder  was  a  warranty  to 
the  drawee  that  the  drawer's  signature  was  genuine,  it  is  unsound  in 
principle  and  will  not  be  accepted  as  a  correct  statement  of  the  law. 

First  Xational  Bank  v.  Wyndnicre,  cited  by  ])laintiif,  supra,  docrv 
sustain  its  argument,  but  we  are  of  opinion  that  the  Orleans  case, 
supra,  commits  this  court  to  the  doctrine  that  (he  drawee  must  estab- 
lish tiie  cashing  bank's  negligence,  or  bad  faith,  to  justify  a  recovery. 
Since  the  drawee  should  only  recover  in  this  suit  in  case  the  cashing 
bank  was  negligent  or  has  acted  in  bad  faith,  the  Inirden  is  u])on  the 
former  to  ])lcad  such  negligence  or  niaki  fides.  The  pleader  in  the 
instant  case  in  our  opinion  has  not  stated  in  liis  petition  facts  sufli- 
cient  to  establish  that  the  defendant  was  negligent,  or  that  it  acted  ii 
bad  faith  in  purchasing  from  \'iterna  the  forged  draft  in  question. 


Bk.  Belmont  v.  National  Bk.  Barnesvillc.  58  Oliio  St.  207,  wliile  iiotciitig  tliat 
a  rf'strictrd  indorsement  ;)s  '  for  collection  '  I'.as  not  Hint  etreet,  ;i|)])!U-eiitly 
concedps  that  an  iinrc^trieted   indorsement  does  iiave  tlmt  cllVrt," 

This  case  is  reported  in  7  A.  &  E.  Ann.  Cas.  744,  with  iintc  entitled  "  Unre- 
stricted indorsemnt  of  draft  or  clieck  as  warranty  that  instrument  is 
genuine." 

.\s  to  the  hearini;  of  tlie  Ncgotiaide  Tnslruments  Law  upon  the  doctrine  of 
Fnrft  V.  P'oplr's  Bank,  .tupra,  attention  i«  called  to  tlie  followinc;  eonmient  of 
Mr.  Crawford  on  section  IHi  of  the  New  ^■ork  Act,  provifling  that  "Every 
indorser  who  indorses  witliout  (jualilication,  warrants  to  all  .suli-e(|ueiit  holders 
in  due  course."  etc.  On  page  !)0  of  the  third  edition  of  his  work  on  the 
Negntiaide  Instruments  T.aw.  ttie  draftsmin  of  tlic  Act  sny^:  "Under  this 
section,  as  under  ttie  rule  of  the  law  merchant,  the  warranty  is  in  favor  of 
sulmrqiirnt  holders  only,  and  since  the  adojition  of  the  statute,  as  well  as 
before,  the  iiidorser  does  not  warrant  to  the  drawee  that  tlic  :~i!,'nature  of  the 
drawer  is  genuine.  Farmers'  and  Merchants'  Havk  v.  nmik  of  I'ulhrrfnrd ,  11;! 
Tcnn.  64.  70-71.  Thus,  if  a  check  purporting  to  he  drawn  by  .\.  should  be 
indorsed  by  B.  and  cashed  by  ('.,  the  indorsement  of  H.  would  be  a  warranty 
in  favor  of  f'.,  but  not  in  favor  of  the  bank  on  which  the  check  is  drawn." 

But  see  Williamshinfjh  Trust  Co.  v.  Turn  Sudcn,  120  App.  Div.  (N.  Y.) 
518.  reported   herein  at  j>.  417.  —  C. 


ri.]  ACCEPTOR.  417 

Tlie  judgment  of  the  District  Court,  therefore,  is  reversed,  and  tlie 
cause  remanded  for  further  proceedings.*^ 


§  112     WILLIAMSBURGH  TRUST  COMPANY  v.  TUM  SUDEN. 
120  Appellate  Division   (New  York)   518.  —  1907. 

Appeal  by  the  plaintiff,  tlie  Williamsburgh  Trust  Company,  from 
a  judgment  of  the  Municipal  Court  of  the  city  of  New  York,  borough 
of  Brooklyn,  in  favor  of  the  defendant,  rendered  on  the  10th  day 
of  January,  1907. 

Woodward,  J. : 

This  is  an  action  to  recover  money  paid  by  mistake  —  the  amount 
of  four  certain  checks  payable  to  bearer  which  were  forgeries,  pur- 
porting to  be  signed  by  L.  F.  Rand  and  indorsed  by  Peter  R.  Tum 
Suden.  The  checks  with  Tum  Suden's  single  and  unqualified  indorse- 
ment were  presented  and  paid  to  him  by  the  plaintiff.  It  was  shown 
at  the  trial  that  Tum  Suden  had  been  in  the  habit  of  cashing  checks 
for  Rand,  and  that  the  forged  checks  were  cashed,  in  part,  for  a 
maid  servant  in  the  employ  of  Rand,  the  other  part  of  their  face 
value  being  retained  by  Turn  Suden  for  groceries  previously  furnished 
to  Rand.  As  the  checks  were  negotiable  without  indorsement,  it  is 
evident  that  'J'uin  Suden's  indorsement  would  divert  the  trust  com- 
pany from  that  careful  scrutiny  which  otherwise  it  would  have  been 
likely  to  give  them.  It  was  Turn  Sudeu  who  negotiated  the  checks 
and  put  them  inio  circulation,  and  as  by  his  uncjiialified  indorsement 
he  facilitated  the  forgery  his  position  is  not  that  of  an  indorsee  who 
holds  a  forged  check  sanctioned  by  a  prior  indorsement. 

If  Tum  Suden  suffered  loss  or  damage  by  cashing  the  checks,  it 
is  evident  that  such  loss  was  sustained  before  the  checks  were  honored 
by  tlie  trust  coni]»any.  T  fail  to  see,  thorcforo,  how  the  trust  company, 
when  it  paid  the  checks,  can  be  held  responsible  for  a  loss  previously 
sustained.  As  there  is  no  proof  that  the  mistake  of  the  trust  com- 
f>nny  has  been  to  the  prcjndicr  of  the  respondent,  it  is  but  right  that 
If  sliould   refund   the  money  had   and   received. 

The  evidence  shows  that  Tnin  Suden,  for  several  months  jtrior  lo 
liie  linie  of  iUv^v  forgeries,  had  been  aeeustouiecl  to  ensli  cheeks  for 
li'aiid.  It  follows,  therefore,  thai  Turn  SiidrMi.  who  had  had  every 
o|iporlnnity  to  become  acquainted  with  Ifand's  siirnature,  has  no  right 


•'•  P'or  ji  laff  rust'  iillirniifiy  in  piTHTuI  tlic  lioctriin'  <tf  rricr.  v.  Xral.  hop  Hank 
of  WillianiHtnt  v.  Mrlhnrrll  Counly  Itinik,  fiO  S.  K.  ( W.  V.n.  IfMI't)  701.  where 
ttip  wl)o|p  .mihjort  ii  oxli:iii-f ivoly  coii'^iflfrcil.  atnl  flic  nut*-  to  fliin  ciho  is  40 
Am.  Law  ^c^.,  N.  S..  p.  4.18  (April.  1010). 

See  also  fnitnl  Slntrn  v.  Sat.  Hrrh.  Hunk  of  I'rnrulcncc,  '214  IJ.  S.  302,  and 
note  in  8  .Midi.  Law  UfV.   140   ( Ucwnibcr,  1!J0«).  — C. 
NEOr>T.   lNSTntTI<KNT-»  —  27 


418  LIAIULITY    OF    PAUTIKS.  [aRT.    VI. 

to  sliift  ilie  loss  resulting  from  his  own  fauK,  i.,(  rsiy;lit  or  negligence, 
upon  another.  On  the  other  hand,  it  was  but  natural  for  the  bank 
to  assume  that  Turn  Suden's  indorsement  warranted  the  genuineness 
of  the  signature.  Tt  was  Tum  Suden  who  had  the  first  contact  with 
the  forger,  and  who  first  failed  to  detect  the  forgery,  and  upon  liim, 
therefore,  must  fall  tlie  hurden  of  loss.  From  the  foregoing  it  will 
appear  that  the  case  at  bar  presents  an  interesting  excej)tion  to  Ve 
case  of  Price  v.  Neal  (3  Burr.  1354),  which  ruled  that  the  bank 
must  bear  the  loss  when  it  pays  a  check  to  which  the  drawer's  name 
is  forged.  Sucli  exceptions,  however,  have  long  ceased  to  be  unusual. 
In  National  Bank,  etc.,  v.  Bangs  (106  Miss.  441)  tlie  court  said: 
"  We  are  aware  of  no  case  in  which  the  principle  that  the  drawee  is 
bound  to  know  the  signature  of  the  drawer  of  a  bill  or  check,  which 
he  undertakes  to  pay,  has  been  held  to  be  decisive  in  favor  of  a  payee 
of  a  forged  bill  or  check  to  which  he  has  himself  given  credit  by  his 
indorsement."  The  same  principle  should  be  applied  here.  Upon 
the  first  indorser  is  the  burden  of  the  tirst  precaution,  and  his  negli- 
gence or  omission  will  exonerate,  as  in  the  present  instance,  the  bank. 
Had  a  third  party  presented  the  check,  already  in  circulation,  for 
payment,  the  bank  would  have  been  put  upon  inquiry,  and  for  any 
negligence  in  that  case  it  would  have  been  responsible. 

In  First  National  Bank  of  Danvers  v.  First  National  Bank  of 
Salem  (151  Mass.  281)  the  court  uttered  a  principle  of  construction 
which  justifies  my  view:  "The  indorsement,  which  was  not  neces- 
sary to  the  transfer  of  the  cheek,  was  a  guaranty  of  the  signature  of 
the  drawer,  and  the  plaintiff  had  a  right  to  believe  that  the  indorser 
was  known  to  the  defendant  by  proper  inquiry." 

The  judgment  should  be  reversed  and  a  new  trial  ordered,  costs  to 
abide  the  event. 

Jexks,  Hooker  and  Rich,  J  J.,  concurred. 

Judgment  of  the  Municipal  Court  reversed  and  new  trial  ordered, 
costs  to  abide  the  event.® 


m.  Drawer:  secondary,  conditional  liability. 

1.  Conditions:  Presentment;  Notice;  Protest. 
[See  Art.  VII,  VIII,  XIII,  post.] 

2.  Admissions  as  to  Payee. 

§  111  OREY  V.  COOPER. 

3  Douglas  (K.  B.)  65. —  1782. 
Action  against  drawer  by  indorsee.     Plea,  that  the  payee-indorser 
at  the  time  of  his  indorsement  was  an  infant.    Demurrer. 


«  See  criticism  of  this  case  in  47  Am.  Law  Reg.,  N.  S.,  122  (February,  1908). 
See  also  note  4,  ante,  p.  415.  —  C. 


IV.]  seller:  warranties.  419 

Lord  Mansfield. —  The  ground  on  which  the  drawer  is  charged 
is  tiiat  he  drew  a  bill  by  which  lie  engaged  to  pay  according  to  the 
order  of  the  payee,  whoever  that  payee  might  be.  He  might  give 
the  infant  an  authority  which  the  law  itself  does  not  give  him.  In 
the  same  manner  he  may  give  a  bill  to  his  own  wife.  The  drawer 
says,  "  Let  anybody  trust  the  payee  on  my  credit."  The  ar'ts  of  an 
infant  are  void  or  not,  accordingly  as  they  are  for  his  benefit.  The 
privilege  of  an  infant  is  personal,  and  there  is  no  question  here  as 
between  the  infant  and  another  person.  The  infant  sets  up  no  claim, 
and  the  drawer  is  liable  to  pay. 

Judgment  for  the  plaintiff.^ 


IV.  Seller:  warranties. 

1.  Instrument  Genuine  and  What  it  Purports  to  Be. 

§  116  MEYER  I'.  RICHARDS. 

163  United  States,  385.  — 1896. 

Action  to  recover  back  the  purchase  price  of  thirteen  bonds  of 
the  State  of  Louisiana,  [>ayable  to  bearer,  sold  by  defendant  to  plain- 
tiff, and  afterwards  discovered  to  have  been  issued  without  authoiity 
of  law  and  declared  by  the  constitution  of  the  state  to  be  null  and 
void.  The  bonds  were  in  the  state  treasury  for  cancellation  and  were 
fraudulently  issued  by  the  state  treasurer,  who  put  them  on  the 
market  surreptitiously  and  without  authority.  The  signatures  and 
seal  were  genuine.     Judgment  for  defendant. 

Mr.  Justice  Whitk,  after  stating  the  case,  delivered  the  opinion 
of  the  court. 

We  will  *  *  *  ((jnsidcr  the  case  upon  the  theory  that  the  only 
warranty,  if  any,  is  one  to  be  im])lied  from  the  nature  of  tiie  contract. 

It  is  obvious  from  the  facts  just  detailed  that  the  thirteen  bonds 
which  were  sold  by  the  defendnnt  in  error  to  the  plaintiff  in  error 
were  at  the  time  of  the  sale  alisolutely  void.  The  twelve  which 
originaiiv  belonged  to  the  two  college  funds  were  in  express  terms 
declared  by  the  constitution  of  the  state  to  be  "null  and  void,"  and 
the  (Jeneral  Assembly  was  forbidden  to  make  any  provision  "  for 
their  payment,"  and  they  were  ordered  to  be  "  destroyed  in  such 
manner  as  the  General  Assembly  may  direct."  This  provision  of 
the  constitution  was  irj  existence  while  the  bonds  were  in  the  hands 
of  the  state,  and  before  they  were  fraudulently  and  surreptitiously 
sold.     Indeed,  these  bonds  were  never  lawfully  put  into  circulation, 

T  S*>«>  aho  Frnzirr  v.  Mnssry.  11  Tnfl.  nP2,  nntr.  p.  220;  hfcifann  v.  Walker, 
31  Colo.  261  ante,  p.  401,  and  noteu  to  those  cases.  —  C. 


4',*0  LIA15ILITV    OF    I'AUTIKS.  [aUT.    VI. 

Itocause,  having  been  originally  issued  to  represent  trust  funds  belong- 
ing to  the  state,  they  were  held  hy  olHeers  of  the  state  for  its  aeeount. 
The  remaining  bond  was  also  void  uniler  the  eonstitution  of  the  state, 
sinee  it  luul  been,  under  tiie  express  terms  of  that  instrument,  sur- 
rendered to  the  state  treasurer  for  eaneellation  and  another  bond  issued 
in  its  stead. 

The  bonds  were  undoubtedly  sold  by  the  defendant  in  error  as  law- 
ful obligations  of  the  state.  Both  parties  to  the  contraet  of  sale  so 
considered.  The  pleading  and  the  statement  of  facts  leave  no  question 
on  this  subject.  The  controversy  here  presented  is  wholly  between  the 
vendor  and  vendee  as  to  the  nature  and  extent  of  the  obligation  of 
warranty  resulting  from  the  sale.  We  are  therefore  not  concerned 
with  whether  the  defendant  at  the  time  of  the  sale  stood  in  the  atti- 
tude of  a  third  holder  of  negotiable  paper  for  value  before  maturity. 
Even  if  he  were  in  such  a  condition,  and  at  the  time  of  the  sale  there 
was  a  constitutional  provision  which  rendered  the  bonds  void  and  in- 
capable of  enforcement,  it  is  clear  that  the  delivery  by  the  vendor  to 
the  vendee  of  bonds  stricken  with  constitutional  nullity  was  not  the 
delivery  of  an  existing  obligation  within  the  meaning  of  the  contract 
if  it  imported  a  warranty  of  the  existence  of  the  bonds  which  it 
covered.  The  admission  being  that  both  parties  contemplated  the 
delivery  of  valid  obligations,  bonds  of  that  character  being  outstand- 
ing, if  warranty  of  existence  was  implied  by  law,  such  purpose  was 
not  fulfilled  by  the  delivery  of  a  mere  equity,  which  one  of  the  parties, 
the  seller,  claims  w^as  existing  in  his  behalf.  Valid  bonds,  and  not 
the  mere  claim  by  the  seller  to  enforce  invalid  bonds,  was  the  object 
of  the  contract.  This  is  especially  true  in  view  of  the  fact  just  re- 
ferred to,  that  at  the  date  of  the  sale  the  constitution  of  the  state  in 
express  terms  forbade  the  enforcement  of  twelve  of  the  bonds,  and 
practically  stipulated  to  the  same  effect  as  to  the  other. 

The  sale  was  a  Louisiana  contract.  We  must  consequently  deter- 
mine the  rights  and  obligations  of  the  parties  by  the  law  of  that  state. 
By  the  civil  law,  which  prevails  in  Louisiana,  warranty  whilst  not  of 
the  essence,  is  yet  of  the  nature  of  the  contract  of  sale,  and  is,  there- 
fore, implied  in  every  such  contract  unless  there  be  an  express  stipula- 
tion to  the  contrary.  (Bayon  v.  Vavasscur,  10  Martin,  Gl;  Straw- 
hr'uhje  v.  War  field,  4  Louisiana,  20.)  The  following  provisions  on 
the  subject  of  warranty  are  found  in  the  Louisiana  code: 

"The  seller  is  bound  to  two  principal  obligations,  that  of  delivery 
and  that  of  warranting  the  thing  which  he  sells."  (C.  C.  2475.) 
"Although  at  the  time  of  the  sale  no  stipulations  have  been  made 
respecting  the  warranty,  the  seller  is  obliged,  of  course,  to  warrant 
the  buyer  against  the  eviction  suffered  by  him  from  the  totality  or 
part  of  tike  thing  sold  and  against  the  charges  claimed  on  such  thing 
which  were  not  declared  at  the  time  of  the  sale."  (C.  C.  2501.) 
"  Even  in  case  of  stipulation  of  no  warranty,  the  seller  in  case  of 


17.]  seller:  warranties.  421 

eviction  is  liable  to  a  restitution  of  the  price,  unless  the  buyer  was 
aware,  at  tlie  time  of  the  sale,  of  the  danger  of  the  eviction,  and 
purchased  at  his  peril  and  risk."     (C.  C.  2505.) 

These  articles  of  the  Louisiana  Civil  Code,  which  do  but  formulate 
the  principles  of  the  civil  law  as  to  warranty,  are  not  wholly  in  ac:ord 
with  the  doctrines  of  the  common  law.  The  distinction  between  the 
two  systems  may  be  briefly  summed  up  by  saying  that  the  or?,  the 
civil-law  doctrine,  finds  its  expression  in  the  maxim  caveat  venditor, 
whilst  the  rule  of  the  common  law  is  conveyed  by  the  aphorism 
caveat  emptor.  It  is  unnecessary  to  determine  the  scope,  under  the 
Louisiana  law,  of  the  obligation  of  warranty  as  to  property  generally, 
since  we  are  in  this  case  concerned  only  with  its  limit  when  arising 
from  the  sale  of  a  credit  or  other  incorporeal  right.  Tlie  code  of 
that  state  contains  express  provisions  defining  the  extent  of  the  obli- 
gations arising  in  such  case : 

"He  who  sells  a  credit  or  an  incorporeal  right,  warrants  its  exis- 
tence at  the  time  of  the  transfer,  though  no  warranty  be  mentioned 
in  the  deed."  (C.  C.  2646.)  "The  seller  does  not  warrant  the 
solvency  of  the  debtor  unless  he  has  agreed  so  to  do."  ^     (C.  C.  2647.) 

These  provisions,  instead  of  causing  the  obligation  of  warranty  in 
a  sale  of  an  iTicorporcal  right  to  bo  broader  than  in  the  case  of  tangible 
property,  on  the  contrary  makes  its  narrower. 

As  then,  under  the  law  of  Tiouisiana,  tlie  seller  under  the  contract 
of  sale  was  obliged  to  wari-;iiit  iho  existence  of  the  thing  sold,  the 
case  of  the  defendant  in  error  involves  tlie  practical  contention  that 
a  bond  which  at  the  time  of  the  sale  was  declared  by  tlie  constitu- 
tion of  the  state  to  be  non-existing,  is  yet  for  the  purposes  of  the 
sale  to  be  treated  as  an  existing  obligation.  This  projiosition  is  an 
obvious  contradiction  in  terms,  and  of  course  refutes  itself.  [Citing 
authorities  from  Louisiana  and  Frcncli  courts.]      *     *     * 

Of  course,  this  warranty  of  exislence,  as  established  by  the  law  of 
Louisiana  and  as  found  in  France  and  other  civil-lMw  countries,  does 
not  govern  a  contract  of  sale  when  the  object  contemplated  by  a  sale 
is  a  thing  whether  existing  or  not  existing;  in  other  words,  where 
the  parties  buy,  not  an  existing  obligation,  but  the  chance  of  there 
being  one.  This  is  illustrated  by  Kniijlit  v.  Laufear  (7  Kol>.  |  La.  ] 
172),  where  the  court,  per  Martin,  J.,  said,  in  speaking  of  the  thing 
sold:  "  Whatever  may  be  its  value,  if  it  Ix;  not  in  substance  what  the 
purchaser  believed  be  was  receiving,  bis  error  must  invaliilalc  the  sale, 
because  it  prevented  bis  consent;  tmn  videtiir.  qui  errnt,  ninsenlire." 
And,  in  speaking  of  a  sale  of  doubtful  or  non-existing  things,  this 
great  judge  said  :  "  This  claim  was  a  fair  object  of  sale  if  its  nature 
had  been  disclosed,  but  that  was  concealed  and  was  probably  unknown 


•  See  Rrmim  v.   Monlijumrry.  20  N.  Y.  2S7,  pont,  p.  4.15.  —  TI. 


(■JO  I.IAIill.ITY    or    I'AKTIKS.  [aHT.    VI. 

to  thorn,  and  what  \va?  olTtMcil  for  sale  was  sonieihing  (luite  difTerent 
from  this  ch\iin."  Tho  smiiic  dislinction  has  been  considered  and 
applied  by  the  courts  of  France.  {Ihthic  c.  Chisel  et  Cie.,  Lyons, 
Nov.  30,  1819,  Journal  du   Pahiis,  1,  isr)',>,  32.) 

The  defendant  in  (Mior  does  not  dispute  that  the  foregoing  prin- 
ciples exist  in  and  are  controlling  under  the  Louisiana  law,  under  the 
hiw  of  France,  and  also  under  the  civil  law  generally  from  which  the 
law  of  Louisiana  is  derived.  But  whilst  thus  admitting,  he  denies 
that  the  contract  of  sale,  involved  in  this  case,  was  governed  either 
by  tiie  Louisiana  code  or  the  general  principles  of  the  civil  law. 
This  proposition  rests  on  the  contention  that  when  the  Civil  Code 
of  Louisiana  was  compiled,  its  framers  contemplated  the  simultaneous 
enactment  of  a  Commercial  Code  which  was  then  drafted,  and  there- 
fore omitted  from  the  former  code  the  necessary  provisions  to  govern 
commercial  contracts,  under  the  hypothesis  that  the  latter  would  also 
be  enacted;  that  in  consequence  of  the  failure  to  adopt  the  Com- 
mercial Code,  the  courts  of  Louisiana  have  held  that  cases  arising 
under  the  law  merchant  are  governed  by  that  law  in  the  absence  of 
an  e.xpress  statutory  requirement  to  the  contrary.  From  this  premise 
the  conclusion  is  drawn  that  as  the  contract  in  question  involved  the 
sale  of  negotiable  bonds,  the  obligations  resulting  from  the  sale  are 
commercial  in  their  nature,  and  are  controlled  by  the  law  merchant, 
by  which  it  is  asserted  the  vendor  in  such  a  ease,  when  selling  in 
good  faith,  warrants  only  that  the  signatures  to  the  paper  sold  are 
not  forgeries.  In  a  restricted  sense  the  part  of  the  proposition  relat- 
ing to  the  operation  of  the  law  merchant,  in  the  state  of  Louisiana, 
is  well  founded.  (Ilarrod  v.  Lafayre,  13  Martin,  29;  Wagner  v. 
Kenner,  2  Rob.  La.  122;  Barry  v.  Insurance  Co.,  12  Martin,  498; 
McDonald  v.  Millovdon,  5  Louisiana,  403.)  Whilst  this  is  true,  the 
contention  is  yet  erroneous  in  a  twofold  sense;  first,  in  presupposing 
that  a  mere  contract  of  sale  of  commercial  paper,  without  recourse, 
is  governed  as  to  the  obligations,  between  the  vendor  and  vendee,  by 
the  law  merchant;  second,  in  assuming  that  in  such  a  sale,  either 
under  the  principles  of  the  civil  law  or  what  the  argument  presumes 
to  be  the  law  merchant,  the  only  warranty  resting  upon  the  vendor 
is  that  of  the  genuineness  of  the  signatures  to  the  paper  sold.  [Citing 
authorities  from  Louisiana  and  French  courts.] 

None  of  the  authorities  referred  to  by  counsel  for  defendant  in 
error  sustain  the  proposition  heretofore  stated  with  reference  to  the 
supposed  existence  and  applicability  of  the  law  merchant,  and  the 
results  which  it  is  claimed  flow  therefrom.  On  the  contrary,  both 
in  England  and  in  the  United  States  the  doctrine  is  universally 
recognized  that  where  commercial  paper  is  sold  without  indorsement 
or  without  express  assumption  of  liability  on  the  paper  itself,  the 
contract  of  sale  and  the  obligations  which  arise  from  it,  as  between 
vendor  and   vendee,  are  governed   by   the  common   law,   relating  to 


IV.]  SELLER  :  WARRANTIES.  423 

the  sale  of  goods  and  chattels.  So,  also,  the  undoubted  rule  is  that 
in  such  a  sale  the  obligation  of  the  vendor  is  not  restricted  to  the 
mere  question  of  forgery  vel  non,  but  depends  upon  whether  he  has 
delivered  that  which  he  contracted  to  sell,  this  rule  being  designated, 
in  England,  as  a  condition  of  the  principal  contract,  as  to  the  essence 
and  substance  of  the  thing  agreed  to  be  sold,  and  in  this  country 
being  generally  termed  an  implied  warranty  of  identity  of  the  thing 
sold. 

Benjamin  on  Sales  (4th  Am.  ed.,  sec,  600),  says: 

"  When  the  vendor  sells  an  article  by  a  particular  description,  it 
is  a  condition  precedent  to  his  right  of  action  "  [to  recover  the  price 
agreed  to  be  paid  by  the  vendee]  "  that  the  thing  which  he  offers  to 
deliver,  or  has  delivered,  should  answer  the  description ;  "  [and,  in 
sec.  607,  the  author  says :]  "  Under  this  head  may  also  properly  be 
included  the  class  of  cases  in  which  it  has  been  held  that  the  vendor 
who  sells  bills  of  exchange,  notes,  shares,  certificates  and  other 
securities,  is  bound,  not  by  the  collateral  contract  of  warranty,  but 
by  the  principal  contract  itself,  to  deliver  as  a  condition  precedent 
that  which  is  genuine,  not  that  which  is  false,  counterfeit  or  not 
marketable  by  the  name  or  denomination  used  in  describing  it." 

It  is  upon  this  general  principle  of  the  common  law,  not  upon  any 
peculiar  doctrine  of  commercial  law,  that  the  cases  in  the  common 
law  courts  proceed.  [Discussing  Jo7ies  v.  Hyde,  5  Taunt.  488;  Fenns 
V.  Harrison,  3  T.  I^.  757;  Willcinson  v.  Johnson,  3  B.  &  C.  428; 
Yonnf]  V.  Cole,  3  Bing.  N.  C.  724;  Lamert  v.  TJeath,  15  M.  &  W.  486; 
(lompertz  v.  Bartlett,  2  El.  &  Bl.  849;  Gurney  v.  Womersley,  4  El.  & 
Bl.  133.] 

The  cases  in  the  American  courts,  whilst  declaring  the  same  rule 
as  that  recognized  in  England,  place  it  upon  a  theoretical  basis 
differing  somewhat  from  that  pronounced  l)y  the  English  courts; 
that  is,  instead  of  pronouncing  it  a  condition  of  the  i)rincipal  con- 
tract that  the  thing  sold,  in  its  essence  and  substance,  must  be  de- 
livered, declare  that  there  is  an  implied  warranty  of  identity,  or,  in 
oilier  words,  that  the  thing  sold  is  what  it  i)urports  to  be.  Daniel, 
in  his  treatise  on  Negotiable  Paper  (§  733«),  calls  attention  to  the 
different  definitions  given  to  the  same  obligation  by  the  .America n  and 
English  courts,  and  indicates  the  view  that  the  form  of  expression  used 
by  Benjamin  in  the  passage  already  quoted  is  the  more  accurate  one. 

Aside,  however,  from  the  mere  garb  in  which  the  thought  is 
clothed,  the  American  and  English  courts  are  in  full  accord.  This 
is  shown  by  the  case  of  (niry  v.  Donaldson  (04  U.  S.  2'),  15),  where 
Benjamin  on  Sales  is  approvingly  referred  to,  as  also  Fhnm  v.  MJen 
(57  Penn.  St.  482),  and  Wrhh  v.'Oflrll  (10  \.  Y.  583),  both  (.f  which 
cases,  as  also  the  line  of  American  adjudications  which  enforce  the 
same  doctrine,  are  noted  in  the  marein  of  this  opinion.' 


V  Thrall   v.    Jewell,    l'.»   Vl.   202;    Liinns   v.    Millrr,   0   f'.ratt.   427;    Aldrirh   v 


4\?  1  LIAllILITY    OF    PARTIES.  [aUT.    VI. 

^fanv  of  tlio  coiitrovorsios  oovorod  l)y  the  cases  referred  to  arose  in 
L-onseqiUMice  of  the  sale  of  a  forj^ed  notei  but  the  j)riiu'ii)les  upon 
whieh  all  the  authorities  ])rO('eed  do  not  confine  the  ri^ht  of  recovery 
to  such  a  case,  but  rest  upon  the  general  doctrine  to  which  we  have 
already  referred.  In  fad,  no  case  is  reported  wherein  the  obligation, 
as  between  vemlor  and  vendee,  in  the  sale  of  negotiable  paper,  is 
claimed  to  be  controlled  other  than  by  the  general  princi})les  of  the 
conunon  law,  though  in  three  cases,  Baxter  v.  Duren  (29  Maine,  134), 
Fisher  v.  Hieman  (12  Maryland,  497);  and  Ellis  v.  Wild  ((i  Mass. 
321),  the  deduction  was  made  from  the  law  respecting  the  sale  of 
goods  that  on  a  sale  of  negotiable  paper  there  was  under  the  principle 
of  caveat  eiitpior  no  implied  warranty  even  that  the  signatures  to  the 
paper  were  not  forged.  Ellis  v.  Wild  was,  however,  expressly  over- 
ruled in  Merriam  v.  Wolcott  (3  Allen,  258,  260)  ;  and  from  the 
allusions  to  Baxter  v.  Duren,  contained  in  the  later  Maine  decisions 
previously  noted  in  the  margin,  it  is  doubtful  whether  the  early  ruling 
in  Maine  would  now  be  followed  there.  The  three  eases  referred  to, 
it  is  needless  to  say,  are  practically  disregarded  by  the  entire  current 
of  American  and  English  authority,  and  stand  alone.  They  ;ii  dis- 
avowed by  the  defendant  in  error  here,  since  his  argument  adiuiis 
that  there  is  a  warranty  of  the  genuineness  of  tlie  signatures  to  an 
apparent  negotiable  instrument,  thereby  conceding  the  subsistence  of 
the  obligation  to  warrant  the  existence  or  identity  of  the  thing  sold, 
and  vet  seeking  to  avoid  its  consequences  by  limiting  it  to  non-existence 
resulting  from  a  particular  nullity. 

There  is  an  exceptional  case  (Littaner  v.  Cloldnian,  72  N.  Y.  50G,  — 
1878),  which  holds  that  the  common  law  obligation,  as  to  the  iinplied 
warranty  of  identity  in  the  thing  sold,  in  the  case  of  commercial 
paper,  extends  only  to  the  genuineness  of  the  instrument.  The  case 
was  one  involving  the  nullity  of  a  usurious  note,  and,  if  correctly 
decided,  would  be  authority  for  the  proposition  that  there  was  a 
peculiar  species  of  warranty  in  tlie  sale  of  commercial  paper,  diifer- 
ing  from  all  others;  in  other  words,  that  there  was  a  law  merchant 
of  warranty  where  there  was  no  commercial  contract.     The  opinion 


Jackson,  o  II.  I.  218;  liarton  v.  Trent,  .3  Head.  ](i7;  Delaware  Bank  v.  .farvin, 
20  \.  Y.  22G;  Merriam  v.  Wolrotf,  3  Allen,  258;  Bvll  v.  Caffcrty,  21  Irid.  411; 
Svanrri)  v.  Parker.  .50  Ponn.  St.  441  ;  Morrison  v.  Lovell,  4  W.  Va.  346;  Wehb 
V.  (ttleli,  40  N.  Y.  ."iRS;  Worthinfitan  v.  Coirles,  112  Mas'«.  30;  Snyder  v.  Reno, 
38  Iowa.  329;  aiffert  v.  West,  33  Wis.  017,  37  Wis.  115;  flannum  v.  Richard- 
son, 48  Vt.  508;  Ifussey  v.  Sibley,  00  Me.  192;  Uurst  v.  Chambers,  12  Bush 
(Ky.)  155;  Allm  v.  f'lark.  49  Vt.  390;  Bankhrail  v.  Oiren.  00  Ala.  457;  Smith 
V.  MeXair.  19  T\an«.  330;  Challiss  v.  MeCrum.  22  Kans.  157;  Ror/ers  v.  Walsh, 
12  Neb.  28;  Milliken  v.  Chapman.  75  Mo.  300;  Dnskam  v.  Tillman.  74  Wis. 
474;  Palmer  v.  Courtney,  32  Neb.  773;  Ware  v.  McCormack,  96  Ky.  139; 
Brown  v.  Ames,  59  Minn.  470. 


IV.]  seller:  waeraxties.  425 

in  this  case  illustrates  the  same  contradictory  position  presented  here 
by  the  argument  of  the  defendant  in  error,  to  which  we  have  just 
called  attention,  that  is,  that  it  admits  the  common  law  rule  and 
then  denies  its  essential  result  by  eliminating  conditions  of  non- 
existence which  are  necessarily  embraced  by  it.  It  follows  that  this 
New  York  decision  leads  logically  to  the  view  expressed  in  the  Maine 
and  Maryland  cases  just  referred  to,  for  either  the  principle  of 
warranty  of  identity  must  be  accepted  or  rejected ;  it  cannot  be  ac- 
cepted and  its  legitimate  and  inevitable  results  be  denied.  The  rule 
there  announced  was  in  conflict  with  previous  decisions  in  New 
York,  and  the  decision  is  strongly  criticised  by  the  Court  of  Errors 
and  Appeals  of  New  Jersey  in  Wood  v.  Sheldon  (42  N.  J.  L.  421, 
425.)^ 

In  Gijfert  v.  West  (3.S  Wisconsin,  617,-1873),  where  a  note  was 
sold  which  was  void  for  usur}',  tlie  vendee  was  allowed  to  recover 
the  consideration  paid  by  him,  and  his  right  to  do  so  was  based 
upon  the  general  doctrine  that  one  making  a  sale  is  bound  as  a  con- 
dition of  the  principal  contract  to  an  implied  warranty  of  the  exist- 
ence of  the  thing  sold. 

[After  discussing  Ilaniiuin  v.  Richardson,  reported  herein  at  p.  432, 
tlie  court  continues:] 

Nor  is  there  any  foundation  for  the  assertion  that  Oils  v.  CuUum 
(02  U.  S.  447),  and  the  cases  of  Orleans  v.  Plait  (90  U.  S.  676),  and 
.h'Ina  Life  Ins.  Co.  v.  Middlepori  (124  U.  S.  531),  both  of  which  cite 
Otis  V.  CuUum,  support  tbe  doctrine  that  a  sale  of  commercial  paper 
without  recourse  is  not,  as  between  the  vendor  and  vendee,  governed 
by  tbe  ordinary  rule  of  the  common  law.  On  the  contrary,  that 
case  expressly  rested  its  conclusion  on  the  decision  in  Lnwert  v. 
ffenth,  supra,  wbidi    bitter  case,   as   we   have   seen,   whilst   enforcing 

1  NotwithstanrlitiK  tlie  .ibovo  rritirism  of  Littaurr  v.  Goldman,  Mr.  Crawford, 
in  comnipntinfx  on  sortion  Il.T  of  tlio  Now  York  Ncpotinlilo  In^trnnionts  T^nw, 
says:  "  It  will  he  noted  that  the  warranty  nicntinncd  in  tlio  next  scrlion, 
that  the  in-stninu-nt  is  valid,  is  ftniittcd  from  this  section.  The  inferenec  from 
sneh  oinis-'ion  is.  that  a  person  nc;;<)t iiitinj;  eonnnereial  paper  l>y  delivery 
merely,  or  by  a  ()iiaIirirM|  indnrsf-nient .  does  nut  warrant  that  it  is  an  enforeihie 
eontrnct.  as.  for  example,  tli.it  it  is  not  void  for  usury.  This  was  the  New 
York  rule  {l.itlnurr  v.  (idIiIiiiiih.  ~rl  N.  \.  .'iOfi ) ,  and  while  it  has  been  eritieised 
itid  disajiiiroved  by  the  Sii|ir<'nie  Conrl  of  the  Tnited  Stales  (  Uri/cr  v. 
Rirhnnlif,  1  fi.l  I*.  S.  Wft ) .  it  seems  to  be  the  more  eonvenient  rnle  in  jiraeliee. 
The  contrary  rnb-  wonbl  often  work  prent  hardship,  anri  wonM  make  the  biisi- 
nesH  of  dealing'  in  eommereial  |>aper  extremely  ha/ardous.  A  broker,  for 
example,  buying;  and  sellinjr  notes  an<l  bills,  may  assure  himself  that  an  instru- 
ment is  /feniiine,  and  that  the  parties  had  capacity  to  contract.  bu(  he  could 
not  always  know  the  circumslanceR  under  which  the  paper  was  mmle.  Oii  the 
other  han<l.  the  New  York  rule  which  is  conceived  to  be  the  nde  of  the  statute, 
does  no  injury  to  the  f>urchaser;  for  if  he  desires  a  warranty,  he  has  only 
to  exnct  it.  or  to  rerpiire  the  indorsement  of  the  srdler  (see  section  117)." 
Craw.  Neg.  Inst.  Law  (3d  od.),  p.  88.  —  C, 


4',.Vi  l.IAl!ll,^^^    (ti-   i'.\i;rii:s.  [art.  vi. 

the  princ'i[)l(.'s  of  the  I'oininou  law,  ((Misidcird  thai  under  tlie  particular 
facts  there  prcsenletl  it  was  a  iiiirsliuii  for  llu-  jury  (u  detcniiiiio 
whether  the  serij)  delivered  was  thi'  kind  ol'  si  rip  whieli  the  defendant 
had  ordered  puri'hased.  That  ease  iiul  011I3,  as  has  already  heen 
stated,  eoneerned  non-ne^a)(iahle  paper,  hut  its  decision  involved  no 
question  of  the  scope  of  tlie  warranty,  hut  solely  what  was  the  thing 
bought.  Nor  does  the  case  of  Otis  v.  Cull  11  m  justify  ttie  assumption 
that  this  court  laid  down  the  rule  that  a  mere  sale  of  commercial 
paper,  as  hetween  vendor  and  vendee,  when  the  sale  was  made  with- 
out recourse,  created  some  peculiar  and  exceptional  warranty  to  Ix' 
considered  in  this  particular  a^  the  law  merchant.  Tt  is  true  that  in 
expressing  the  general  doctrine  IVfr.  Justice  Swayne  said :  "'  The 
seller  is  liahle  ex  drlirfn  for  had  faith,  and  ex  contractu  there  is  an 
im])lied  warranty  on  his  part  that  they  heiong  to  him  and  are  not 
forgeries.  Where  there  is  no  express  stipulation  there  is  no  liahility 
beyond  this.""  But  in  using  this  language,  as  to  the  extent  of  the 
warranty,  the  mind  was  directed  to  that  form  of  non-existence  which 
more  commonly  ohtains,  and  the  expression  is  a  mere  illustration  of 
the  rule  de  eo  quod  pJerumque  fit.  If  this  were  a  case  where  a  vendee 
claimed  to  recover  hack  the  price  paid  by  him  on  a  purchase  of 
negotiable  securities,  which  pass  by  delivery  from  hand  to  hand,  on 
the  averment  that  after  the  sale  it  had  developed  that  they  were  not 
valid  (although  not  forgeries),  because  the  law  under  which  they 
had  been  issued  was  constitutionally  void  or  ultra  vires,  tlie  claim  of 
implied  warranty  of  existence  would  be  without  merit,  for  the  reason 
that  such  a  state  of  fact  would  present  a  case  of  a  sale  of  securities 
whether  valid  or  invalid,  hence  engendering  no  implication  of  war- 
ranty of  existence.  Under  the  state  of  facts  tlius  supposed,  the  piir- 
pose  of  the  parties  to  make  a  contract  of  that  nature  would  legally 
result  from  the  fact  that  they  were  both  necessarily  equally  charge- 
able with  notice  of  want  of  power,  and  therefore  Avould  be  both  pre- 
sumed to  have  acted  with  reference  to  such  knowlcflije.  This  is  Otis 
V.  CuUum.  But  it  is  not  the  case  at  bar,  since  it  is  here  admitted 
that  both  parties,  in  entering  into  the  contract  of  sale,  contemplated 
valid  securities,  of  which  there  were  many  outstanding,  and  those 
delivered  were  void,  not  because  of  a  want  of  power  to  enact  the  law 
under  which  they  were  issued,  or  because  they  were  ultra  vires  for 
some  other  legal  cause,  but  because  they  were  stricken  with  nullity 
by  a  constitutional  provision  adopted  after  the  act  authorizing  the 
issue  of  the  securities,  and  where  nothing  on  the  face  of  the  bonds 
indicated  that  they  were  illegal.  The  distinction  pointed  out  by  the 
foregoing  statement  not  only  illustrates  the  correctness  of  the  decision 
in  Otis  v.  Cullum,  but  also  demonstrates  the  error  of  attempting  to 
extend  it  to  the  state  of  facts  presented  in  the  case  under  considera- 
tion. Indeed,  in  examining  and  applyincr  0//.v  v.  CnUvm  the  fact 
that  it  does  not  control  a  ca=e  like  this  has  been  recognized.     (Daniel, 


IV.]  seller:  warranties.  487 

Neg.  Inst.,  §  734a;  Rogers  v.  Walsh,  supra;  Cincinnati,  New  Orleans, 
etc..  Railway  v.  Citizens'  National  Bank,  24  Week.  Law  Bull.  [Ohio], 
198,  211.) 

The  foregoing  analysis  of  the  principles  and  review  of  the  authori- 
ties governing  the  law  of  sale  of  negotiable  paper,  transferred  with- 
out recourse,  as  between  vendor  and  vendee,  clearly  demonstrates  the 
unsoundness  of  l!  i  joitions  upon  which  the  defendant  in  error  relies, 
since  it  affirmatively  establishes  that  there  is  no  peculiar  warranty, 
in  a  sale  of  commercial  paper,  and  that  the  reasoning  by  which  it  is 
attempted  to  prove  its  existence  is  a  mere  misconception  of  the  prin- 
ciples of  the  common  law  relating  to  the  sale  of  goods  and  chattels. 

In  passing,  however,  it  is  worthy  of  note  that  whilst  the  civil  law 
enforces  in  the  contract  of  sale  generally  the  broadest  obligation  of 
warranty,  it  has  so  narrowed  it,  when  dealing  with  credits  and  incor- 
poreal rights,  as  to  confine  it  to  the  title  of  the  seller  and  to  the 
existence  of  the  credit  sold,  and,  e  converso,  the  common  law,  which 
restricts  warranty  within  a  narrow  compass,  virtually  imposes  the 
same  duty  by  broadening  the  warranty  as  regards  personal  property 
BO  as  to  impose  the  obligation  on  the  vendor  to  deliver  the  thing 
sold  as  a  condition  of  the  principal  contract  or  by  implication  of 
warranty  as  to  the  identity  of  the  thing  sold.  By  these  processes  of 
reasoning  the  two  great  .systems,  whilst  apparently  divergent  in  prin- 
ciple practically  work  substantially  to  the  same  salutary  conclusions. 

There  are  n:any  questions  discussed  in  the  brief  of  counsel  which 
we  do  not  rioticL",  and  which  we  content  ourselves  with  saying  are 
without  nuMJt.  The  views  above  stated  are  controlling  and  decisive 
of  the  case  and  lead  necessarily  to  the  reversal  of  the  judgment.  As 
the  case  was  heard  upon  a  stipulation  waiving  a  jury  and  upon  an 
agreed  statement  of  facts,  it  i-;  our  duty,  in  reversing,  to  direct  that 
the  proper  judgment  be  entered  bolnw.  (Fnrt  Scoff  v.  Ffirkvinn.  112 
IT.  S.  l.'iO,  and  ca^^es  there  cited.) 

It  follows  that  — 

The  judgnu-nt  of  the  Circuit  Court  must  bo  reversed,  and  the  case 
bo  remanded  wifli  dirfctions  to  cntor  judgment  for  [dainlilfs  for  eight 
thousand  tlirci-  hundrod  and  oighty-throo  flollars  and  seventy-five  cents 
($8,.'}H,'J.75),  with  interest  from  judicial  demand  and  costs. 


g  115  CIIALLISS  r.  McCRUM. 

22  Kansas,   l.-)?.—  I87f>. 

AcTiov  to  recover  damages  upon  an  inifdied  warranty  in  the  sale 
of  certain  notes.  Demurrer  to  the  petition  overruled,  Defendant 
appeals, 


4'v'S  LIABIMTY    ()['    I'AKTIES.  |  ART.    VI. 

The  opinion  of  the  court  was  ilolivcicd  by  — 

Bkewki;,  J. —  On  Dt'i't'mlit.i-  I,  IS^  1,  plainlill  in  cnor  loaned  one 
EilwarJ  A.  K^a^  $v'50,  aiul  took  his  noto  thoivlor  in  the  sum  of  $205, 
payable  to  liiihanl  Piubasio  or  bearer,  and  secured  by  niort;,fage. 
Long  after  its  maturity,  and  in  1S7(),  several  payments  having  been 
inailo  thereon  in  the  meantime.  ])lainti(T  in  eri'or  sold  the  note  for 
its  then  face  value  to  lict'endaiit  in  error.  At  the  lime  of  such  sale 
he  indorsed  it,  "Without  recourse. —  W.  Tj.  Challiss."'  AfcCrum  sued 
on  the  note.  Ege  pleaded  usury.  The  jtlca  was  sustained,  and  Mc- 
Crum  recovered  $2'20.00,  less  than  the  face  value  of  the  note,  for 
which  sum  lie  brought  this  action.  A  demurrer  to  the  j)etition  was 
overruled,  and  this  ruling  is  now  presented  for  review. 

(\nn  the  action  be  sustained?  Of  course  no  action  will  lie  on  the 
indorsement,  for  by  his  written  contract  Challiss  expressly  declines 
to  assume  the  liabilities  of  an  indorser.  If  sustainable  at  all,  it 
must  be  as  against  him  as  a  vendor,  and  not  as  an  indorser,  and  upon 
the  doctrine  of  an  implied  warranty.  The  theory  of  the  defendant 
in  error  is,  that  every  vendor  of  a  bill,  bond  or  note  impliedly  war- 
rants that  it  is  what  it  purports  on  its  face  to  be  —  the  legal  obliga- 
tion of  the  parties  whose  names  appear  on  the  instrument;  and  that 
the  character  of  the  indorsement  or  the  lack  of  an  indorsement  in 
no  manner  affects  this  implied  warranty.  On  the  other  hand,  the 
counsel  for  plaintiff  in  error  lays  down  the  broad  proposition  that 
"  there  is  no  such  thing  as  implied  warranty  in  the  sale  of  chattels;" 
and  that,  in  the  absence  of  express  warranty,  the  maxim  caveat  emptor 
is  of  universal  application.  Tt  is  clear  that  the  character  of  the 
indorsement  cuts  no  figure  in  the  question;  as  stated,  no  action  will 
lie  on  it.  But  further,  the  restriction  is  only  as  to  his  liability  as 
indorser,  and  in  no  manner  affects  his  relation  to  the  paper  as  vendor. 
An  unqualified  indorsement  is  the  assumption  of  a  conditional  lia- 
bility. The  indorser  becomes  a  new  drawer,  and  is  liable  on  the 
default  of  the  drawee.  "  Without  recourse,"  does  away  with  this 
conditional  liability.  Tt  leaves  the  indorsement  simply  as  a  transfer 
of  title,  and  the  indorser  liable  only  as  vendor;  yet  it  leaves  him  a 
vendor,  and  divests  hira  of  none  of  the  liabilities  of  a  vendor.  It 
makes  the  transaction  the  equivalent  of  a  delivery  of  paper  payable 
to  bearer,  and  transferable  by  delivery.  (Ilaminm  v.  Ricliardson,  48 
Vt.  508.) 

Independent,  therefore,  of  any  matter  of  indorsement,  what  im- 
plied warranty  is  there  in  the  transfer  of  a  promissory  note?  Two 
things  are  clear  under  the  authorities:  First,  that  there  is  an  implied 
warranty  of  the  genuineness  of  the  signatures;  and,  second,  that  there 
is  no  warranty  of  the  solvency  of  the  parties.  Tt  is  unnecessary  to 
more  than  refer  to  a  few  of  the  authorities  upon  these  propositions: 
(Byles  on  Bills,  pp.  123,  125,  and  cases  in  notes;  Jones  v.  Ri/de, 
5  Taunt.  488;  Gurney  v.  Womcrsley,  4  El.  h  Bl.  132;  Gompertz  v. 


IV.]  seller:  warranties.  429 

Bartlett,  24  Eng.  Law  and  Eq.  156;  Terry  v.  Bissell,  26  Conn.  23; 
Merriam  v.  Wolcolt,  3  Allen,  259;  Aldrich  v.  Jaclson,  5  R.  I.  218; 
Lohdell  V.  SaAer,  3  Mete.  469;  1  Addison  on  Cont.,  p.  152;  Ellis  v. 
Wild,  6  Mass.  321 ;  Eagle  Bank  v.  Smith,  5  Conn.  71 ;  Shaver  v. 
£'/f/e,  16  Johns.  201;  Dumont  v.  Williamson,  18  Ohio  St.  515;  2 
Parsons  on  Xotes  and  Bills,  eh.  2,  §  2.)  But  in  the  case  at  har,  the 
signature  of  the  maker  was  genuine.  The  objection  is,  that  it  was 
never  his  legal  obligation  to  the  full  amount  for  which  it  purported 
to  be.  How  far  is  there  any  implied  warranty  in  this  respect?  A 
reference  to  some  of  the  leading  cases  will  throw  light  upon  this 
question. 

In  Thrall  v.  Newell  (19  Vt.  203),  it  appeared  that  one  of  the 
makers  of  a  note  was  insane.  The  vendor  made  a  written  assign- 
ment, in  which  was  a  description  of  the  note,  and  the  court  construed 
this  as  an  e.xpress  warranty  that  the  instrument  was  the  legal  obliga- 
tion of  the  apparent  makers,  and  one  being  incapable  of  contracting, 
gave  judgment  against  the  vendor  on  account  of  this  breach  for  the 
amount  received  by  him.  While  the  judgment  of  the  court  is  rested 
upon  the  fact  of  an  express  warranty,  the  judge  who  writes  the 
opinion  expresses  his  individual  conviction  that  the  same  result  would 
follow  on  a  mere  transfer  without  any  express  warranty,  and  quotes 
approvingly  an  extract  from  Rand's  edition  of  Long  on  Sales,  that 
'•  there  is  an  implied  warranty  in  every  sale  that  the  thing  sold  is 
that  for  which  it  was  sold." 

In  LnhdeU  v.  Bal-er  (3  Mete.  469),  it  appeared  that  tlie  owner  of  a 
note  procured  the  indorsement  of  a  minor,  and  then  put  the  paper 
in  circulation.  He  was  held  liable  to  a  subsequent  holder.  Chief 
Justice  Shaw,  delivering  the  opinion  of  the  court,  says: 

"  Whoever  takes  a  negotiable  security  is  understood  to  ascertain 
for  himself  the  ability  of  the  contracting  parties,  but  he  has  a  right 
to  believe,  without  inquiring,  that  he  has  the  legal  obligation  of  the 
contracting  parties  appearing  on  the  bill  or  note.  Unexplained,  the 
purchaser  of  such  a  note  has  a  right  to  believe,  upon  the  faith  of 
the  security  itself,  that  it  is  indorsefl  by  one  capable  of  binding  him- 
self  by  the  contract  which  an  indorsement  by  law  iinf)oiis." 

In  Hannum  v.  Richardson  (48  Vt.  508),  a  note  was  given  for  li(|uor 
8old  in  violation  of  law,  and  was  by  statute  void.  Defendant  knew 
its  invalidity,  transferred  it  by  an  indorsement  without  recourse,  and 
he  was  held  liable  to  his  vendee. 

In  Drlairarn  linvl-  v.  Jnrvis  (20  X.  Y.  226),  a  usurious  note  was 
sold,  and  the  vendor  was  adjudged  liable,  not  merely  for  the  money 
received  bv  him.  but  also  the  costs  paid  by  his  vendee  in  a  suit  against 
the  makers  of  the  note.  In  the  opinion,  Mr.  Justice  Comstock  uses 
this  languarrn : 

"  The  authorities  state  the  dor-trine  in  general  terms  that  the 
vendor  of  a  chose  in  action,   in   the  absence  of  express  stipulation, 


430  LIAIHLITY    OF    r.MlTIKS.  [aRT.    VI. 

impliedly  warrants  its  legal  soundness  and  validity.  In  peculiar  cir- 
cunistanees  and  rel;itii>ns,  the  law  may  not  iiiii)iite  lo  iiiin  an  engage- 
ment of  this  sort.  I'ut  if  llirrc  air  oxceptiuns,  llicy  certainly  do 
not  e.xist  where  the  invalidity  of  the  deht  or  security  sold  arises  out 
of  the  vendor's  own  dealing  with  or  relation  to  it.  In  this  case,  the 
defendant  held  a  promissory  note  which  was  void.  l)ecause  he  had 
himself  taken  it  in  violation  of  the  statutes  of  usury.  When  he  sold 
the  note  to  the  plaintilVs  and  received  the  cash  thend'or,  hy  that  very 
act  he  attirnu'd  in  judgment  of  law  that  the  instrument  was  un- 
attainted  so  far  at  least  as  he  had  heen  connected  with  its  origin."  ^ 

In  Young  v.  Cole  (3  Bingham  N.  C.  724),  certain  hoiuls  were  sold 
as  Guatemala  honds,  which  turned  out  afterward  to  he  lacking  the 
requisite  seal,  and  the  vendor,  though  ignorant  of  the  defect  and 
innocent  of  wrong,  was  compelled  to  refund  the  money.  The  thing 
in  fact  sold  was  not  the  thing  supposed  and  intended  to  he  sold. 

In  Gompertz  v.  Bartlett  (24  Eng.  Law  and  Eq.  156),  the  plaintiff 
discounted  for  the  defendant  an  unstamped  hill,  purporting  on  its 
face  to  have  heen  a  foreign  hill,  drawn  at  Sierre  Leone  and  accepted 
in  London,  luit  which  was  in  fact  drawn  in  London.  If  actually  a 
foreign  bill,  it  re(iuired  no  stamp,  and  was  valid;  hut  being  an  inland 
bill,  it  required  a  stamp  to  make  it  a  valid  hill  in  a  court  of  law. 
The  acceptance  was  genuine,  and  the  acceptor  had  previously  paid 
similar  bills.  But  the  acceptor  becoming  bankrui)t  the  commissioner 
refused  to  allow  it  against  his  estate  because  not  stamped.  There- 
upon the  plaintiff,  who  bad  sold  the  bill  and  been  compelled  to  take 
it  up,  brought  his  fiction  to  recover  the  price  he  had  paid  for  it,  and 
the  action  was  sustained.  Lord  Campbell,  before  whom  the  case  had 
been  tried,  and  who  then  held  adversely  to  the  plaintiff,  said: 

"I  then  thought  that  the  rule  cavcnt  pwpinr  applied;  but  after 
hearing  the  argument  and  the  authorities  cited,  I  think  the  action  is 
maintainable,  and  upon  this  ground  :  'JMiat  the  article  sold  did  not 
answer  the  description  under  which  it  was  sold.  If  it  had  been  a 
foreign  bill,  and  there  had  been  any  secret  defect,  the  risk  would 
have  been  that  of  the  purchaser;  hut  here  it  must  be  taken  that  the 

2  "  The  defendant  in  the  case  cited  [Marvin  v.  JarviH]  had  knowledge  of  the 
usury,  which  was  not  the  fact  here,  and  hcnco  it  difTcr^;  from  the  case  at  bar, 
and  is  not  decisive  of  the  question.  .  .  .  The  law  in  regard  to  the  transfer 
of  negotiable  bills  of  exchange  and  promissory  notes,  as  laid  down  for  a  century 
or  more,  only  excepts  two  cases  as  coming  within  tlie  doctrine  of  an  implied 
warranty,  viz..  a  warranty  of  title,  and  that  the  instrument  is  genuine  and 
not  forged.  There  is  no  precedent  and  not  a  single  reported  case  in  the  books 
in  favor  of  the  doctrine  that  where  a  promissory  note  is  infected  with  usury, 
and  that  fact  is  unknown  to  the  party  who  transferred  it.  that  is  an  implied 
warranty  of  the  validity  of  the  note." — LUtauer  v.  Cnhlwnn.  72  N.  Y.  506. 
See  critinism  of  LUlnurr  v.  flnhhnnn.  in  Mryer  v.  RirhardH.  Ifi.T  U.  R.  .385,  411, 
and  ^Vnod  v.  Sheldon,  42  N.  J.  L.  421,  424.  —  H.  fBut  see  Mr.  Crawford's 
approval  of  Liltaucr  v,  Goldman,  in  note  1,  ante,  p.  425.  —  C] 


IV.]  seller:  warranties.  431 

bill  was  sold  as  and  for  that  which  it  purported  to  be.  On  the  face 
of  the  bill  it  purported  to  be  drawn  at  Sierre  Leone,  and  it  was  sold 
as  answering  the  description  of  tliat  which  on  its  face  it  purported 
to  be.  That  amounted  to  a  warranty  that  it  really  was  of  that 
description.'' 

In  Ticonic  Bank  v.  Smiley  (27  Me.  225),  an  overdue  note  was  trans- 
ferred with  this  indorsement,  "  Indorser  not  holden ; "  yet  it  was 
decided  that  the  indorser  was  liable  to  his  vendee  for  any  payment 
made  on  the  note  before  tlie  transfer,  or  any  set-off  existing  against  it 
of  which  the  note  gave  no  indication  and  the  vendor  no  information. 

In  Snyder  v.  Reno  (.38  Iowa,  329),  it  was  held  that  there  is  an 
implied  warranty  that  there  has  been  no  material  alteration  in  the 
paper  since  its  execution.  The  court  says :  "  We  have  no  doubt  tliat 
there  is  an  implied  warranty  of  the  transferer  that  there  is  no  defect 
in  the  instrument,  as  well  as  that  the  signature  of  the  maker  is 
genuine."  (See  also,  Blethen  v.  Lovering,  58  Me.  437;  Ogden  v. 
Bhjdenhurgh,  1  Hilton,  182;  Fake  v.  Smith,  2  Abb.  [N.  Y.]  App.  76; 
2  Parsons  on  Notes  and  Bills,  ch.  2,  §  2,  and  cases  in  notes;  Terry 
V.  Bissell,  26  Conn.  23;  1  Daniel  on  Neg.  Inst.,  §  670.) 

In  this,  the  author  thus  states  the  law: 

"When  the  indorsement  is  vithnut  recourse,  the  indorser  specially 
declines  to  assume  any  responsibility  as  a  party  to  the  bill  or  note; 
but  by  the  very  act  of  transferring  it,  he  engages  that  it  is  Avbat  it 
purports  to  be  —  the  valid  obligation  of  those  whose  names  are  upon  it. 
He  is  like  a  drawer  who  draws  without  recourse ;  but  who  is,  neverthe- 
less, liable  if  he  draws  upon  a  fictitious  party,  or  one  without  funds. 
And,  therefore,  the  holder  may  recover  against  the  indors(>r  vifJiout 
recourse,  C)  if  any  of  the  })rior  signatures  were  not  genuine;  or, 
(2)  if  the  note  was  inviilid  bet  with  the  original  pai'lics,  heciiuso  of 
the  want,  or  illegality  of,  the  coni-ideration  ;  or,  (3)  if  any  prior  party 
was  inconif)f't<'nt ;  or,  (t)   the  indorser  was  without  title." 

These  authorities  fully  sustain  the  ruling  of  the  district  court. 
The  note  was  not  the  legal  ohligation  of  the  maker  to  the  full  amount. 
As  to  the  usurious  portion,  it  was  as  it  were  no  note.  This  was  a 
defect  in  the  very  inception  of  the  note.  It  was  known  to  the  vendor 
and  arose  out  of  his  own  dealings  in  the  matter.''  I'y  all  these  au- 
thorities there  is  an  implied  warranty  against  sueh  a  defect,  and  the 
vendor  is  liable  for  a  breach  thereof. 

The  suggestion  of  counsel  that  thr'  change  in  the  usurv  law,  hy 
the  legislation  of  1872,  affected  the  right  of  recovery  upon  the  note, 
has  been  already  decided  adversely,  in  the  case  of  Jenness  v.  Culler 
(12  Kas.  .'iOf)).' 

All  the  justices  concurring,     .fudgment  affirmed. 


3  It  will  hv  otiHt'rvffl  tli.it   tliln  hringH  the  case  witiiin  .siilxi.  4  of  §  liri.  —  H. 


132  LIABILITY    OF    PARTIES.  [AUT.    VI. 

§  116  HANNUM  V.  RICHARDSON. 

48  Vkkmont,  508.  —  1875. 

Assumpsit  for  false  waiiaiity  in  sale  of  a  promissory  note.  The 
note  was  made  by  Liiieolu  payable  to  Meliitosii,  for  an  illegal  con- 
sideration rendering  it  void  by  statute ;  was  indorsed  without  recourse 
by  Mcintosh  to  defendant  and  without  recourse  by  defendant  to 
plaintiff.     Judgment  for  plaintilT. 

The  opinion  of  the  court  was  delivered  by 

Piekpont,  Cii.  J. —  It  may  be  observed  in  the  outset,  that  this 
action  is  not  brought  by  the  plaintiff  as  the  indorsee  of  the  note 
referred  to  against  the  defendant  as  the  indorscr,  and  the  action  is  not 
based  iipon  the  indorsement,  but  is  brought  upon  an  alleged  \vrir- 
rnnty  by  the  defendant  that  the  note  was  a  valid  and  binding  note, 
ba.sed  upon  a  valid  and  lawful  consideration,  when  in  fact  it  was 
given  for  an  illegal  consideration,  and  was  at  its  inception  void.  On 
trial  the  plaintiff  introduced  evidence  in  support  of  his  declaration. 
After  the  evidence  was  in,  the  defendant  insisted  that  as  it  appeared 
from  the  note  that  it  was  indorsed  by  the  defendant  "  without  re- 
course,'' the  legal  effect  of  the  indorsement  could  not  be  varied  or 
controlled  by  evidence  outside  of  the  indorsement  itself  —  that  the 
same  was  conclusive  in  that  respect;  but  the  court  held  that  such 
indorsement  was  not  of  itself  conclusive  of  its  legal  effect  in  such 
sense  as  to  exclude  the  evidence  aliunde;  and  submitted  the  case  to 
the  jury  in  accordance  with  such  ruling,  and  it  is  upon  this  decision 
and  the  charge  of  the  court  in  respect  to  it,  that  the  only  question 
that  has  been  raised  and  discussed  by  the  defendant's  counsel  arises. 

What  would  have  been  the  effect  of  this  objection  if  the  action  had 
been  based  upon  the  indorsement,  it  is  not  necessary  now  to  inquire. 
By  indorsing  the  note  "  without  recourse,"  the  defendant  refused  to 
assume  the  responsibility  and  liability  which  the  law  attaches  to  an 
unqualified  indorsement,  so  that  in  respect  to  such  liability,  it  may 
perhaps  be  regarded  as  standing  without  an  indorsement.  Tf  it  be 
so  regarded,  then  in  what  position  do  those  parties  stand  in  respect 
to  the  transaction?  The  principle  is  well  settled,  that  where  per- 
sonal property  of  any  kind  is  sold,  there  is  on  the  part  of  the  seller 
an  implied  warranty  that  he  has  title  to  the  property,  and  that  it  is 
what  it  purports  to  be,  and  is  that  for  which  it  was  sold,  as  under- 
stood by  the  parties  at  the  time ;  and  in  such  case,  knowledge  on 
the  part  of  the  seller  is  not  necessary  to  his  liability.  The  implied 
warranty  is,  in  this  respect,  like  an  express  warranty,  the  scienter 
need  not  be  alleged  or  proved.  Edwards,  in  his  work  on  Bills  and 
Promissory  Notes  (p.  188),  says:  "One  who  transfers  a  negotiable 
instrument  by  delivery  or  by  indorsement,  impliedly  guarantees  that 
it  is  genuine,  and  that  he  has  title  to  it.     The  rule  is  the  same  in 


IV.]  seller:  WABBANTIES.  433 

regard  to  personal  property.  The  vendor  of  a  chattel  always  gives 
an  implied  warranty  of  the  title.  (15  Johns.  240;  6  Cow.  484;  4 
Duer  [N.  Y.]  191;  6  Johns.  5.)  Thougli  tlie  indorser  transfers 
the  note  upon  condition  that  it  is  to  be  collected  at  the  risk  of  the 
indorsee,  he  is,  nevertheless,  responsible  if  the  note  proves  to  be  a 
forgery."     (Edwards,  289.) 

In  this  case  the  note  in  question  was  given  for  intoxicating  liquor 
sold  in  this  state  in  violation  of  law,  and  therefore  was  void  at  its 
inception ;  in  short,  it  was  not  a  note,  it  was  not  what  it  purported 
to  be,  or  what  it  was  sold  and  purchased  for;  it  is  of  no  more  effect 
than  if  it  had  been  a  blank  piece  of  paper  for  which  the  plaintiff  had 
paid  his  fifty  dollars.  In  this  view  of  the  case  we  think  the  defendant 
is  liable  upon  a  warranty  that  the  thing  sold  was  a  valid  note  of 
hand. 

The  plaintiff  has  declared  as  upon  an  express  warranty.  If  he  could 
prove  one,  very  well ;  if  he  could  not,  the  implied  warranty  is  just 
as  available  to  him,  tbe  declaration  being  according  to  its  lesfal  effect. 

This  view  of  the  case  relieves  it  from  all  embarrassment  growing 
out  of  the  question  as  to  the  admissibility  of  parol  testimony  to  vary 
the  indorsement,  as  the  effect  of  the  indorsement  is  really  not  in- 
volved in  the  case.  And  the  ruling  and  charge  of  the  court  were 
really  more  favorable  to  the  defendant  than  he  had  the  right  to  ask. 

The  exceptions  to  the  overruling  of  the  motion  in  arrest  were 
waived.  The  exceptions  to  the  refusal  to  set  aside  the  verdict  as 
against  the  evidence,  this  court  refuses  to  hear,  the  decision  of  the 
County  Court  being  conclusive  in  such  cases. 

Judgment  affirmed.* 


2.  TiTi.K  OF  Seller. 


§  115    WILLIAMS  V.  TISHOMINGO  SAVINGS  INSTITUTION. 

:n   Missi.s.sii'pi,  G33.  —  1880. 

fJEOHGE,  ('.  J.,  delivered  the  opinion  of  the  court. 

The  appellants,  having  indorsed  to  the  appellee  a  bill  of  exchange, 
to  which  they  claimed  title  through  a  forged  indorsement,  now  insist 
that  they  inoirrcd  Hf)  responsibility  by  their  indorsement,  except  a 
guaranty  that  the  drawee  would  pay  it  on  presentation.  \\\\\  the 
nde  IS  well  settled  that  an  indorser  warrants  the  L^ennineness  of  the 
prior  indorsements  on  the  bill,  and  also  his  title  to  tlir  paper.  Should 
it  be  ascertained,  even  after  payment  of  the  bill,   that  any  of  the 


*  W'hPTf  tJi«-  >*tat«'  rfinHtitiitinn  forl)if]s  the  mforccnu'rif  of  any  <lil>t  the  ron- 
sidrration  of  wliirh  y,a^  a  slave,  tlic  indorsor  of  a  note  is  ni'vcrtlirlcsH  liahlo  on 
hiM  indortemfnt.  altlum(.'h  tho  orifrinal  ronHiilprjilion  lirtwcen  tho  maker  and 
the  paypr  was  a  slave,     drnham  v.  Mayuire,  39  Ga.  531.  —  H. 

NK^iOT.   IN8TRUMENTH  —  2S 


4;M  l.lAllll.lTV     Ol'     I'AKI'IKS.  I  ART.    W. 

iiulorsonients  are  forijotl,  Hk'  (InnviH'  can  I'ccovfi-  \n\vk  tlu'  amount  of 
the  bill  from  tlio  ihtsoii  to  wlioiii  lie  paid  it  ;  ami  so  each  proeeiling 
imlorsor  may  rcrovor  from  tlio  })or!?on  who  indorsi'd  the  hill  to  him. 
The  drawee  is  hound  to  know  the  siyfnalui'e  of  the  drawer,  hut  not 
of  the  indorser.  The  juiliiinent,  wliicii  is  in  aerordance  with  these 
views,  is 

Atnrmed.^ 


3.  Capacity  of  Pkior  Parties. 

§  115  ERWIN  V.  DOWNS. 

15  Nkw  Yokk,  575.  —  1857. 

Action  against  indoi'S(>r  of  notes  signed  by  a  firm  of  niarrierl 
women,  and  indorsed  l)y  defendant  for  their  accommodation.  Plain- 
tiff took  the  notes  with  knowledge  tliat  tlie  makers  were  married 
women.    Judgment  for  ])laintiff. 

SHAXKT.Axn,  J.— The  note  was  void,  as  against  the  makers,  be- 
cause they  were  married  Avomen,  and  incapable  of  contracting  obliga- 
tions in  that  form.  But  when  the  defendant  indorsed  the  note,  he 
impliedly  contracted  that  tlie  makers  were  competent  to  contract,  and 
had  legally  contracted,  the  ol)ligation  of  joint  makers  of  the  note. 
He  also  assumed  the  legal  obligation,  in  most  respects,  of  the  drawers 
of  the  bill.  The  fact,  known  to  the  plaintiff  at  the  time  he  took  the 
note,  that  the  makers  were  married  women,  did  not  deprive  him  of 
the  character  of  a  ho7ia  fide  purchaser.  Xor  does  the  payee's  knowl- 
edge that  the  drawee  is  a  married  woman,  discharge  the  drawer  in 
case  of  non-payment  of  the  bill  by  the  drawee.  Nor  is  the  indorser 
discharged,  though  the  name  of  the  maker  is  forged.  (I  Comst.  113.) 
The  fact  is  not  found  that  the  plaintiff  was  aware  the  note  was  accom- 
modation paper.  The  plaintiff  was  a  bo7ia  fide  purchaser  within  the 
law  merchant.  Neither  the  complaint,  nor  the  finding  of  the  referee, 
tell  us  who  transferred  the  notes  to  the  plaintiff.  The  legal  presump- 
tion is,  that  he  received  them  fi'om  some  legal  liolder  in  due  course 
of  business. 

The  judfrment  should  be  afTirmed. 

P>7;owx,  J.,  delivered  an  opinif»n  to  the  same  effect. 

All  the  other  judges  concurring. 

Judgment  affirmed. 

5  Accord:     State  Bank  v.  Fearing,  16  Pick.   (Mass.)  633.  —  H. 


iv.]  seller:  warranties.  435 

4.  Knowledge  of  Invalidity  or  Valdelessness. 

§  115  BROWN  V.  MONTGOMERY. 

20  New  York.  287.  —  1859. 

Action  on  a  note.  Defense,  fraud.  Plaintiffs  sold  defendants  a 
post-dated  check  drawn  by  Farnham  &  Co.  to  the  order  of  L.  R. 
Farnhani,  one  of  the  firm,  and  by  him  indorsed.  On  the  day  of 
the  sale  plaiiitiff.s  employed  Cuttinor,  a  bill  broker,  to  sell  the  check. 
(.'uttini(  olleicd  it  to  uiio  Chard,  who  declined  it  on  the  srround  that 
he  lield  one  drawn  and  indorsed  by  the  same  parties  which  had  just 
been  protested  for  non-payment.  Cutting  then  sold  it  to  defendants 
without  disclosing  the  conversation  with  Chard.  The  drawers  were, 
unknown  to  defendants,  insolvent.  The  note  in  suit  was  given  for 
the  purcha-e  price  of  the  check. 

The  court  charged  t!ie  jury  that  the  non-payment  and  protest  of  the 
check,  on  the  lltli  .\pi'il,  was  evidence  tending  to  show  insolvency 
in  the  drawers;  that  it  was  the  duty  of  Cutting  to  communicate  to 
the  defendants  what  he  had  heard  Chard  say  about  the  protest  of  that 
check,  witlioiit  regard  to  what  he  may  have  thought  about  the  sol- 
vency of  the  drawers ;  and  if  he  did  not  do  so,  and  they  were  really 
insolvent,  the  plaintiffs  could  not  recover  on  the  note.  The  plain- 
tilfs'  counsel  excepted  to  both  branches  of  the  charge.  There  was 
a  verdict  and  judgmcut  for  the  defendants,  which  was  affirmed  at  a 
general  term.     'J'hc  plaintiff  appealed. 

Dknio,  J. —  I  think  there  was  no  error  in  the  charge  to  the  jury 
in  the  Superior  Ccjurt.  The  law  unqucslionahly  is,  as  it  was  assumed 
on  the  argument,  thai  notice  to  the  plaintiffs'  agent.  Cutting,  while 
ho  was  actually  engaged  in  attempting  to  sell  the  check,  of  the  failure 
of  the  drawers,  was  c(juivalent,  so  far  as  the  present  action  is  con- 
cerred,  to  notice  to  tlic  |tlai:itiffs  themselves. 

What  Chard  informed  him,  was  not  precisely  that  Farnham  &  Co. 
I  il  failed,  but  that  their  dicck  on  the  bank  at  which  tlicv  kept  their 
r  •.•our.t  was  that  day  protested  for  non-payment.  This,  prima 
f  clr,  wa.s  notice  that  they  ba.l  suspended  paynumt ;  for  when  a 
l.usiness  man  in  a  coninierciMi  town  fails  to  meet  his  j)aper,  pavable 
at  a  bank,  and  especially  his  checks  upon  the  bank  at  which  he 
keeps  his  account,  the  natural  inference  which  every  one  draws  is, 
that  he  is  no  longer  able  to  pay  his  debts.  Such  a  circumstance  may 
occur  from  oversight  or  accident,  but  those  are  exceptional  cases. 
The  failure  to  meet  the  paper  is  itself  a  suspension  of  payment, 
and  notice  of  such  a  fact,  unaccompanied  with  any  explanation  which 
woulil  give  it  a  different  character,  is  notice  of  the  commen'i.il  f.iilnre 
of  the  party.  That  it  was  so  understood  bv  Cutting  miwI  Cli.ird  is 
evident  from  the  fact  that  tliey  speculated  upon  the  cjuestion,  whether 


436  LIAHILITY    OK    PARTIES.  [aRT.    VI. 

the  mombors  of  tlie  firm  druwin'r  the  cheek  woiiUl  ultimately  he  uhle 
to  pay.  Upon  tliat  question,  Chard,  as  a  creditor  is  apt  to  do,  took  the 
most  favorahle  view.  It  is  apparent  that  neither  of  them  expected 
the  check  to  ho  j)aid  on  presentation  when  it  sliould  mature,  five  days 
afterwards.  The  Suj)erior  Court  considered  tliat  the  confidence  wliich 
Chard  expressed  in  the  ultimate  solvency  of  the  members  of  the  firm, 
did  not  relieve  Cutting  from  the  duty  of  communicating  to  the  defend- 
ants the  fact  that  its  check  had  not  been  met.  I  am  of  the  same 
opinion.  T^p  to  tliat  time  the  drawers  were  in  good  credit,  and  their 
paper  of  this  kind,  we  are  to  presume,  was  promptly  met.  Thereafter, 
the  holders  of  such  paper  were  to  be  put  upon  their  legal  diligence 
in  the  courts,  with  a  fair  expectation,  perhaps,  that  they  might  ulti- 
mately be  able  to  obtain  payment.  The  difference  between  a  bank 
check  having  five  days  to  run,  and  which  is  then  to  he  paid,  and  a 
suspended  debt  against  parties  who  have  failed,  is  sufficiently  obvious. 
The  defendants  purchased  this  check  as  one  of  the  former  class,  while 
the  plaintiffs'  agent  well  knew  that  it  belonged  to  the  latter,  and  with- 
held that  knowledge  from  the  defendants.  The  plaintiffs'  conduct  is 
less  censurable,  morally,  tlian  it  would  be  had  it  been  proved  that  they 
personally  knew  of  the  failure  of  the  draw'ers;  but  in  point  of  law, 
the  case  is  the  same  as  though,  after  hearing  that  Farnham  &  Co.  had 
failed,  they  took  the  paper  which  they  held  against  them  into  the 
street,  and  sold  it  to  parties  who  had  not  heard  of  that  event.  Such 
an  act  could  not  be  justified  at  law  any  more  than  in  the  forum  of 
conscience. 

The  judge  was  therefore  perfectly  correct  in  instructing  the  jury 
that  it  was  the  duty  of  Cutting  to  communicate  to  the  defendants 
what  he  had  heard  Chard  say  as  to  the  protest  of  the  other  check. 
He  was  also  correct  in  advising  them  that  the  consequences  of  omit- 
ting to  do  so  was  that  the  plaintiffs  could  not  recover  on  the  note. 
Where  a  party  negotiates  commercial  paper,  payable  to  bearer,  or 
under  the  blank  indorsement  of  another  person,  he  cannot  be  sued 
on  the  paper  because  he  is  not  a  party  to  it;  but  he  nevertheless  war- 
rants that  he  has  no  knowledge  of  anv  facts  which  prove  the  paper 
to  be  worthless,  on  account  of  the  failure  of  the  makers,  or  by  its 
being  already  paid,  or  otherwise  to  have  become  void  or  defunct;  for, 
eays  Judge  Story,  any  concealment  of  this  nature  would  be  a  manifest 
fraud.     (Story  on  I^rom.  Xotes,  §  118.) 

The  plaintiff's  counsel  argued  that,  according  to  the  case  of 
Nichols  V.  Pinner  (18  X.  Y.  295),  the  plaintiffs  and  their  agent  were 
warranted  in  maintaining  silence  as  to  the  failure  of  Farnham  &  Co., 
though  they  knew  it  and  the  defendants  did  not.  But  the  cases  are 
essentially  different.  There  we  decided,  that  where  a  merchant,  know- 
ing himself  to  be  insolvent,  purchases  goods  without  disclosing  the 
fact,  there  being  no  inquiry  made,  he  is  not  necessarily  guilty  of 
fraud,  as  he  may  honestly  believe  that  he  can  go  on  and  retrieve 


IV.]  SELLER:  WARRANTIES.  437 

his  affairs.  Where  so  much  of  the  trade  of  the  country  is  conducted 
without  invested  capital,  or  on  borrowed  capital,  it  must  often  happen 
that  a  merchant  who  is  ultimately  successful  has  known  periods  of 
commercial  disaster  when  his  property  would  not  pay  his  debts.  It 
would  be  too  strict  to  hold,  that  under  such  circumstances  he  must 
in  all  cases  go  into  liquidation,  or  expose  himself  to  probably  bank- 
ruptcy by  disclosing  his  condition.  But  the  case  does  not  countenance 
the  position,  that  a  dealer  who  has  been  of  known  standing,  but  who 
has  suddenly  failed  in  business,  can  go  to  those  who  w^ere  acquainted 
with  his  former  character,  but  who  have  not  heard  of  his  failure,  and 
innocently  purchase  their  property  on  credit.  Judge  Selden,  in  his 
opinion,  puts  that  case  as  one  not  covered  by  the  judgment. 

The  judge  was  also  right  in  stating  to  the  jury,  that  the  non-pay- 
ment of  the  check,  spoken  of  by  Chard,  was  evidence  upon  the  ques- 
tion of  the  insolvency  of  the  drawers.  I  have  already  stated  what  I 
consider  the  necessary  inference  from  such  a  circumstance  among 
business  men.    The  judgment  must  be  affirmed. 

Johnson,  Ch.  J.,  Comstock,  Gray,  and  Grover,  JJ.,  concurring. 

Judgment  affirmed.® 


5.  Indorser  :  Instrument  Valid  and  Subsisting. 

§116  HOROWITZ  V.  WOLLOWITZ. 

59  Miscellaneous  (N.  Y.  Sup.  Ct.,  App.  T.)  520.  —  1908. 

GiEGEKiCH,  J.  The  complaint  alleges  that  on  the  28th  day  of 
December,  lOOfi,  the  defendant  Barnet  Cohen  made  and  delivered  to 
the  defendant  Jacob  Jormack  his  promissory  note,  in  form  as  follows: 

"  $500.00  Dec.  28,   IHOG. 

"  Six  months  and  fivp  flays  .after  date  T  promise  to  pay  to  tlie  order  of 
myself  five  hundred  dollars  at  lOV^  Carmine  St. 

"  Value  received.  B.  Cohen." 

—  and  that  at  the  time  of  making  said  note,  and  prior  to  its  delivery 
to  the  fijaintiff,  the  defendant  Louis  Wollowitz  indorsed  it,  for  the 
purpose  of  giving  credit  thereto  with  the  defendant  Jormack,  and 
with  the  intent  to  charge  liiniself  as  first  indorser.  It  is  further 
alleged  that  thereafter  and  before  maturity  the  defendant  Jormack 
indorsed  tlie  note  to  the  plaintiff,  who  on  the  credit  of  the  prior  in- 
dorsements, gave  value  therefor.  Then  follow  appropriate  allegations 
of  presentment,  nonpayment,  protest,  and  notice.    The  answer,  among 


•Cited  with  approval  in  Rothmilhr  v.  Stein,  14.1  N.  Y.  p.  592.  But  the 
§eller  is  not  hound  to  disclose  that  the  instrument  is  accommodation  paper 
drawn  hy  a  clerk  nnd  aceepted  hy  the  accommodated  party.  People's  Bank  v. 
Bogart,  81  N.  Y.  101.  — H. 


438  LIAIUI.ITV    OF    I'AlMlliS.  [aUT.    VI. 

othor  things,  sets  ii})  lli;it  Jorniack  exacted  and  received  usury  from 
Cohen,  the  maker  ol'  the  note,  and  that  (he  di'fendant  signed  his  name 
to  said  note  after  sudi  usurious  auit'cniciil  had  ln-en  consummated  and 
executed  between  Jorniai'k  ami  Cohen,  and  that  the  note  was  taiiilc;! 
witli  usui'V  in  its  ince])ti(tii,  and  never  liad  any  legal  and  valid  in- 
ception, and  was  void  \'ov  usury.     *     *     * 

At  the  close  of  the  ])hiinlill"s  I'ase  a  concession  was  made  that  there 
was  usury  in  the  in('e])lion  of  the  note  hetwccMi  roheii  and  Jormack. 
The  defendant  ])ut  in  no  evidciicc,  hut  tiiovcd  to  dismiss  the  com- 
plaint on  the  ground  thai  it  airii'inal  i\  cly  apiirai'i'd  that  tlie  note  was 
void  in  its  inception.  'Vlw  couii  I'cscrvcd  dcci^iiui,  ami  sul»s(M]ui'ntly 
rendered  judgment  in  favor  of  the  defendant.     *     '''     * 

On  behalf  of  tlie  a])j)('lhint  it  is  claimed  that  section  1)G  of  the 
Negotiable  Instruments  Law  (Laws  1897,  c.  612,  ]).  7;)2)  has  en- 
tirely swept  away  the  defense  of  usury  as  against  holders  in  due 
course,  citing  Schlesinger  v.  Kelly,  114  App.  Div.  546;  Wirt  v. 
Stubble  field,  17  App.  Cas.  D.  C.  284;  Broadiiunj  Trust  Co.  v.  Man- 
heim,  47  Misc.  Rep.  415,  and  the  concurring  memorandum  of  Mr. 
Justice  WiUard  liartlctt  in  Scltlemnjer  v.  diUioolij,  189  N.  Y.  1,  at 
page  34.^ 

It  is  not  necessary  in  the  present  case,  however,  to  pass  upon  the 
question  of  the  availability  to  the  maker  of  a  note  of  the  defense  of 
usury  as  against  holders  in  due  course,  because  the  liability  involved 
in  this  appeal  is  that  of  an  indorscr,  not  of  the  maker,  and  the  liability 
of  an  indor.ser  is  dealt  with  in  oilier  ])ortions  of  the  act;  section  116 
providing: 

"That  every  indorser  wlio  indorses  without  (|ualification  warrants 
to  all  subsequent  holders  in  due  course:  *  *  *  (2)  That  the  in- 
strument is  at  the  time  of  his  indorsement  valid  and  subsisting." 

In  Packard  v.  Windliolz,  88  App.  Div.  365,  one  Truman  made  his 
promissory  note  to  one  Eaton,  and  then  forged  Eaton's  indorsement, 
and  next  procured  the  defendant  Windholz  to  indorse  it.  '^Fhe  note 
with  these  two  indorsements  upon  it,  was  preseided  to  the  plaintiffs, 
who  were  note  brokers;  and  ])y  them  was  negotiated  for  the  benefit  of 
Truman.  The  defendant  and  those  subsequent  to  him  believed  the 
indorsement  of  Eaton  was  genuine,  and  the  ])laintiffs  learned  he  was 
responsible.  The  Appellate  Division  sustaiiied  the  judgment  in  favor 
of  the  plaintiffs,  holding  that  the  defendant  by  his  contract  of  indorse- 
ment guaranteed  the  genuineness  of  the  signature  of  Eaton,  the  prior 
indorser  on  the  note,  and  that  the  note  was  a  valid  and  subsisting 
obligation,  citing  section  116  of  the  Negotiable  Insti'uments  Law. 
This  ruling  was  upheld  by  the  Court  of  Appeals  without  opinion. 
180  X.  Y.  549. 

T  Sep  fichleftinfifr  v.  hchriuiifr,  101  N.  Y.  TO,  ante,  p.  :37S,  and  Klar  v.  Koa- 
tiuk,  65  Misc.  199,  ante,  note  7,  p.  380.  —  f. 


IV.]  seller:  warranties.  439 

In  Lennon  v.  Grauer,  159  N.  Y.  J;53,  it  was  held  that  the  fact  that 
the  name  of  the  maker  of  a  note  was  forged  did  not  discharge  tlie 
indorser;  the  ground  of  the  decision  being  that  the  indorsement  of  a 
promissory  note  implies  a  contract  by  the  indorser  with  a  subsequent 
bona  fide  holder  that  the  instrument  itself  and  all  the  signatures  prior 
to  the  particular  indorsement  are  genuine. 

Under  the  language  of  the  statute,  as  applied  by  the  above  decisions, 
it  must  be  held  that  in  indorsing  the  note  the  defendant  warranted  its 
validity,  and  that  he  cannot  be  heard  now  to  assert  that  it  is  void  for 
usury,  any  more  than  for  forgery  or  any  other  cause.  Furthermore, 
apart  from  the  provisions  of  section  116,  it  is  an  established  rule  that 
the  obligation  of  an  indorser  is  a  new  and  independent  contract, 
separate  and  distinct  from  the  contract  evidenced  by  the  note.  4  Am. 
&  Eng.  Ency.  L.  (2d  Ed.)  p.  477,  and  cases  cited;  Morford  v.  Davis, 
28  N.  Y.  481  ;  Donahoe  v.  Meel'er,  ^5  App.  Div.  43. 

The  judgment  should  be  reversed,  and  a  new  trial  ordered,  with 
costs  to  appellant  to  abide  the  event.     All  concur.^ 


§116        UNITED    STATES   r.   AMERICAN   EXCEANGE    NA- 
TIONAL BANK. 

70  Federal  Reporter  (Dist.  Ct.,  S.  D.,  N.  Y.)  232. —  1895. 

AcTio.v  to  recover  the  amount  of  a  pension  draft  which  defendant 
had  collected,  as  collecting  agent  of  another  bank;  it  appearing  that 
the  name  of  the  payee  had  been  forged  upon  the  draft  after  her  death. 
The  court  directed  a  verdict  for  defendant,  and  plaiutiil  moved  for  a 
new  trial. 

Brown,  I).  .J.  The  pension  draft  in  this  case  was  paid  to  the  de- 
fendant bank  by  the  subtreasury,  upon  the  forged  indorscmcMt  of  the 
payee's  name  after  her  death.  The  liellaire  Haid<  of  Ohio  had  pre- 
viously cashed  the  drafl  upon  Hie  forged  indorseinenl.  ;iml  thereupon 
indorsed  it  "for  collection"  to  the  defendant  hank  iil  New  ^'ork. 
The  latter  was  the  collecting  correspondent  of  the  Hellaire  Hank  as 
regards  its  funds  in  New  York.  The  collection  was  made  in  good 
faith  by  the  defendant  bank  and  the  proceeds  remitted  to  the  I'.ellaire 
r.ank  soine  months  before  the  discovery  ftf  the  forgerv.  The  indorse- 
ment of  the  forged  draft  by  the  I'.ellaire  Hnidc  showed  uy)on  its  face 
that  the  riefendnnt  was  to  act  as  collecting  agent  only.    The  defendanl 


« Tnflor-^ompnt  nrlmifs  tbr>  siirnntnrr'  imrl  rnpiipify  of  ovory  prior  pnrtv 
I'rr.irott  linnk  v.  Cnvrrh/.  7  finiy.  217.  TIhh  ini-lu<l.'s  tlif  oxislcnco  ;iti(I  r:ip.nri 
ty  of  a  firm,  nnlrj/mplr  v.  tliUmhianil,  V,2  N.  Y.  .'j ;  or  of  a  corporation.  (Hid 
den  V.  Chnmhrrlin,  1R7  MnHs.  ISfi,  .191 ;  or  ef  a  married  woman.  Eilmumh  y 
Rnrnt,  51  N.  .1.  1-.  .'547.  Sr-p  Unmiiiw  v.  Kichnrdftnn.  4S  Vt.  5nH,  ante,  \ 
432.  —  H. 


440  LIAUILITV    OK    i'AKTlKS.  [aUT.    VI. 

nt'vor  had  any  property  in  tlie  tlral't  or  its  proceeds.  Tlie  later  au- 
thorities sustain  the  proposition  tliat  in  such  a  case  where  tlie  collect- 
ing agent  pays  over  the  funds  before  any  notice  of  irregularity  or 
fraud,  the  remedy  is  against  the  principal  alone.  Bank  v.  Arnislrung, 
148  U.  S.  50;  White  v.  Bank,  102  U.  S.  G85;  Sweeny  v.  Easter,  1 
Wall.  166;  Wells.  Fargo  cC  Co.  v.  U.  S.,  45  Fed.  337;  National  Park 
Bank-  V.  Seaboard  Bank,  114  N.  Y.  28. 

In  such  cases  the  indorsement  by  the  collecting  agent,  who  has  no 
proprietary  interest,  does  not  import  any  guaranty  of  the  genuineness 
of  all  prior  indorsements,  but  only  of  the  agent's  relation  to  the  princi- 
pal, as  stated  upon  the  face  of  the  draft;  and  as  this  relation  is  evident 
upon  the  draft  itself,  the  payor  cannot  claim  to  have  been  misled  by 
the  indorsement  of  the  agent,  or  any  right  to  rely  upon  that  indorse- 
ment as  a  guaranty  of  the  genuineness  of  the  payee's  indorsement. 

In  the  case  of  Onondaga  Co.  Sav.  Bk.  (64  Fed.  703),  as  T  find  upon 
examination  of  tlie  record  on  appeal,  no  question  like  the  present 
arose.  The  Onondaga  Bank  was  in  the  same  situation  as  the  Bellaire 
Bank  in  the  present  case.  It  had  cashed  the  forged  draft  and  was  col- 
lecting the  money  for  its  own  benefit  as  owner  of  the  draft.  Its  in- 
dorsement imported  a  guaranty  of  the  prior  signatures;  and  the  de- 
fendant's remedy  here  is  against  the  Bellaire  Bank. 

The  direction  of  a  verdict  for  the  defendant  upon  the  undisputed 
facts  w^as,  I  think,  correct,  and  the  motion  for  a  new  trial  should  be 
denied.® 

9  Mr.  Crawford  says  that  the  doctrine  of  this  case  has  been  changed  by  the 
Negotiable  Instruments  Law.  In  commenting  upon  §  IIG  on  page  89  of  the 
3rd  edition  of  his  work  on  this  statute,  he  says:  "  As  this  and  tlie  preceding 
section  include  the  case  of  every  indorser,  the  warranty  as  to  genuineness 
will  apply  to  one  to  whom  the  paper  has  been  indorsed  restrictively,  as,  for 
example,  where  the  indorsement  is  '  for  collection.'  This  undoubtedly  changes 
the  law;  for  the  former  rule  was  that  the  indorsement  of  a  bank  to  which 
paper  had  been  indorsed  '  for  collection  '  did  not  import  a  guaranty  of  the 
genuineness  of  all  prior  indorsements,  but  only  of  the  agent's  relation  to  the 
principal  as  stated  upon  the  face  of  the  paper;  and  it  was  held  that,  in  such 
a  case,  the  collecting  bank  was  not  liable  after  it  had  paid  the  proceeds  to  its 
principal,  though  a  prior  indorsement  was  a  forgery.  Vniind  States  v.  Ameri- 
can Exchange  Nat.  Bank,  70  Fed.  232;  Nat.  Park  Bank  v.  Seaboard  Nat.  Bank, 
114  N.  Y.  28.  But  this  rule  was  exceedingly  inconvenient  in  practice,  and 
hence  it  was  deemed  expedient  to  make  every  indorser  a  warrantor  of  genu- 
ineness. There  is  no  hardship  in  this  rule,  for  each  indorser  has  a  right  of 
recourse  against  all  prior  parties.  The  former  rule,  however,  introduced  such 
an  element  of  uncertainty  that  the  clearing  house  associatif)ns  throughout  the 
country  adopted  rules  to  obviate  its  effects,  and  the  bankers  sent  letters  to 
their  customers  requesting  that  they  discontinue  the  use  of  the  indorsement 
'  for  deposit,'  '  for  collection,'  etc.  In  this,  as  in  several  other  instances 
where  the  law  was  changed,  the  needs  of  the  business  community  were  deemed 
of  more  importance  than  technical  principles." 

For  a  statement  of  the  action  of  the  clearing  house  associations,  referred 
to  above  by  Mr.  Crawford,  see  also  First  Nat.  Bank  of  Belmont  v.  First  Nat. 
Bank  of  Barnesville,  58  Oh.  St.  207,  at  p.  214.  —  C. 


IV.]  seller:  warranties.  441 

6.  Liability  of  Agent  as  Seller. 

§  119  WOKTHINGTON  v.  COWLES. 

112  Massachusetts,  30.  —  1873. 

Action  to  recover  back  money  paid  by  plaintiff  to  defendants  for 
a  promissory  note  signed  by  one  Hanson,  the  indorsement  upon  which 
was  forged.  Defendants  were  note-brokers,  who  sold  the  note  for 
Hanson,  and  paid  him  the  purchase  money,  less  commissions,  before 
the  forgery  was  discovered.  Judgment  for  plaintiff.  Defendants 
allege  exceptions. 

Morton,  J.  —  This  is  an  action  of  contract  upon  the  implied  war- 
ranty of  the  genuineness  of  the  signature  to  a  note  sold  by  the  defend- 
ants to  the  plaintiff.  The  plaintiff  claimed  that  in  the  purchase  of  the 
note  he  dealt  solely  with  the  defendants,  and  upon  their  credit.  The 
defendants  claimed  that  they  were  acting  as  agents  of  Hanson  in  the 
transaction,  and  that  their  principal  was  disclosed  to  the  plaintiff. 
Upon  thopo  points  the  evidence  was  conflicting.  The  defendants  asked 
the  court  to  rule  "  that  if  the  defendants  were  in  fact  agents  for  Han- 
son, and  disclosed  their  agency  to  the  plaintiff,  or  the  plaintiff  knew  it, 
or  had  reasonable  cause  to  know  it,  the  defendants  would  not  be 
liable." 

Considered  as  an  abstract  proposition  of  law,  this  is  too  broad. 
It  omits  the  necessary  element  that,  in  the  dealing  or  transaction  in 
question,  they  were  acting  as  such  agents.  It  may  be  true  that  the 
defendants  were  agents  of  Hanson,  and  known  to  be  such  by  the 
plaintiff,  and  yet  if,  in  the  purchase  of  this  note,  it  was  understood 
by  the  parti(;s  that  the  plaintiff  was  dealing  with  and  upon  the  credit 
of  the  defendants,  they  would  be  liable.  An  agent  may  deal  so  as 
to  bind  himself  personally;  it  is  always  a  question  of  the  intention 
and  understanding  of  the  parties.  The  presiding  judge  properly 
refused  to  give  the  instructions  in  the  form  requested  by  the  defend- 
ants. Tiistf.'ul  thereof,  he  ruled  in  substance  that  the  question  was, 
from  whom  did  the  plaintiff  understand  that  he  was  buying  the 
note  —  from  the  brokers  oi-  from  Hanson?  and  that  if  snch  a  state 
of  farts  ocrurred,  that  the  plaintiff  understood,  or  ought  to  have 
undorstood  as  a  man  of  reasonable  intolligenfc,  that  he  was  dealing 
with  Hanson,  tho  defrndants  would  not  be  liablo. 

These  instructions  were  correct,  as  applied  to  the  farts  of  the  case. 
The  plaintiff  dealt  with  the  defendants.  His  evidence  tended  to 
show  that  he  contrnrtfd  witli  I  horn  as  principals,  'i'o  meet  this  prima 
facie,  rasp,  tho  defcnflarits  undertook  to  <jIiow  that  in  this  transaction 
they  were  dealing  as  agents  of  a  disclospd  principal.  Unless  from  their 
disclosures  or  other  sources  the  plaintiff  unrlerstood,  or  ought  as  a  rea- 
sonable man  to  have  understood,  that  he  was  dealing  with  Hanson,  he 


.j-lv'  1.1  Al•.ll.^l'^    OK   i'Ai;rii;s.  [art.  vi. 

had  a  right  to  nssunu'  that  lio  was  dcaliiij;  with  the  (lefoiHlants  as 
priufipals.  The  iiistriK-tioiis  g\\v]\  were  to  this  ('(ycct,  ami  were  as 
favorable  to  the  defendants  as  tlie  instnutioiis  rotiuestod,  with  tlic  addi- 
tion of  the  neiessary  (-|\ialili(atioii  tlial  tlie  defendants  were  in  this 
transaction  dealing  as  the  agents  of  Hanson.  (Wilder  v.  Coirlcs.  100 
Mass.   1ST;  Mcrriam  v.  Wolcolt,  :?  Allen,  258.) 

Exceptions  overruled.^ 


V.  Indorser:  secondary,  conditional  liability. 

1.  Indorsee's  Contract  as  Seller. 

[See  preceding  subdivision  TV,  pp.  419-442.] 

2.  Indorser's  Contract  as  Assurer  of  Payment. 

§  116  LONG  V.  STEPHENSON. 

72  North  Carolina,  560.  —  1875. 

Action  against  indorser.  Plaintid'  alleged  that  the  drawee  refused 
to  accept  or  pay,  and  that  defendant  on  demand  also  refused  to  pay. 
Defendant  alleged  non-preseninient  to  drawee  and  want  of  notice  of 
dishonor.     Judgment  for  defendant. 

Settle,  J. —  The  authorities  cited  by  the  defendant's  counsel 
establish  beyond  controversy : 

1.  That  the  draft  should  have  been  presented  for  pa}Tnent.^ 

2.  That  notice  of  non-payment  should  liave  been  given  in  reason- 
able time  to  the  defendant.^ 

As  both  of  these  essential  requisites  to  the  maintenance  of  this 
action  are  wanting,  we  concur  with  his  honor  that  the  plaintiff  is 
not  entitled  to  recover. 

Jndu'nierit  affirmed. * 


1  Accnrrl:      Mcritirn   National  Hank  v.   (la,llau(let,   120  N.  Y.  298;    Brown  v. 
Ames,  59  Minn.  470;  HufTcut  on  Agency,  §  186.  —  H. 
z  Post.  Art.  VII.  — H. 

3  Post,  Art.  VITI.     As  to  protest  as  a  third  requisite,  see  Art.  XIIT.  pofit. — H. 

4  "  Tlie  liability  of  the  indorser  is  strictly  conditional,  dependent  both  upon 
due  demand  of  payment  upon  the  maker  or  acceptor,  and  also  due  and  legal 
notice  of  the  non-payment.  The  purpose  and  object  of  such  demand  and 
notice  is  to  enable  the  indorser  to  look  to  his  own  interest,  and  take  immedi- 
ate measures  for  his  indemnity.  The  demand  and  notice  being  conditions 
precedent  to  the  indorser's  liability,  it  is  incumbent  on  the  holder  to  make 
clear  and  satisfactory  proof  of  them  before  he  can  recover."  Lawson  v. 
Farmers'  Bank,  1  Ohio  St.  206. 

"  The  indorser  of  a  bill  of  exchange,  whether  payable  after  date  or  after 
Bight,  undertakes  that  the  drawee  will  pay  it,  if  the  holder  present  it  to  him 
at  maturity  and  demand  payment;  and  if  he  refuse  to  pay  it,  and  the  holder 


V.  2.]  INDORSER.  443 

§  117    BRUSH  V.   ADMINISTRATORS  OF  REEVES. 

3  Johnson    (N.  Y.)    439.  — 1808. 

The  plaintiff  declared  on  a  promissory  note,  given  by  one  Spring 
to  Reeves,  the  intestate,  and  payable  to  him  or  bearer.  The  note 
was  indorsed  over  by  Reeves,  and  the  present  suit  was  brought  by 
the  indorsee  against  his  administrators.  There  was  a  general  de- 
murrer to  the  declaration,  which  was  in  the  usual  form  against  the 
indorsor. 

Per  Ctriam.— The  note  was  negotiable  under  the  statute,  and 
transferable  without  indorsement :  but  if  the  payee  chose  to  put  his 
name  on  the  bar-k,  he  became  as  much  bound  as  an  indorser,  as  if 
the  note  bad  been  made  payable  to  him  or  order. 

It  wa«  ruled  by  Chief  Justice  Holt,  in  the  case  of  The  Bank  of 
England  v.  Xnntian  (1  Lord  Raym.  442),  that  if  a  person  indorses  a 
bill  payable  to  bearer,  he  becomes  a  new  security,  and  is  liable  on 
the  indorsement.  The  declaration  at  least  is  good  on  a  special  de- 
murrer. But  the  defendant  may  withdraw  the  demurrer,  on  payment 
cf  costs,  and  pleading  forthwith. 

Judgment  for  the  plaintiff.^ 


8  116  OOTHOTTT  v.  BALLARD. 

41  Babboub  (N.  Y.)  33. —  1864. 

Action  against  indorscrs  on  note  due  Nov.  29  (Saturday).  Notice 
of  dishonor  received  about  T.  p.  m.  of  that  day.  Service  of  summons 
and  corrif»l!iint  in  Ihis  action  soon  after  on  tlic  same  day.  Juilginrnl 
for  plaint itr. 

By  the,  Court,  Mason,  J. —  The  only  question  presente<l  in  this 
case  is  whether  a  suit  can  be  maintained  against  tlie  indorscrs  of  a 
note  payable  at  a  bank,  and  wliich  has  been  duly  i)rolcstcd,  where 
the  suit  is  fommcnccd  on  the  day  of  the  protest,  or  the  third  day  of 
grace.  The  rule  in  England,  as  understood  by  Chiliii.  is  that  the 
Kuit  on  the  third  day  of  grace  is  premature.  (Sec  Chitty  on  Bills, 
400,  407,  400,  8th  Lond.  ed.)     And  such  I  understand  to  be  the  rule 


CBUsp  it  to  ho  profo«to(l.  an'!  duo  notioo  to  ho  givon  to  tho  indorsor,  tlion  h«> 
pronii<»n^  in  p,.v  it.  All  thoso  oonditions  ontor  into  nnd  mnko  part  of  tho  con- 
tract hotwoon  thoHo  partioR  to  n  foroi^m  |)i||  „f  oxohanjro;  an<l  tho  hnv  imposos 
tho  porffirnianoo  of  th«-m  upon  tho  linldor.  ;ih  conditions  precedent  to  tho  lia- 
bility of  tho  indorsor  of  tho  hill."      Muxsati  v.   f,nhr,   1    ITow.    (\\  S.  1    202. IT. 

fSoo  Roqrrn  v.  DrtmU  Snv.  Itnnk.  140  Mich.  039.  reported  in  IS  T..  X.  S.  R30. 
with  note  ontitlod  "  Holoaso  of  indorser  of  note  by  failure  to  enforce  liability 
of  maker."  —  C'.l 

5  See  p.  447,  note  (2),  pont.  —  \\. 


444  LlAIUl.lTY    OF    PARTIES.  [ART.    VI. 

held  in  Westminster  Hall.  (Castrique  v.  Bernaho,  6  Queen's  B.  R. 
498;  Liffrrfjf  v.  Mills.  \  T.  E.  170.)  The  rulo  is  so  understood  by 
Byles.  (See  his  late  work  on  Bills,  p.  181.)  In  this  country  there  is 
certainly  considerable  conflict  of  authority  over  the  question,  in  the 
courts  of  tlie  difTerent  states.  The  courts  of  Maine,  New  TTamp- 
shire,  Massachusetts,  South  ("arolina,  and  some  others,  have  held  that 
the  suit  could  be  commenced  on  the  third  day  of  grace,  at  any  time 
after  the  close  of  banking  hours  and  proper  protesting  of  the  note. 
(1  Pick.  401 ;  21  id.  310;  8  id.  414;  1  Metcalf,  43,  48;  4  Greenl.  Rep. 
479;  7  N.  Hamp.  Rep.  199;  8  Foster,  303;  4  Humph.  341;  5  Shep. 
230;  31  Maine  Hep.  580;  40  id.  62;  15  id.  67;  Wilson  v.  Williamson, 
1  Nott  &  McCord,  440.)  While  on  the  other  hand  the  courts  of 
Pennsylvania,  Ohio,  Hlinois,  Mississippi,  Alabama  and  some  others 
have  held  the  suit  prematurely  brought  if  commenced  on  the  third 
day  of  grace.  (Thomas  v.  Shoemaker,  6  Watts  &  Serg.  179;  Walter 
V.  Kirk,  14  Illinois  Rep.  55;  Wiggle  v.  Thomason,  11  Smedes  & 
Marsh.  452;  Beavan  v.  Eldridge,  2  Miles,  353;  Randolph  v.  Cook,  2 
Porter,  865;  5  Serg.  &  R.  318.) 

The  rule  in  this  state  has  long  been  regarded  as  settled  that  the 
suit  commenced  on  tlio  third  day  of  grace  was  prematurely  brought. 
The  question  came  before  the  Supreme  Court  in  Jlogan  v.  Cuyler  (8 
Cowen's  Rep.  203),  when  it  was  held  to  be  premature  to  commence 
the  suit  on  the  third  day  of  grace.  The  question  was  distinctly  pre- 
sented again  in  Oshorn  v.  Moncvre  (3  Wend.  170),  when  it  was  dis- 
tinctly held  the  suit  could  not  be  maintained,  when  commenced  on 
the  third  day  of  grace.  Chief  Justice  Savage  regarded  the  rule  so 
well  settled  with  us,  in  this  state,  that  he  held  in  Hopping  v.  Quin 
(12  Wend.  517),  that  where  an  attorney  commenced  a  suit  upon  a 
note  on  the  third  day  of  grace  and  was  beaten  and  then  brought 
suit  against  his  client  to  recover  for  his  services,  he  was  not  en- 
titled to  recover ;  and  in  speaking  upon  this  question  he  says :  "  It 
was  the  duty  of  the  plaintiff  to  have  known  that  a  suit  could  not 
be  brought  on  the  last  day  of  grace;  and  his  bringing  such  a  suit 
must  be  imputed  either  to  negligence  or  ignorance.  In  either  case 
it  lays  no  foundation  for  an  action  against  his  client,  who  has  been 
the  sufferer."  There  is  no  case  in  the  courts  of  this  state  to  the 
contrary  of  these  cases,  while  all  the  elementary  books  have  treated 
our  law  in  this  state  as  settled  in  conformity  to  these  cases.  Judge 
Cowen  so  regarded  it  when  he  wrote  his  treatise.  (1  Cowen's  Tr.  220, 
ed.  1844),  where  he  lays  down  the  doctrine  distinctly,  that  the  suit 
cannot  be  maintained  if  commenced  on  the  last  day  of  grace.  And 
so  Edwards  regards  it  in  his  treatise  on  Bills  and  Notes  (see  pages 
525,  526,  527)  ;  and  the  rule  in  this  state  is  so  regarded  by  Parsons 
in  his  treatise.  (See  Vol.  1,  page  440,  and  also  note  i.)  Chief 
Justice  Shaw  regards  our  rule  in  this  state  as  different  from  theirs. 
(1  Metcalf,  54.) 


V.    2.]  INDORSER.  445 

The  rule  in  England  seems  to  have  conformed  to  a  general  prac- 
tice —  the  practice  to  postpone  notice  of  the  dishonor  and  other  pro- 
ceedings, till  the  day  following  —  so  that  it  has  been  regarded 
amongst  merchants  as  a  right  to  have  all  of  the  last  day  of  grace  in 
which  to  pay  In  Hartley's  case  (1  Carr.  &  P.  555),  Abbott,  Ch.  J., 
en  a  motion  to  show  cause,  said,  "  I  think  the  notice  of  dishonor 
given  on  the  day  on  which  the  bill  is  payable,  will  be  good  or  bad  as 
the  acceptor  may  or  not  afterwards  pay  the  bill.  If  he  does  not 
afterwards  pay,  on  that  day  the  notice  is  good,  and  if  he  does  it  of 
course  comes  to  nothing"  And  Byles,  in  his  late  valuable  treatise 
on  Bills,  page  131,  says:  "The  acceptor  of  a  bill,  whether  inland 
or  foreign,  or  the  maker  of  a  note,  should  pay  it  on  demand  made 
at  any  time  within  business  hours  on  the  day  it  falls  due,  and  if 
it  be  not  paid  on  such  demand  the  holder  may  instantly  treat  it  as 
dishonored.  But,"  he  adds,  "  the  acceptor  has  the  whole  of  that  day 
within  which  to  make  payment,  and  though  he  should  in  the  course 
of  the  day  refuse  payment,  which  entitles  the  holder  to  give  notice  of 
dishonor,  yet  if  he  subsequently  on  the  same  day  makes  payment  it 
is  good,  and  the  notice  of  dishonor  becomes  of  no  avail."  This  is 
precisely  as  I  understand  the  rule  with  us.  Now  if  we  admit  that  the 
courts  of  Massachusetts,  Maine,  New  Hampshire,  etc.,  have  the  better 
reason  for  their  decisions,  there  is  no  such  great  principle  involved  in 
the  case  as  would  justify  us  in  overruling  our  own  cases  and  follow- 
ing theirs;  especially  so  where  we  are  supported  by  equal  weight  of 
authority  on  our  side;  and  Parsons,  who  is  an  earnest  advocate  on  the 
other  side,  admits  that  "  there  is  strong  reason  for  holding  that  a 
party  boiinfl  to  pay  has  the  whole  of  the  day  of  maturity."  (Parsons 
on  Notes  and  Bills,  vol.  2,  p.  460.)  And  our  rule  has  certainly  one 
advantage ;  it  tends  to  uniformity  in  the  law  by  conforming  to  the 
general  rule  with  reference  to  all  other  contracts,  which  holds  that 
when  a  flay  is  appointed  for  the  payment  of  money  the  payer  has  the 
whole  of  the  day,  down  to  the  last  moment,  in  wliich  to  tender  the 
money. 

It  is  proper  to  remark  that  none  of  the  cases  make  anv  difTer- 
ence  or  distinction  between  the  case  of  the  maker  or  indorscr.  None 
can  be  made.  As  regards  this  question  of  the  right  to  bring  the 
suit,  there  is  not  and  ought  not  to  be  any  distinction  between  a  note 
payable  at  bank  and  one  payable  at  large,  or  at  the  counting  house 
of  the  merchant;  and  none  seems  to  have  been  recognized  in  this 
Btate.      (2  Cowen,  766.)     *     *     ♦ 

New  trial  grantecj. 


446  LIABILITY    OF    PARTI KS.  [aRT.    VI. 

3.  Irregular  Indorser. 

§114  COULTER  7'.  RICHMOND.  • 

59  New  York,  478.  —  1875. 


8  [The  foUnwinp  note  was  in  the  first  edition  appended  to  the  case  of  Coul- 
ter V.  Richmond,  5!»  N.  Y.  478.  which  is  omitted  in  this  edition.  It  will  of 
course  be  observed  that  the  note  pivcs  the  law  as  it  existed  prior  to  the  enact- 
ment of  the  Negotiable  Instruments  Law.  —  C] 

Irregi'I.ar  Inporskr.  There  is  a  liopeless  conflict  of  judicial  authority  as 
to  the  nature  of  the  contract  of  the  irregular  indorser.  e.  <f.  where  a  negotiable 
instrument  payable  to  A.  is  indorsed  first  ^y  B.,  delivered  to  A.,  and  then  (per- 
haps) indorsed  by  A.  and  transferred  to  C.  The  matter  is  solved,  prst,  by  a 
presumption  from  the  appearance  of  the  paper,  and,  second,  by  parol  evidence 
as  to  the  time  of  B.'s  indorsement  or  as  to  that  and  also  as  to  the  actual  con- 
tract intended  by  the  parties.     The  conflicting  rules  may  be  thus  stated: 

/.  Presumption  that  B.  is  an  indorser.  (1)  The  presumption  from  the 
appearance  of  the  paper  is  that  B.  is  a  second  indor.ser.  (o)  Upon  proof  that 
the  indorsement  was  made  before  delivery  to  the  payee  (A.),  the  irregular 
indorser  (B.)  is  treated  as  the  first  unqualified  indorser  and  is  liable  as  such 
to  the  payee  (unless  he  signed  for  the  accommodation  of  the  payee),  and  to 
subsequent  parties.  It  is  as  if  the  payee  (A.)  indorses  without  recourse  to 
the  irregular  indorser  (B.),  and  the  latter  then  indorses  in  blank  to  the  payee. 
In  theory,  therefore,  the  payee  (A.)  is  the  first  (qualified)  indorser;  the 
irregular  indorser  (B.)  is  the  second  (unqualified)  indorser;  and  should  the 
payee  (A.)  then  indorse  in  blank  he  becomes  the  third  (unqualified)  indorser. 
It  is  a  short  cut  to  say  that  the  irregular  indorser  is  the  first  indorser,  because 
he  is  the  first  unqualified  indorser.  Moore  v.  Cross,  19  N.  Y.  227;  Wade  v. 
Creighton,  25  Ore.  455;  BInkeslcc  v.  Hen-rtt,  76  Wis.  341.  (b)  Upon  parol 
proof  as  above  the  same  rule  follows,  but  parol  proof  is  further  admissible  to 
show  the  actual  contract,  as  that  the  irregular  indorser  signed  as  maker  or 
(if  statute  of  frauds  can  be  escaped),  guarantor.  De  Pauw  v.  Bank  of 
Salem.  12fi  Ind.  55.3;  Schafcr  v.  Farmers',  etc.,  Bank,  59  Pa.  St.  144;  Central 
K.  B.  v.  Dreydoppel,  134  Pa.  St.  490;  nayden  v.  Weldnn,  43  N.  J.  L.  128; 
Jfeal  V.  Wilson,  79  Ga.  736.  (c)  But  if  the  instrument  is  non-negotiable,  the 
irregular  indor.eer  is  held  to  bo  a  maker  or  guarantor.  Cromwell  v.  Hewitt, 
40  N.  Y.  492;  First  ^\  B.  v.  Babcock,  94  Cal.  96;  Pool  v.  Anderson,  116  Ind. 
88;  Gorman  v.  Ketchum,  33  Wis.  427. 

(2)  In  Alabama  it  seems  that  the  irregular  indorser  is  treated  as  a  regular 
first  indorser.  Books  v.  Anderson,  58  Ala.  238.  See  also  Yuen  Lung  v.  Burke, 
9  Hawaiian  Rep.  142. 

(3)  By  statute  in  some  jurisdictions  the  irregular  indorser  is  treated  as  a 
regular  indorser.  Bills  of  Exchange  Act  (Eng. ),  §  56,  and  Chalmer's  Notes, 
p.  188  et  seq.;  Dominion  Bills  of  Exchange  Act  (Canada),  §  56;  California 
Code,  §  3117,  and  see  Fessenden  v.  Summers,  62  Cal.  484;  Massachusetts  St. 
of  1874,  c.  404.  In  Massachusetts  the  original  doctrine  that  the  irregular 
indorser  is  liable  as  a  co-maker  (Union  Bank  v.  Willis,  8  Met.  504),  seems 
to  be  modified  only  to  the  extent  of  requiring  that  the  irregular  indorser  have 
notice  of  dishonor.  The  irregular  indorser  in  Massachusetts  is  therefore  a 
co-maker  with  a  right  to  notice  of  non-payment  the  same  as  an  indor.ser. 
Mulcare  v.  Welch,  160  Mass.  58;  Legg  v.  Vinal,  165  Mass.  555;  Connecticut 
Gen.  St.,  §  1860.  as  construed  in  Spencer  v.  Allerton,  60  Conn.  410  (now 
governed  by  Neg.  Inst.  L.). 


V.    3.]  INDORSES.  447 

§  114     ROCKFIELD  v.  FIRST  NATIONAL  BANK  OF  SPRING- 
FIELD. 

77  Ohio  State,  311.  —  1907. 

Action  on  note  indorsed  by  defendants  Rockfield,  Snyder  and 
others  before  delivery  to  plaintiff.  Defendants  answered  that  they 
were  not  notified  of  tlie  nonpayment  of  the  note  by  the  maker  at 
maturity.  Plaintiff's  denuirrer  to  answer  was  sustained,  and  de- 
fendants not  pleading  furtlier,  judgment  was  rendered  against  them. 
Defendants  bring  error. 

//.  Presumption  that  B.  is  a  co-maker.  (I)  The  presumption  from  the 
appearance  of  tlie  paper  is  that  the  irregular  imlorser  (B.)  i>  a  coniakei. 
Good  V.  Martin.  95  U.  S.  90;  flood  v.  Martin,  1  Colo.  165;  Tabor  v.  Miles,  15 
Colo.  .App.  127;  McCallum  v.  Drir/ifs,  35  Fla.  277;  Bradford  v.  Prescott,  85 
Me.  482;  Schrorder  v.  Turner.  OS  Md.  506;  Cumz  v.  Giegling,  108  Mich.  295; 
Peninsular  Bank  v.  Ilnsie.  112  Mich.  351;  Dennis  v.  Jaekson,  57  Minn.  286; 
fichultz  V.  Houard.  03  Minn.  100;  h'ichardson  v.  Foster.  73  Miss.  12;  Mastin 
Rank  V.  Hammersloufih.  72  Mo.  274  (cf.  First  Nat.  Bk.  v.  Payne.  Ill  Mo. 
291)  ;  f^alisbury  v.  First  .V.  /?.,  37  Neb.  872;  Sargent  v.  Bobbins,  19  N.  H.  572; 
McFetrich  v.  ivoodrow,  67  X.  H.  174;  Hoffman  v.  Moore,  82  N.  Car.  313; 
''•ran  V.  Brooks-Waterfeld  Co.,  55  Oh.  St.  596;  Jackson  Bank  v.  Irons,  18 
!^  T.  718;  Riflvester  Bleckley  Co.  v.  .Aleirine,  48  S.  Car.  308;  Provident,  etc., 
.s'or.  V.  Edmonds,  95  Tenii.  53;  Barton  v.  .American  N.  /?..  8  Tex.  Civ.  .'\pp. 
223;  Bank  v.  Dorset  Marble  Co.,  61  Vt.  106;  Donohoe-Kelly  Banking  Co.  v. 
I'uget  Sound  Sav.  Bank,  13  \\'ash.  407.  («)  Most  of  the  above  jurisiiictiona 
.'illow  parol  eviflence  to  show  the  real  contract.  1  Daniel  on  Neg.  Tnst..  §§  710- 
712.  (b)  .\  f»'w  states  do  not  if  in  fact  1?.  signed  l)efore  delivery  to  the  payee. 
Dennis  v.  Jaekson,  57  Minn.  2S6. 

(2)  But  if  the  paper  is  payable  to  the  drawer's  or  maker's  own  order  and 
indorsed  by  B.  before  negotiation,  the  irregular  indorser  is  treated  as  a  (ir.st 
indorser,  the  paper  being  put  upon  the  same  footinr'  as  paper  payable  to 
Iciirer.  Bigelow  v.  CoHon.  13  Cray  (Mass.)  309;  Clapp  v.  Rice,  13  Gray 
I  Mass.)    403;    Dubois  v.   Mason.   127   Mass.  37;    First  .V.    B.  v.   Payne.   Ill    Mo. 

291;     Hately  V.   Pike.    162    III.   241.     See   §    117   post.      But    s.c    Xational    Bunk 
V.   Dorset   Marble  Co.,  61    Vt.    106. 

(3)  In  one  or  two  states  it  seems  immaterial  (hat  the  payee  actually 
indorses  above  the  name  of  the  irregular  iiirlorx' r.  Hank  v.  Dnrsrt  Marble 
Co..  01   Vt.   106:    MvFilvirh  v.   Woodroir.  (17   \.    II.    171. 

///.  I'resumplinn  that  B.  is  a  guaranlm  The  presumption  fioiii  (lie  appear- 
ance of  the  iiajifr  '\<  that  the  irregular  indorser  is  a  u'uarantor.  ttlalrhford  v. 
MUliken,  35  Ml.  438;  Kivgsland  v.  Koeppr.  137  111.  314;  [mold  v.  Bryant. 
8  Bush  (Ky.l.  t;68  (by  sfatutfi;  Cnngrr  v.  Babbit.  67  Inwa.  13  (by  -tatute); 
FuHerton  v.  //(//.  IS  Fans.  558.  Tartd  evidence  is  admissible  to  show  the 
actual  contract.  \fHli<ia»  v.  llfJliroid,- .  168  111.  313.  Tn  srnue  states  the  payee 
f)r  holder  may  treat  the  irretrular  indf)rser  either  as  a  comaker  fir  suret\'  as  he 
may  elect.  Iiiit  fiarol  proof  may  show  the  trm-  contract.  Orrick  v.  Cnlstnn.  7 
Gratt.  (Va.)  180;  Bonnokr,  etc.,  Cn.  v.  Wntkins,  41  W.  Vn.  7H7 ;  ,1fi7/'r  v. 
Clrndennin.  42  \V.  \'n.  416. 

Ah  to  whether  an  irregular  indorsement  construed  as  a  guaranty  is  within 
the  atatufe  of  frauds,  there  is  a  conflict.  That  it  is:  Culbrrtson  v.  Smith.  52 
Md.  R2H;  llaudm  v.  Wridnn.  43  \.  .1.  T,.  128;  ftauer  v.  Patterson,  84  Pa.  St. 
274.  That  if  is  not:  Brrkuiih  v.  .\ng>ll.  6  (Own.  315;  Stourll  v.  Raymond, 
83  III.  120;  Petcmon  v.  Rmsill,  62  Minn,  220,  —  H, 


448  LIAIULITV    OF    PARTIES.  [aRT.    VI. 

Spear,  J.  Wliothor  or  not  tlio  answer  avers  a  defense  to  the  cause 
of  action  set  uj)  in  (lie  pctilion  is  (lie  (lucstion  here.  The  theory  of 
the  defendants'  pleading  is  that  h'oi'kfiehl  and  Snyder,  hy  writing 
their  names  across  tlie  back  of  tlie  note,  became  indorsers  in  tlie  com- 
mercial sense,  and  therefore  entitled  to  notice  of  demand  at  maturity 
of  the  maker  and  of  nonpayment,  and,  failing  that,  no  liability  at- 
tached. The  theory  of  the  petition  is  that  these  defendants,  having 
signed  the  note  before  delivery,  must  be  held  to  have  signed  with  the 
purpose  of  giving  it  credit  and  of  aiding  negotiability,  and  therefore 
stand  as  makers,  and  although  their  names  appear  on  the  back  of 
the  instrument,  and  they  are  in  law  sureties,  yet  they  are  not  in- 
dorsers in  the  commercial  sense,  and  therefore  not  entitled  to  notice 
of  demand  and  nonpayment.  This  view  is  the  one  adopted  by  the 
trial  court,  which  incorporated  in  the  judgment  entry  a  finding  that 
the  defendants  are  indebted  as  joint  and  several  makers  of  the  note, 
and  this  is  the  view  taken  of  the  question  by  the  Circuit  Court  in 
atlirming  the  judgment  of  the  common  pleas.  Which  is  the  correct 
view  is  the  question  we  have. 

That  the  conclusion  adopted  by  the  lower  courts  is  in  accord  with 
the  law  as  held  in  tlrs  state  from  early  times,  and  with  all  decisions 
of  this  court  thus  far  made,  is  conceded.  The  latest  deliverance  on 
the  subject  is  the  case  of  Ewan  v.  BrooJcs-Water field  Co.,  55  Ohio  St. 
596,  opinion  by  Williams,  C.  J.  It  is  there  held  that  where  the  name 
of  a  third  party,  a  stranger  to  the  note,  appears  in  blank  upon  the 
back  of  the  note  at  the  time  it  takes  effect,  his  undertaking  rests 
upon  the  consideration  which  supports  the  note,  and  the  presumption 
is  that  he  intended  to  be  liable  as  a  surety,  and  he  will  be  held  accord- 
ingly unless  it  is  shown  that  there  was  a  different  agreement  between 
the  parties.  This  conclusion  is  reached  after  a  careful  and  some- 
what extended  review  of  authorities,  many  of  them  decisions  of  this 
court,  and  is  supported  by  strong  and  convincing  argument.  While 
a  contrary  doctrine,  holding  such  party  to  be  an  indorser  in  the  com- 
mercial sense,  had  been  held  in  a  number  of  states,  notably  Alabama, 
California,  Connecticut,  Indiana,  Mississippi,  New  York,  Oregon, 
Pennsylvania,  and  Wisconsin,  the  Ohio  rule,  as  above  indicated,  had 
been  the  settled  common  law  rule  of  the  states  of  Arkansas,  Colorado, 
Delaware,  Maine,  Maryland,  Massachusetts,  Michigan,  Minnesota, 
Missouri,  New  Hampshire,  North  Carolina,  Rhode  Island,  South 
Carolina,  Texas,  Utah,  and  Vermont. 

The  statute  referred  to  is  the  act  of  April  17,  1902,  known  as  the 
Negotiable  Instruments  Act  (95  Ohio  Law^s,  p.  162),  carried  into  the 
Revised  Statutes  of  1906  as  sections  3171  to  3178g,  inclusive,  the 
particular  sections  relied  upon  being  3171,  3173/i,  3173t,  3173fc, 
dlKSq,  3174.9  and  3178a.'' 

1  N.  Y.,  §§  20,  1 13,  1 14,  1 16,  ]32,  160,  and  3.  —  C, 


V.    3.]  INDORSEE.  449 

[After  giving  the  substance  of  these  sections,  the  court  continues :] 
The  question  at  issue  very  largely  turns  upon  wliat  is  meant  by  the 
terms  of  section  3173i/  the  substance  of  which  we  liere  repeat: 
"  Where  a  person  not  otherwise  a  party  to  an  instrument  places 
tliereon  his  signature  in  blank  before  delivery,  he  is  liable  as  in- 
dorser,"  etc.  It  seems  to  have  been  the  view  of  the  learned  Circuit 
Court  (see  opinion  by  Dustin,  J.,  8  0.  C.  C.  [N.  S.]  290)  that, 
inasmuch  as  the  liability  defined  by  the  rules  following  the  above- 
quoted  portion  of  section  3173i  does  not  differ  essentially  from  the 
liability  attaching  to  such  party  under  the  decisions  of  this  court, 
no  change  in  the  law  can  be  presumed  to  have  been  intended  by  the 
General  Assembly  in  the  enactment  of  the  statute.  Also,  that  the 
subi-equent  provisions  of  the  sections  relating  to  indorsers  and  pro- 
viding what  shall  be  done  to  fix  liability,  etc.,  are  not  inconsistent 
with  this  conclusion  because  the  later  sections  apply  only  to  general 
indorsers,  and  in  those  sections  everv  indorser  is  described  as  such  — 
is  called  an  indorser — while  in  the  earlier  section  the  party  described 
is  only  to  be  deemed  an  indorser,  and  has  the  liability  of  an  indorser 
only  to  a  limited  extent.  The  contention,  further,  is  that  the  terms 
of  section  3173/t*  forbid  the  conclusion  that  such  party  is  to  be 
deemed  an  indorser  in  the  commercial  sense,  because  he  must,  in 
order  to  have  that  effect,  place  his  name  on  the  back  otherwise  than 
as  maker,  and  the  rule  is,  and  was,  that  the  person  so  placing  his 
name  is  a  maker  unless  he  shows  a  different  agreement  between  the 
parties. 

There  is  much  plausibility  in  these  contentions,  and  they  <vould 
seem  to  be  sound  wore  it  not  for  tlie  incorporation  of  the  words  "  as 
indorser"  in  section  3173t.  Ihid  these  words  been  left  out  of  the 
section  the  construction  claimed  would  not  scorn  an  unnatural  one. 
But  we  are  rof|iiir('d,  by  the  inoxorable  rule  of  construction,  to  give 
to  them  some  signification  — some  meaning  consistent  witli  a  rational 
purpose  in  placing  them  in  the  statute.  The  lawmakers  were  making 
law.  They  cannot  be  presumed  to  have  been  simply  dealing  with 
legal  terms  in  a  loose,  popular  .souse  Tlio  word  "  indorser  "  has  a 
distinct,  clearly  dofiiiod  legal  meaning.  .Vn  iudorsor  is  one  who  utider- 
takes  to  be  responsible  to  the  lioliler  of  the  i)a}jer  for  the  amount 
thereof,  if  the  latter  shall,  at  maturity,  make  legal  demand  of  the 
f)ayer,  and,  in  default  of  payment,  give  proper  notice  thereof  to  the 
indorser.  The  language  of  the  sectif)n  is  plain  and  free  from  am- 
biguity. Th*"  words  express  a  dear  meaning.  The  party  has  placed 
his  name  upon  the  instrument  where  general  indorsers  sign.  Tie  is 
not  a  party  to  the  note,  but  is  a  stranger.  Section  3171/(  savs  he 
shall  be  deemed  to  be  an  indorser  unless  he  clearly  indicates  by  appro- 

"N.  Y..  8114.  — C. 
»N.  Y.,§  113. —  C. 

KKGOT.  IN8TRDMENTB  —  29 


450  i.iAHii.iTY  OF  i'Aiii'ii;s.  [aut.  VI. 

priate  words  liis  inliMitioii  to  W  liouiul  in  sonu'  other  capacity.  He 
lias  not  so  indicattHl.  He  has  usetl  no  words  appropi'iate  or  otherwise. 
His  status  on  tlie  paper  is,  therefore,  lixed  l)y  the  emphatic  words  of 
tlie  statute.  Then  IoIUjus  the  lixinij;  of  liability.  He  is  liable  "as 
indorser."  And  luiw  is  that?  Why,  he  must  pay  wlien,  and  only 
wiien,  proper  (hiiiand  has  been  made  of  the  maker  at  maturity  and 
k\iral  notice  given  him.  This  is  clearly  shown  hy  what  follows.  Every 
indorser  who  indorses  without  (|ualification  engages  that  on  due  pre- 
sentment and  dishonor,  and  due  notice  to  him,  he  will  pay.  'J'his 
e.vpresses  the  extent  of  his  liability;  without  these  requisites  being 
complied  with  he  is  discharged.  And,  then,  as  though  to  cover  a 
doubtful  situation,  the  provision  is  (section  3171/?)^  that,  where  the 
language  of  an  instrument  is  ambiguous,  because  of  the  signature 
being  so  i)hue(l  that  it  is  not  clear  in  what  capacity  the  person  in- 
tended to  sign,  he  is  deemed  to  be  an  indorser.  Of  the  rules  pre- 
scribed by  scc-tiou  3]73i,  it  is  enough  to  say  that  they  are  not  incon- 
sistent with  the  obligation  of  the  general  indorser.  He,  too,  is  liable 
to  those  who  come  after  him  as  indorsers  or  holder.  The  important 
question  is,  not  to  whom  is  such  party  liable,  but  iti  what  capacity  — 
in  uihat  relation  —  is  he  liable? 

The  contention  that  the  provision  (section  3173A-)-  to  the  effect 
that  every  indorser  undertakes  to  pay  if  the  instrument  is  dishonored 
and  he  has  due  notice  applies  only  to  general  indorsers,  we  think 
untenable.  The  language  forbids  it.  It  is :  "  Every  indorser  who 
indorses  without  qualification,"  etc.  The  word  "every"  is  a  term 
of  inclusion.  It  embraces  every  party  who,  by  previous  provisions,  is 
classed  as  an  indorser  unless  his  indorsement  has  been  qualifiet]  by 
appropriate  words.  Nor  is  the  obligation  as  indorser  imposed  on  the 
stranger  an  unreasonable  one,  for,  if  not  content  to  assume  the  posi- 
tion of  indorser,  the  opportunity  to  indicate  upon  the  paper  his  in- 
tention to  be  bound  in  some  other  capacity  is  given  him. 

The  contention  that  these  later  provisions  relate  only  to  general 
indorsers  rests  wholly  on  the  assumption  that  in  placing  his  name 
on  the  back  in  blank  the  stranger  himself  fixes  his  own  position  and 
that  he  has  conclusively  declared  himself  a  maker;  that  is,  that  he 
has  placed  his  name  as  maker.  But  it  seems  a  sufficient  answer  to 
this  to  say  that  he  has  not  and  could  not,  by  a  mere  blank  indorse- 
ment, so  place  himself,  because  the  statute  fixes  his  ])Osition.  That 
position  is  important  only  as  it  relates  to  his  liability,  and  the 
statute  has  said  that  that  liability  is  "  as  indorser."  An  indorser  is 
not  a  maker  or  a  drawer;  not  one  primarily  liable.  This  conclusion 
ignores  neither  the  words,  "  A  person  placing  his  name  upon  an  in- 
strument otherwise  than  as  maker,"  etc.,  nor  the  words,  "  Where  a 

»  N.  Y..  6 .36.  —  C. 
»N.  Y.,  §  116. —  C. 


V.    3.]  INDORSES.  451 

person  not  otherwise  a  party  to  an  instrument  places,"  etc.  Both 
sections  must  be  construed  together.  Thus  construed,  tlioy  simply 
describe  a  person  who  is  not  a  party  by  the  terms  of  the  instrument. 
And  he  is  not,  in  fact,  such  party,  in  any  possible  sense,  at  the  time 
he  places  his  signature.  He  remains  a  total  stranger  until  he  has 
placed  his  name  on  the  back,  and  then  the  statute  says  he  is  an 
indorser. 

But  other  considerations  enter  into  the  question.  It  is  so  much 
a  matter  of  common  knowledge  as  to  make  it  proper  to  take  judicial 
notice  of  the  fact  that  the  act  herein  considered  was  enacted  because 
of  an  effort  on  the  part  of  the  bar  of  many,  if  not  all,  of  the  states 
of  the  Union  to  bring  about  a  uniform  system  of  law  respecting  nego- 
tiable instruments.  In  a  substantial  measure  the  effort  has  been 
successful.  Of  th3  states  wiiich  had,  by  judicial  decision,  adopted 
the  rule  prevailing  in  tliis  state,  the  legislatures  of  the  following  have 
enacted  a  Xegotiable  Instruments  Act  substantially  like  that  of  Ohio, 
viz.:  Colorado,  Maryland,  Massachusetts,  North  Carolina,  Rhode 
Island,  and  Utah.  And  it  has  been  enacted  also  in  the  states  of 
Connecticut,  Florida,  Iowa,  New  Jersey,  New  York,  North  Dakota, 
Oregon,  Pennsylvania,  Tennessee,  Virginia,  Washington,  and  Wis- 
consin. Joyce  on  Defenses  to  Commercial  Paper,  at  page  859,  gives 
a  list  of  32  states  and  territories  which  have  passed  the  act.  All  of 
these  several  statutes  are  not  framed,  in  the  particular  here  under 
investigation,  in  the  exact  language  of  the  Ohio  act,  but  it  is  be- 
lieved that  they  all  embody  the  same  principle,  and  it  is  manifest 
that  one  prominent  motive  leading  to  their  enactment  was  the  desire 
to  establish  a  uniform  law  on  the  subject  of  negotiable  instruments. 
And  wherever  these  acts  have  received  judicial  interpretation  in  the 
several  states  this  purpose  ha.s  been  recognized.  See  Fesscnden  v. 
Summers,  62  Cal.  48-1;  Fisk  v.  Miller.  G3  Cal.  3()7 ;  Downey  v. 
O'Keefe,  26  P.  I.  571  ;  Thorpe  v.  White.  188  Mass.  333,  7  Cyc.  673; 
Hank  \.  Law,  127  Mass.  72;  Toole  v.  Crafts,  193  Mass.  110;  Gibbs  v. 
(hinraqUa,  75  X.  J.  L.  I(i8;  Baumeisler  v.  Kuntz,  53  Fla.  310;  Far- 
quharCo.  v.  Iligham,  16  N.  Dak.  106;  Vander  I'larg  v.  Van  Zuuk,  135 
Iowa,  350. 

That  this  purpose  was  prominent  in  Ihe  minds  of  the  members 
of  our  Ocncral  As.'Jcmbly  in  the  enactment  of  llu'  Ohio  act  is  shown 
by  the  title  of  the  act  itself,  wliicli  is:  "An  act  to  establish  a  law 
uniform  with  thf  laws  of  otlicr  stntes  on  negotiable  instruments." 
The  desirability  of  such  Icgisliition  had  been  long  felt  by  commercial 
people  f>f  our  state  as  well  ns  by  the  judiciary  and  the  bar  at  large. 
Indeed,  the  learned  jurist  who  reported  the  case  of  Ewnn  v.  liraoks- 
Wnlrrfirlft  fa.,  supra,  gives  expression  to  that  sentiment  in  his 
opinion.  Trtie,  it  is,  as  suggested  by  the  Cireuit  Court,  that  the  act 
covers  many  phases  of  the  subject,  and  tluit  the  title  does  not  apply 
especially  to  the  subject  of  indorsement,  but  inasmuch  as  this  very 


452  LIABILITY    OK    I'AUTIES.  [arT.    VI. 

subjivt  hfltl  been  the  source  of  irreconcilable  conflict  between  judicial 
utterances  in  so  nuiny  states,  and  that  such  ditferenees  of  judicial  in- 
terpretation of  the  common  law  had  been  so  marked,  and  these  dif- 
fereni'es  so  recently  enij)hasi/.ed  by  this  court,  and  the  importance  of 
uniformity  in  the  law  on  this  particular  phase  of  the  general  subjects 
had  been  so  recently  pointed  out,  it  is  inconceivable,  it  seems  to  us, 
that  the  General  Assembly,  while  treating  the  subject  at  large,  should 
have  failed  to  endeavor  to  establish  uniformity  respecting  the  position 
of  indorsers  and  their  liability  to  others  connected  with  the  paper. 
These  considerations,  if  they  stood  alone,  and  if  the  language  of  the 
act  were  less  plain  than  it  is,  would  impose  a  duty  upon  this  court 
to  look  for  ground  in  the  statute  warranting  the  conclusion  that  the 
purpose  of  the  act  is  to  bring  Ohio  into  harmony  with  the  other  states 
of  the  Union  on  so  important  a  branch  of  the  law  as  the  relation  of 
parties  to  commercial  paper,  but  we  are  not  compelled  to  resort  to 
such  an  effort,  for  the  plain,  natural  meaning  of  the  language  of  the 
sections  cited,  as  we  think,  fully  warrants,  if,  indeed,  it  does  not 
compel,  the  conclusion  hereinbefore  indicated,  whicli  conclusion  is 
also  supported  by  a  number  of  the  cases  hereinbefore  cited.  See 
Fessenden  v.  Summers;  Fisl-  v.  Miller;  Downey  v.  O'Keefe;  Thorpe 
V.  White;  7  Cyc. ;  BanJc  v.  Laiu;  Toole  v.  Crafts;  Gibbs  v.  Guaraglia; 
Baumeisier  v.  Kuntz;  Farquhar  Co.  v.  Iligham;  Vander  Ploeg  v. 
Van  Zxnil'. 

But  another  purpose  seems  to  us  to  be  indicated  by  this  legislation. 
Not  only  were  the  courts  of  the  country  in  conflict  respecting  the 
attitude  and  liability  of  a  third  party  —  a  stranger  —  who  placed  his 
name  in  blank  on  the  back  of  commercial  paper,  but  the  situation  was 
in  itself  an  anomalous  one,  calculated  to  lead,  as  it  often  did  lead,  to 
confusion  respecting  the  duty  of  the  holder  of  such  paper  with  regard 
to  demand  and  notice.  Mistakes  in  this  respect  were  easy  and  were 
frequently  made,  often  resulting  in  litigation,  and,  not  infrequently, 
loss.  To  clear  this  situation  up,  and  to  establish  a  plain,  easily  under- 
stood rule,  and  one  of  universal  application,  was  surely  a  result  of 
high  importance  to  all  who  deal  in  commercial  paper,  and  it  seems  to 
us  that  the  desire  to  accomplish  this  purpose  had  much  to  do  with 
inducing  the  enactment  of  the  Negotiable  Instruments  Act  by  our 
General  Assembly. 

It  follows  from  these  conclusions  that  by  force  of  sections  3171, 
3173A,  3173i,  3173)!-,  3173r/,  3174<7,  and  3178a  of  the  Revised  Stat- 
utes of  1906,  a  person  who,  being  a  stranger  to  a  promissory  note, 
places  his  name  on  the  hack  by  blank  indorsement,  is  an  indorser  of 
the  paper  and  cannot  bo  held  in  any  other  capacity.  As  such  he  is 
entitled,  in  order  to  render  him  liable,  to  notice  of  demand  upon  those 
who  are  primarily  liable,  and,  failing  such  demand  and  due  notice 
to  him,  he  is  discharged.     The  answer,  therefore,  stated  a  defense, 


V.    3.]  INDORSER.  453 

and  the  sustaining  of  the  demurrer  and  rendering  judgment  for  the 
bank  upon  the  note  was  error.  Judgment  reversed,  and  cause 
remanded. 

Shauck,  C.  J.,  and  Price,  Crew,   Summers,  and  Davis,  JJ., 
concur. 

Reversed.* 


§  114     HADDOCK,  BLANCHARD  &  COMPANY  v.  HADDOCK. 
192  New  York,  499.  —  1908. 

The  Lenape  Coal  Company  executed  its  promissory  note  payable 
to  plaintiff.  Plaintiff  executed  several  bills  of  exchange  payable  to 
its  own  order  and  drawn  upon  certain  coal  companies.  Said  note 
after  it  had  been  signed  by  said  Lenape  Coal  Company  and  each  of 
said  bills  after  they  had  been  accepted  by  the  corporation  on  which 
they  were  severally  drawn  were  indorsed  by  the  defendant  before  de- 
livery, and  thereafter  before  maturity  delivered  to  the  plaintiff  as 
payee,  and  tlie  plaintiff  indorsed  and  procured  them  to  be  discounted. 
The  above  instruments  were  indorsed  by  the  defendant  for  the  accom- 
modation of  the  maker  of  said  note  and  the  acceptor  of  said  bills 
respectively  and  for  the  purpose  of  giving  such  maker  and  acceptors 
credit  with  the  plaintiff,  and  the  plaintiff  was  induced  to  take  said 
instruments  by  reason  of  the  indorsement  of  tlie  defendant  and  pur- 
suant to  an  agreement  that  the  defendant  would  be  liable  thereon 
to  the  plaintiff  in  case  the  corporations  primarily  liable  thereon  should 
make  default. 

Thereafter  the  plaintiff  was  compelled  to  take  up  the  above  instru- 
ments, and  this  action  is  brought  to  compel  the  defendant  to  pay 
the  amount  of  said  instruments  pursuant  to  his  agreement  with  the 
plaintiff  when  he  indorsed  them.  The  plaintiff  has  succeeded  in  the 
courts  below,  and  the  defendant  has  appealed. 

Chase,  J.  *  *  *  As  the  facts  are  found,  if  the  intention  of 
the  parties  is  to  prevail,  the  defendant  should  be  required  to  pay  to 
the  plaintiff  the  amount  of  such  note  and  bills  as  established  by  the 
judgment. 

The  defendant  contends  that  the  position  of  his  name  upon  tl]e 
note  an<l  bills  conclusively  establishes  that  he  indorsed  the  several 
instruments  without  liability  to  the  plaintiff  and  that  parol  evidence 
should  not  have  been  received  to  affect  or  overcome  the  alleged  con- 
clusive presumption  arising  from  his  indorsements  as  iiiiidc.     *     *     * 

•  Thin  c«8P  in  reportoH  in  14  L.  N.  8.  842.  with  a  note  entitled  "  Charncter 
under  uniform  nopotiable  instruments  law  of  one  wlio  placMH  liis  nariic  on  tlie 
back  of  n  note  prior  to  or  nt  the  (ime  of  delivery." 

See  nlso  tho  notc«  on  the  liiihility  of  an  nnoninWiiiH  iiidorHf-r  nt  enmnion  law 
and  iindrr  the  NpffotinhU-  In^tninwrifs  Art  in  5  Midi  F-aw.  Uev.  189  (January, 
1907).  and  in  2'A  Harv.  Law  Uev.  39G    (March,  lUlU).  — C. 


454  LIAI'.Il.lTV    OK    PAUTIKS.  [ahT.    VI. 

There  lias  always  been  conflict  among  tlu'  lourts  of  the  several 
states  both  in  asserting  the  principles  upon  which  irregular  indorsers 
upon  conunercial  paper  are  to  be  held  and  in  the  conclusion  arrived 
at  in  particular  oases  litigated.  The  number  of  cases  is  so  great, 
and  the  possibility  of  even  a  partial  reconciliation  of  them  so  remote, 
tliat  we  will  confine  our  citation  of  authorities  wholly  to  those  in 
this  state. 

It  was  well  settled  in  this  state  for  many  years  prior  to  the  enact- 
ment of  the  Negotiable  Instruments  Law  that  a  person  who  puts  his 
name  on  the  back  of  a  bill  or  note  before  its  delivery,  is  presumably 
a  second  indorser  and  not  liable  to  the  payee,  but  the  presumption 
could  be  rebutted  by  parol  evidence  to  show  that  the  intention  of 
the  indorser  was  to  become  surety  for  some  prior  party  to  the 
instrument.'* 

The  Negotiable  Instruments  Law  was  first  enacted  in  this  state  in 
1897.  (Laws  of  1897,  chapter  612.)  Section  113  of  the  said  law 
provides:  *'  A  person  placing  his  signature  upon  an  instrument  other- 
wise than  as  maker,  drawer  or  acceptor  is  deemed  to  be  an  indorser, 
unless  he  clearly  indicates  by  appropriate  words  his  intention  to  be 
bound  in  some  other  capacity." 

The  defendant  \vas  within  this  definition  an  indorser  of  each  of 
said  instruments. 

Section  114  of  the  said  law  provides:  'MVliere  a  person,  not  other- 
wise a  party  to  an  instrument,  places  thereon  his  signature  in  blank 
before  delivery,  he  is  liable  as  indorser  in  accordance  with  the  follow- 
ing rules: 

"1.  If  the  instrument  is  payable  to  the  order  of  a  third  persoi., 
he  is  liable  to  the  payee  and  to  all  subsequent  parties. 

"  2.  If  the  instrument  is  payable  to  the  order  of  the  maker  or 
drawer,  or  is  payable  to  bearer,  he  is  liable  to  all  parties  subsequent 
to  the  maker  or  drawer. 


*  ntinfr  Moore  v.  Cross,  supra;  Bacon  v.  Bvrnham.  37  N.  Y.  614;  Meyer  v. 
Il'hsher,  47  N.  Y.  265;  Phelps  v.  ViscJier,  50  N.  Y.  69;  Clothier  v.  Adriance, 
TA  N.  V.  322;  Hubbard  v.  Mattheics,  54  N.  Y.  43;  Coulter  v.  Richmond.  5!) 
N.  Y.  478;  Easterly  v.  Barber.  66  N.  Y.  433;  /affray  v.  Broicn.  74  N.  V.  393; 
Witherow  v.  {playback.  158  N.  Y.  649;  Rmith  v.  Weston,  159  N.  Y.  194; 
Dains  V.  Hly.  32  App.  Div.  124;  affd.,  164  N.  Y.  527;  Far  Kockaway  Bank  v. 
Norton,  186  N.  Y.  484;  Lester  v.  Paine,  39  Barb.  616;  Foerster  v.  Sqnier,  46 
N.  Y.  R.  R.  289;  Reed  v.  PhotoGravure  Co.,  38  N.  Y.  S.  H.  467;  Wyckoff  v. 
Wilson.  36  N.  Y.  S.  R.  35;  Luft  v.  Grnham.  13  Abb.  (N.  S.)  175;  Draper  v. 
Chase  Mfn.  Co..  2  Abb.  (N.  C.)  79:  Tlolz  v.  Woodside  Breniny  Co..  83  Hun, 
192;  Mei.te  v.  Doscher,  68  Hun.  557;  Bank  of  Port  Jefferson  v.  Darling,  91 
Hun,  236;  Hendrie  v.  Kinnrar,  84  Hun.  141;  Montyonury  v.  Hc.hcnk,  82  Hun, 
24;  McPhillips  v.  ./ones.  73  Hun,  516;  Hffiiyer  v.  Theiss,  19  Misc.  Rpp.  170; 
Rose  V.  Packard,  4  Weekly  Dij.'est.  27;  Cuming  v.  Roderick,  16  App.  Div.  339; 
McMoran  v.  Lange,  25  .App.  Div.  11;  Howard  v.  Van  Cieson,  46  App.  Div.  77; 
A'ayei  v.  Lutz,  41  App.  Div.  193. 


V.    3.]  INDORSEE.  455 

"  3.  If  he  signs  for  the  accommodation  of  the  payee,  he  is  liable 
to  all  parties  subsequent  to  the  payee." 

By  this  section  of  said  law  the  presumption  as  established  by  the 
courts  in  this  state  was  changed,  and  an  irregular  indorser  is  now 
presumed  to  be  liable  in  accordance  with  the  express  language  of  the 
statute.  Questions  relating  to  the  sufficiency  of  the  pleadings  are 
settled  by  the  statute.  A  complaint  upon  a  note  or  bill  without 
alleging  a  collateral  agreement  between  the  parties  whose  names  are 
on  the  instrument  seeking  to  recover  against  a  person  except  as  pro- 
vided by  the  statute,  would  clearly  be  demurrable. 

The  note  of  the  Lenape  Coal  Company  was  payable  to  the  plain- 
tiff, a  third  person,  and  the  defendant,  according  to  the  provisions 
of  said  section  114,  is  liable  to  the  plaintiff,  the  payee  therein.  No 
serious  contention  has  been  made  to  the  contrary.  The  serious  ques- 
tion for  consideration  arises  from  the  fact  that  the  bills  were  payable 
to  the  maker  and  drawer  thereof  respectively  and  the  defendant  as 
an  indorser  thereon  before  delivery  is  not  under  the  statute  prima 
facie  liable  thereon  to  the  plaintiff.  Should  parol  evidence  have  been 
allowed  to  show  the  intent  of  the  parties?  We  have  not  discovered 
any  exception  to  the  rule  as  established  by  the  courts  of  this  state 
allowing  parol  evidence  as  between,  the  parties  whose  names  appear 
on  the  bill  or  note  to  determine  their  liability  as  between  themselves. 
It  is  frequently  stated  that  where  a  note  is  payable  to  a  person  other 
than  the  maker  and  is  indorsed  by  a  third  person  before  delivery  the 
intention  of  the  indorser  is  ambiguous  and  uncertain  on  the  face  of 
the  paper  and  such  uncertainty  justifies  the  receipt  of  parol  evidence 
to  determine  the  true  intention  of  the  parties.  We  do  not  see  that 
any  greater  certainty  exists  upon  the  face  of  a  hill  as  to  the  true 
intention  of  the  parties  where  it  is  drawn  to  bearer  or  to  the  order 
of  the  maker,  and  it  is  indorsed  by  a  third  person  after  acceptance 
by  the  acceptor  and  before  <leliv(>ry  to  the  payee  and  maker.  There 
is  a  certain  rule  of  presumption  determined  by  common  law  or  by 
statute,  but  the  alleged  reason  for  the  rule  in  eillier  case  is  not  very 
apparent.  The  long-established  rule  to  allow  ])arol  evidence  that  the 
intention  of  the  parties  may  ))revail  seems  to  have  met  with  sonie- 
wliat  genera]  approval  without  discussing  specidcally  the  priiu  ijiles 
upon  which  such  evidence  is  ailmitted.     *     *     * 

111  flood  v.  ^fnrlin  (05  U.  S.  90)  the  .onrt  say:  "Considerable 
diversity  of  decision,  it  must  be  admitted,  is  fouiul  in  the  reported 
cases  where  the  record  presents  the  case  of  a  blank  indorsement  by  a 
third  party,  made  before  the  instrument  is  indorsed  by  the  payee 
and  before  it  is  delivered  to  take  effect,  the  question  being  whether 
the  party  is  to  be  deemed  an  original  promisor,  guarantor  or  in- 
dorser. Irrcconrilnblo  conflict  exists  in  that  regard  ;  but  there  is  one 
principle  upon  the  subject  almost  universally  admitted  by  them  all, 
and  that  is,  that  the  interpretation  of  the  contract  ought  in  every 


456  UAniMTY    OF    I'AKTIHS.  [akT.    VI. 

rase  to  be  such  ns  will  oarry  into  ellVct  ttic  intention  of  the  i)artie8, 
and  in  most  cases  it  is  adniitteti  that  proof  of  facts  and  circiunstances 
which  took  place  at  the  time  of  the  transaction  are  admissible  to  aid 
in  the  interpretation  of  the  language  employed.  {Denton  v.  Peters. 
L.  R.   [5  Q.  B.J   475.)"     *     *     * 

It  must  constantly  be  borne  in  mind  that  the  acceptance  of  a  bill 
makes  the  acceptor  the  principal  debtor.  A  bill  when  accepted  be- 
comes similar  to  a  promissory  note,  the  acceptor  being  the  promisor 
and  the  drawer  standing  in  the  rehation  of  an  indorser.  (Daniel  on 
Negotiable  Instruments  |  ath  edition],  section  532.)  There  is  noth- 
ing in  the  Negotiable  Instruments  Law  to  indicate  an  intention  on 
the  part  of  the  legislature  to  change  the  rule  as  established  in  this 
state  relating  to  the  receipt  of  parol  evidence  to  determine  the  primary 
liability  as  between  the  persons  whose  names  appear  upon  the  instru- 
ment or  as  between  those  secondarily  liable  thereon. 

By  section  55  of  the  Negotiable  Instruments  Law  it  is  provided: 
"An  accommodation  party  is  one  who  has  signed  the  instrument  as 
maker,  drawer,  acceptor  or  indorser,  without  receiving  value  there- 
for, and  for  the  purpose  of  lending  his  name  to  some  other  person. 
Such  a  person  is  liable  on  the  instrument  to  a  holder  for  value,  not- 
withstanding such  holder  at  the  time  of  taking  the  instrument  knew 
him  to  be  only  an  accommodation  party." 

Parol  evidence  is  necessary  to  determine  whether  a  party  to  an 
instrument,  including  an  indorser  thereon,  is  an  accommodation 
party,  and  also  to  determine  which  other  party  to  the  instrument 
he  had  accommodated.  The  plaintiff  was  the  holder  of  the  note  for 
value,  and  the  evidence  showed  that  the  defendant  was  an  accommoda- 
tion indorser  for  the  benefit  of  the  acceptor. 

The  last  subdivision  of  section  114,  as  we  have  quoted,  makes 
parol  evidence  necessary  to  establish  whether  the  indorser  signed  the 
instrument  for  the  accommodation  of  the  payee.  It  is  true  that  this 
section  does  not  expressly  state  that  if  the  indorser  signed  for  the 
accommodation  of  the  acceptor  he  is  liable  to  all  parties  subsequent 
to  the  acceptor,  but  the  fact  that  such  a  provision  is  not  included  in 
section  114  does  not  prevent  the  admission  of  parol  evidence  to  deter- 
mine generally  the  questions  relating  to  an  accommodation  party  as 
provided  by  section  55. 

The  Negotiable  Instruments  Law  by  section  7  provides :  "  In  any 
ease  not  provided  for  in  this  act  the  rules  of  the  law  merchant  shall 

govern." 

Bv  section  IIH  of  the  Negotiable  Instruments  Law  it  is  provided: 
"  As  respects  one  another,  indorsers  are  liable  prima  facie  in  the 
order  in  which  they  indorse ;  but  evidence  is  admissible  to  show  that 
as  between  or  among  themselves  they  have  agreed  otherwise." 

As  we  have  seen,  upon  the  acceptance  of  the  bill  the  acceptor  be- 
comes the  principal  debtor  and  the  one  primarily  liable  to  pay  the 


3.]  INDORSES. 


457 


amount  of  the  bill,  and  all  other  parties  to  the  instrument,  includ- 
ing the  maker  and  indorser,  are  secondarily  liable.  We  are  of  the 
opinion  that  the  maker  of  the  bill  is  in  legal  effect  and  within  the 
intention  of  this  section  an  indorser,  and  that  as  between  the  plaintiff 
and  the  defendant  parol  evidence  is  authorized  to  determine  the  lia- 
bility as  between  them. 

The  articles  of  the  Negotiable  Instruments  Law  relating  to  the 
presentation  of  bills  and  notes  for  payment  and  notice  of  dishonor 
(Articles  7  and  8)  further  show  an  intention  by  the  legislature  to 
leave  the  order  of  liability  among  those  whose  names  are  on  the  in- 
strument subject  to  determination  by  any  competent  evidence. 
[Quoting  sections  130,  130,  140,  160,  18fi,  subd.  3.] 

There  is  no  reason  that  we  can  conceive  why  the  legislature  should 
intend  to  change  the  rule  in  regard  to  the  admission  of  parol  evidence 
as  it  bad  existed  in  this  state  for  many  years.  All  of  the  quotations 
that  we  have  made  from  the  Negotiable  Instruments  Law  show  that 
it  has  enlarged  rather  than  restricted  the  rules  allowing  parol  evi- 
dence to  show  the  true  linltility  and  relation  of  the  parties  whose 
names  appear  upon  the  bill  or  note  in  all  actions  between  themselves. 
It  is  certainly  very  material  to  the  drawer  of  a  bill  whether  an  in- 
dorser signs  it  at  Ids  rccpiest  or  at  the  request  and  for  the  benefit  of 
the  acceptor.  We  do  not  think  it  was  the  intention  of  the  legislature 
by  the  enactment  of  section  114  of  the  Negotiable  Instruments  Law 
to  establish  a  rule  as  to  the  liability  of  an  irregular  indorser  con- 
clusive on  the  parties  to  the  instrument  as  between  themselves  in  an 
action  where  the  facts  showing  a  different  intention  are  fully  alleged. 
All  of  the  decisions  of  our  courts  since  tTTe  enactment  of  the  Nego- 
tiable Instruments  Law  tend  to  sustain  the  views  herein  expressed. 
(Corn  V.  Lrrif,  07  App.  Div.  48;  7\nhn  v.  CnnsoJifJafrd  Biilirr  cf- 
Eqfj  Co.,  30  Misc.  TJcp.  7?.'i.)  In  the  case  last  mentioned  "Mr.\nAM, 
J.,  said:  "Prior  to  the  statute  of  1S07  (miprn)  the  allegation  re- 
ferred to  was  a  n^^cessary  one  in  such  cases,  and.  if  denied,  the  onus 
of  proving  the  allegation  was  on  the  plaintiff,  for  the  payee  was  pre- 
Rtimably  the  first  indorser.  (Daniel's  Neg.  Inst.  |'4th  ed.]  see.  701; 
Wood's  F?yles  Hills,  151,  note,  and  cases  before  cited  )  Since  the 
statute  the  legal  f)resumpfinn  is  changed  wliere  the  complaint  all(>ges 
that  the  irregular  indorsers  indorsed  the  imper  'before  delivery'  lo 
the  payee.  And  when  this  fact  is  established  the  onus  is  cast  upon 
such  indorsers  lo  allege  and  prove  that,  notwithstanding  such  de- 
li-ery,  the  payee  was  to  become  first  indorser  ac-cording  to  the  cus- 
tomary form  of  tiie  contract  and  that  they  did  not  indorse  for  the 
purpose  of  lending  their  credit  to  the  maker  or  with  the  intention  of 
becoming  liable  to  the  payee.  That  this  is  Ww  [)roi>er  interpretation 
of  the  act  is  obvious.  The  true  intention  of  indorsers  as  between 
themselves  can  always  be  shown  by  oral  evidenef.  (Daniel's  Neg. 
Inst,  svprn;  4  Am.  &  ICng.  Ency.  of  Law  [?d  ed.]   102  ef  xrq  ;  Gnild 


458  LIAHlI.ll^     OK    I'MMll'S.  [art.    VI. 

V.  Butler,  127  Mass.  386;  Cady  v.  Shepard.  VZ  Wis.  <'.;?!>;  Benjamin's 
Cluunbors  Bills  I'v'ml  Am.  cd.J,"  :.'oO ;  Wilhcrow  v.  .SI a, /hack,  158  N.  Y. 
61U.)  To  go  further  and  decide  that  the  statute  intended  to  create 
an  incontestable  liability  against  irregular  indorsers  would  be  to  im- 
pute to  the  legislative  wisdom  a  design  repugnant  to  every  notion  of 
juditMnI  procedure,  especially  in  a  provision  enacted  in  the  interest 
of  law  reform." 

The  judgment  should  he  aHirmed,  with  costs. 

CuLLEN,  Ch.   J.,   TTakjiit,   Vann,  Werner,   W^illahd   Babtlett 
and  lliscoCK,  JJ.,  concur. 

Judgment  affirmed. ° 


§  113        NATIONAL   EXCHANGE    BANK    v.   LUBRANO. 
29  Rhode  Island,  64.  —  1908. 

Action  on  note.  Plaintiff's  declaration  alleged  "that  D.  Di 
Luglio  and  Michael  Tvuhrano,  doing  biisines'^  ns  D.  Di  Tjuglio  Com- 
pany, *  *  *  i)v  thoii-  note  *  *  *  ]^y  fi,p,Y,  sjrrnod  as  D.  Di 
Luglio  Company  *  *  *  promised  said  [daintift'  to  pay  it  or 
order  *  *  *  ^nd  the  said  defendant  individually  then  and  there 
indorsed  and  deliveriMl  said  note  to  said  plaintiif."  The  declaration 
then  alleged  ]n-eseidment  to  makers  when  due,  failure  to  pay,  and 
due  notice  to  defendant  of  the  dislionor  of  the  note.  Defendant  de- 
murred to  the  declaration  on  the  ground  that  by  the  declaration   il 


'■Tliis  case  is  reported  in  19  L.  N.  S.  136.  with  note  entitled  "  Admissibility 
of  parol  evidence  to  \-,\y\  tlic  liability  of  an  irregular  party  to  a  bill  or  note 
from  tbat  declared  by  tlin  Negotiable  Instruments  Act." 

See  also  Merrantilf  Hank  of  Mcmphifs  v.  8.  I.  Brishy,  rt  nl..  120  Tenn.  \\^\'. 
where  the  court,  on  page  666,  says:  "  We  are  of  opinion  that  the  real 
contract  between  the  parties  can  be  shown  now  as  fully  as  it  could  have  been 
shown  before  the  passago  of  the  Negotiable  Instruments  Act.  and  that,  as 
between  the  immediate  parti<'S.  it  i*;  not  necessary  that  the  indorsement  should 
be  accompanied  by  appropriate  words  in  writing,  showintr  an  intention  to  be 
bound  in  some  otlier  capacity.  .As  to  innocent  bolilers  for  value,  the  rule,  of 
course,  would  be  otherwise,  and   the  statute  wmilil   apply." 

But  in  Bfiumeif^trr  v.  Knntz,  ."iS  Fla.  ."^lO.  at  p.  :1  I'),  the  ffuirt  said:  "The 
main  question  for  determination  is:  Does  the  indorsement  in  blank  before 
delivery  of  a  ])romissory  note  ...  for  the  purpose  of  giving  credit  to 
the  maker,  so  fix  a-  matter  of  law  not  the  status  but  the  lialiility  and  rights 
of  such  an  indorser.  as  between  the  original  partic-.  tliat  it  cannot  be  sliown 
that  by  the  course  of  conduct  of  the  parties  attfudiii"  IIk-  iti(lnr«ement,  that 
the  right  of  the  indorser  to  have  demand  made  nn  the  maker  of  the  note  for 
payment  at  maturity,  was  waived  so  as  to  make  tlie  indorscr's  liability  not 
dependent  upon  =ucii  demand?  P.y  the  terms  of  the  statute  [namely,  the 
Negotiable  Instrumonts  Lawl  when  a  person  not  f)tlier\vi'-c  a  p-Mly  to  a  nego 
tiable  instrument  places  thereon  his  sisrnnture  in  blank  before  flelivery,  his 
Btatus  is  fixed  as  that  of  an  indorser.  Where  the  statute  lixes  tlie  status  of  a 
party  to  a  negotiable  instrument  ;(s  being  that  of  an  indorser,  parol  evidence 
JB  not  admissible  to  vary  such   status."  —  C, 


V.    4.]  INDORSER.  459 

appeared  that  defendant's  liability  on  the  note  was  a  joint  liability 
with  one  D.  Di  Luglio,  and  not  a  several  liability.  Demurrer  was 
overruled  and  defendant  excepted. 

Pakkiiurst,  j.  *  *  *  The  first  exception  must  be  overruled. 
The  declaration  shows  that  the  defendant,  Lubrano,  was  a  maker  of 
the  note  as  a  partner  with  one  D.  Di  Luglio,  under  the  firm  name  of 
"  D.  Di  Luglio  Company/'  as  signed  on  the  note.  If  Lubrano  had 
placed  his  name  upon  t':-"  back  of  the  note  before  delivery,  under  the 
law  of  this  state,  as  it  cxi-ted  prior  to  the  passage  of  the  "  N'egotiable 
Instruments  Act*'  (chapter  fiT-l,  p.  222,  Jan.,  18;i9),  he  would 
simply  have  become  a  joint  maker  of  the  note.  As  he  was  a  maker 
already,  his  relation  to  the  note  would  not  have  been  changed,  and 
his  liability  thereunder  would  neither  have  increased  nor  diminished. 
His  act  would  simply  have  been  nugatory.  Under  the  Negotiable 
Instruments  Act,  however,  we  think  he  may  fairly  be  held  to  have 
made  himself  an  indorser  under  the  provisions  of  section  71,"  viz.: 
"  A  person  placing  his  signature  upon  an  instrument  otherwise  than 
as  maker,  drawer,  or  acceptor  is  deemed  to  be  an  indorser,  unless  he 
clearly  indicates  by  a})]n'opriate  words  his  intention  to  be  bound  in 
some  other  capacity."  See,  also,  Negotiable  Instruments  Act,  p.  228, 
c.  674,  §  25,  cl.  6."'  See  McLean  v.  Bryer,  34  R.  I.  599 ;  Doivney  v. 
O'Keefe,  26  R.  I.  571  ;  Dcahi/  v.  Choqnel,  28  R.  I.  3:^,8.  In  other 
words,  we  are  of  the  opinion  that  the  defendant,  by  so  indorsing  said 
note,  added  to  his  liability  as  maker  a  several  and  distinct  liability 
as  indorser,  thereby  making  himself  individually  liable  for  llic  pay- 
ment of  the  note,  aftci-  due  notice  of  dishonor,  and  tliei'cby  also 
guaranteeing  the  signature  on  the  face  of  the  noje,  and  that  the  plain- 
tiff had  a  right,  if  it  saw  fit,  to  sue  him  as  such  indorser,  as  it  has 
don»;.  '^riic  dcuniircr  to  the  dcclai'at ion  was  therefore  properly 
overruled.* 


4,  Ordfr  ok  Tm)oi!skr's  Liaiulity. 
§118  MOOI;e  v.  CTTSTTINrt. 

102  Mahsa(  imsKiTs.  r)!l4.  —  1S05. 

roNTiucT,  against    Ijouis  '\\  Cusliing  and    FIar\cy    11.    Pratt  upon 
tlip  followitiir  promissory  notf : 

$500.  2'1    hi  hi.   ISiLI. 

Thrp<?  mftntliH  aftfr  «lntf.  I  promiso  to  pny   to  tlip  orricr  f)f  Williniii    Moore 
five  hiirulrffl  doIlarH.     I'jiyahlo  nt  any  hank  in  Roston.     Value  rcrcivcd. 

IIaHVIV      If.      I'KATT. 

(Indorsril)  :      Loriis  T.  Ciiflhinp,  William    Mof)rc. 

•  N.  Y..  9  113. —  C. 
T  N.  Y..  §  36.  —  f. 

•  Soe,  also,  Grrmniii't  \'it.  Hnnl;  v,    \fniintr.  1  2'l  \\"\'*.  .Olt,  nnlr,  p.  .  —  C- 


460  LIABILITY    OF    PAHTIES.  |  ART.    VL 

The  case  was  submitted  to  tlie  Superior  Court,  and,  after  judg- 
ment for  the  plaintifT,  to  this  court,  on  appeal,  on  agreed  facts,  in 
substance  as  follows: 

Before  the  delivery  of  the  note  Pratt  requested  the  plaintiff  to 
get  it  discounted,  and  the  plaintilT  refused  unless  there  was  a  satis- 
factory indorser.  Thereupon  the  plaintifT  accompanied  Pratt  to  the 
office  of  Cusliing,  whom  the  plaintiff  told  Hint  he  was  going  to  have 
the  note  discounted  for  Pratt,  provided  Pratt  obtained  a  satisfactory 
indorser.  The  plaintiff  asked  Cushini^  if  lie  was  good  for  the  amount, 
mid  Crushing  said  that  he  was,  and  that  the  note  would  lie  paid  when 
due;  and  that  he  was  willing  to  indorse  the  note  for  the  nccommoda- 
tion  of  Pratt,  so  that  the  note  might  he  dipcount(^d  for  'lis  benefit. 
The  note  was  then  indorsed  by  Cushing  at  the  request  of  Pratt,  and 
was  delivered  to  the  plaintifT,  who  thereafter  himself  indorsed  it  and 
had  it  discounted,  and  the  proceeds  were  used  for  the  benefit  of  Pratt. 
The  plaintiff  was  obliged  to  pay  the  note,  and  Cushing  alone  de- 
fended. Pratt  having  been  defaulted. 

IToi.MES,  J. —  This  is  a  suit  upon  a  note  between  two  persons,  who 
both  became  parties  on  it  for  the  accommodation  of  the  maker.  The 
defendant  Cushing  indorsed  the  note  before  delivery,  the  plaintiff 
is  the  payee,  and  indorsed  after  the  defendant.  If  the  plaintiff  had 
not  known  that  the  defendant  indorsed  the  note  for  accommodation, 
he  would  have  been  entitled  to  recover.  {Woods  v.  Woods,  127  Tilass. 
141.)  Knowledge  of  that  fact  under  the  circumstances  stated  does 
not  affect  his  rights.  In  the  absence  of  agreement,  successive  in- 
dorsers  for  the  accommodation  of  a  third  person  are  liable  in  the 
same  order  as  indorsers  for  value.  (!^haiv  v.  Knox,  98  Mass.  214; 
Danl.  \eg.  Inst.  [3d  ed.],  §  703.)  The  conversation  which  took 
place  between  the  parties,  so  far  from  expressing  a  different  agree- 
ment, firave  notice  to  the  defendant  that  the  plaintiff  required  his  in- 
dorsement as  the  condition  of  becoming  a  party.  It  fortifies  the 
presumption  arising  from  the  face  of  the  paper.  The  suggestion  on 
behalf  of  the  defendant,  that  he  signed  also  for  the  accommodation 
of  the  plaintiff,  perverts,  if  it  does  not  contradict,  the  agreed  facts. 
It  was  ursred  that  the  plaintiff  took  the  note  when  overdue.  But  his 
rights  and  liabilities  were  fixed  at  the  time  of  his  indorsement.  If 
the  arg-ument  was  sound,  the  judgment  ought  to  have  been  for  the 
defendant-indorser  in  Woods  v.  Woods. 

Judgment  affirmed.* 


•  Successive  indorsementn  import  a  spvcral,  anrl  not  a  joint,  liability.  A 
joint  action  cannot  be  bronpht  aeainst  successive  inHorscrs  except  by  aid  of 
statute.  Wolf  v.  Hostetter.  182  Pa.  2!»2.  Such  statutes  autliorizinp:  the  join- 
ing of  all  parties  to  a  negotiable  instrument  in  one  action  arc  common  in  the 
American  .States.  N.  Y.  foflc  Civ.  Proc.  §  454;  Pomeroy,  Remedies,  §§  402- 
410:  3  Randolph,  Comm.  Paper,  §  Ififin,  —  H, 


V.   4.]  INDORSEE.  461 

§  118  GEORGE  V.  BACON. 

138  Appellate  Division   (N.  Y.)    208.  —  1910. 

Action  by  Elizabeth  W.  George,  as  committee  of  the  person  and 
property  of  Clara  G.  Rarnaboe,  an  incompetent  person,  agninst  Charles 
R.  Bacon.  From  a  jndirment  for  plaintiff  and  from  an  order  deny- 
ing defendants'  motion  for  a  new  trial,  he  a[ipeals. 

Scott,  J.  This  is  an  action  for  contribution  by  one  indorser  upon 
a  promissory  note  against  a  subsequent  indorser.  The  defendant  ap- 
peals from  a  judgment  upon  a  verdict  directed  by  the  court.  The 
note  was  signed  in  the  name  of  "The  Bostonian's  Incorporated,"  by 
its  president.  The  corporation  was  engaged  in  giving  operatic  per- 
formances. Its  principal  office  was  in  the  city  of  New  York  at  the 
office  of  Loudon  G.  Carleton  (also  an  indorser),  who  was  an  officer 
and  general  director  of  the  company.  The  defendant,  Bacon,  was 
manager  of  the  company,  and  acted  as  treasurer  while  the  company 
was  traveling.  Barnabee,  the  president,  was  one  of  the  performers, 
as  was  also  McDonald,  an  indorser.  The  incompetent  plaintiff  was 
the  wife  of  Barnabee,  and  it  was  she  who  ultimately  paid  the  note. 
The  company  appears  to  have  been  stranded  in  Pittsburgh  and  needed 
money  to  get  home.  The  note,  after  it  bad  been  indorsed  by  all  of 
the  indorsers,  was  discounted  at  the  New  Amsterdam  Bank,  and  the 
proceeds  were  checked  out  by  the  defendant.  Bacon,  in  pursuance  of 
the  purposes  for  which  the  note  was  made.  Bacon  made  the  arrange- 
ments with  the  bank  for  the  discount  of  the  note,  and  procured  it  to 
be  signed  by  the  president.  It  does  not  appear  whetlier  or  not  the 
incompetent  signed  at  his  request.  The  incompetent's  indorsement  is 
the  third  in  order,  and  Bacon's  is  the  fifth.  The  defendant  relies 
solely  upon  section  118  of  the  negotiable  instruments  law  (Consol. 
Law,  c.  38),  wliich  reads  as  follows:  "Order  in  which  indorsers 
are  liable.  As  respects  one  another,  indorsers  are  liable  prima  facie 
in  the  order  in  which  they  indorse;  but  evidence  is  admissible  to  show 
that  as  between  or  among  fhemselves  they  have  agreed  otherwise. 
Joint  payees,  or  joinf  indorsers  who  indorse  are  deemed  to  indorse 
jointly  or  severally." 

If  there  was  sufficient  evidence  in  the  case  to  justify  a  finding  that 
the  parties  had  otherwise  agreed  among  themselves,  the  prima  facie 
presumpfion  disappears,  and  fhe  indorser  who  aclually  pavs  flic  nofe 
is  entitle«l  lo  contribution.  And  it  is  not  necessary  that  there  shall  be 
proof  of  an  actual  formal  contrac-t  in  so  many  words.  It  is  sufficient 
if  the  surrounding  circumstances  indicate  that  the  indorsements  were 
made  upon  the  common  understanding  that  all  the  indorsers  should 
partiripate  in  the  liability. 

"Their  lordships  see  no  reason  to  doubt  thai  the  liabililir'S  xnirr 
nr  of  tfie  successive  indorsers  of  a  bill  or  promissory  note  must,  in 
the  absence  of  all  evidence  to  the  contrary,  be  determined  according 


iG5J  l.lAI'.ll-lTV    01"    rAKTlICS.  [aKT.    VI. 

to  the  ordinary  primipli's  dI"  tlic  l;i\v  iin'rcliant.  TTe  who  is  proved 
or  adinittt^d  to  have  madi-  a  [uiui'  iiidoisciiu'iit  must,  according  to 
those  princii)les,  iiidi'imiiry  sul)S((|iicnt  iiidorsors.  But  it  is  a  well- 
ostahlishod  rule  of  law  lliat  (he  whole  facts  and  circumstances  at- 
ten«hint  upon  the  making,  is-uc.  ami  1  i-aiisfcreiice  ot'  a  hill  or  note  may 
he  legitimately  rercircil  to  for  the  |)uipose  ol"  ascertaining  the  true 
relation  to  each  other  of  the  parties  who  put  their  signatures  ujjon 
it,  either  as  makers  or  as  iii<lorser<,  mid  that  reasonable  inferenties 
derived  I'rom  the<e  fads  ;iiiil  (  iicnmstaiices  are  admitted  to  the  etfect 
of  qualifying,  alleiitig.  oi'  (  \rii  mxciling  the  relative  liabilities  which 
the  law  merchant  woiiM  oi  lei  w  i,-e  assign  to  them."  McDonald  v. 
Whitfield.  ^  App.  (as.   (li.  of  L. )   7;!:?.  745. 

"It  is  not  necessary  that  tliei-e  should  he  a  contract  in  so  many 
words  to  sign  as  cosuieties.  It  was  ^ullicient  if  it  appeared,  taking 
all  of  the  circum'stani  es  ii  to  att-ouiit,  that  that  was  the  nature  of  the 
liability  which,  as  helwceii  tl;en;selvcs,  the  parties  intended  to  assume 
and  did  assume."     ^Vrcis  v.  I'arsnits.  }7C)  Mass.  570-575. 

The  significant  eiic  iinis1an((>s  in  the  present  case  are  that  all  of 
the  indorsers  were  engaged  in  a  common  enterprise;  that  the  money 
to  be  raised  on  the  note  was  for  the  furtherance  of  that  enterprise; 
and,  so  far  as  appears,  tlial  one  inch^rser  was  as  much  interested  in 
the  enterprise  and  as  much  to  be  benefited  by  raising  the  money  as 
was  any  other.  It  is  likewise  a  very  significant  circumstance,  as  bear- 
ing upon  the  mutual  obligations  of  the  indorsers  to  each  other,  that 
all  the  indorsements  were  put  on  the  note  before  it  was  issued,  and 
solely  to  give  it  credit  with  the  bank,  and  that  no  indorser  gained 
any  profit  or  advantage  from  the  note  except  such  as  was  shared  by 
all  in  the  pursuit  of  the  common  enterprise.  TIagerty  v.  Phillips, 
83  Me.  336. 

"The  indorsements  upon  bills  of  exchange  or  promissory  notes  rest 
upon  the  theory  that  the  liability  of  indorsers  to  each  other  is  reg- 
ulated by  the  position  of  their  names,  and  that  the  paper  is  trans- 
ferred from  one  to  the  others  by  indorsement.  But  this  rule  has  no 
practical  application  to  accommodation  indorsers,  where  neither  of 
them  lias  owned  the  paper,  and  no  such  transfer  has  been  made." 
Easterly  v.  Barber,  66  N.  Y.  433,  437. 

We  are  therefore  of  the  opinion  that  enough  appeared  to  justify 
a  finding  that  the  indorsers  upon  the  note,  as  l)etwcen  themselves,  be- 
came joint  sureties  for  the  payment  of  the  nofo,  and  that  the  incom- 
petent, having  paid  it,  was  entitled  to  contribution  from  her  co-in- 
dorsers.  The  defendant  offered  no  evidence  and  made  no  request  to 
go  to  the  jury,  contenting  himself  with  a  motion  to  dismiss  the  com- 
plaint upon  the  plaintiff's  proofs. 

It  follows  that  the  judgment  and  order  appealed  from  must  be 
affirmed,  with  costs.    All  concur. 


V.    4.]  INDORSEE.  463 

§  118  WILSON  V.  HEXDEE. 

74  New  Jebset  Law    (Ct.  Err.  &  App.)     640.  — 1907. 

Plaintiff  was  nonsuited  on  the  trial  and  brings  error. 

Pitney,  J.  —  On  May  12,  1904,  one  Walter  D.  Wilson  made  his 
promissory  note  for  $920  payable  to  the  order  of  the  Vineland  Na- 
tional Bank.  Prior  to  its  delivery  to  the  payee  the  note  was  indorsed 
successively  by  Charles  W.  Wilson,  the  plaintiff  herein,  and  by  the 
defendant  Hendee,  for  the  accommodation  of  the  maker.  The  paper 
having  gone  to  protest  at  maturity,  the  plaintiff  was  obliged  to  pay, 
and  did  pay,  the  whole  amount  of  it  to  the  bank. 

The  present  action  is  based  upon  an  alleged  agreement  made  be- 
tween Hendee  and  the  plaintiff  prior  to  the  indorsement  of  the  note 
by  either  of  them,  to  the  effect  that,  if  plaintiff  would  become  in- 
dorser,  Hendee  would  likewise  indorse,  and  would  pay  the  note  at 
maturity,  and  indemnify  the  plaintiff  and  save  him  harmless  against 
all  loss  by  reason  of  his  indorsement,  in  consideration  of  certain  val- 
uable personal  property  to  be  placed  in  his  hands  by  the  maker. 
*  *  *  It  will  be  well  to  consider  whether  either  the  common-law 
rule  or  the  Negotiable  Instruments  Act  (P.  L.  1902,  p.  583)  excludes 
the  parol  evidence  upon  which  alone  was  rested  the  proof  of  the  agree- 
ment for  whose  breach  recovery  was  sought  in  the  present  case. 

The  note  in  question  was  made  by  Walter  D.  Wilson  to  the  order 
of  the  bank,  and  was  indorsed  by  the  parties  to  this  suit  prior  to  its 
delivery  to  the  bank.  As  the  law  stood  in  this  State  before  the  en- 
actment referred  to,  their  signatures  would  per  se  have  created  no 
implied  or  commercial  contract  whatever,  their  liability  to  the  payee 
would  have  depended  upon  extrinsic  evidence  to  show  the  intent  with 
which  they  became  parties,  and  parol  evidence  would  have  been  com- 
petent for  the  purpose  of  showing  such  intent.  Chaihlock  v.  Vnnness, 
3.5  N.  J.  Law,  .517.  Had  Ihe  payee  afterwards  indorsed  the  note,  and 
had  it  come  to  the  hands  of  a  hoiia  fide  holder  before  maturity,  tlie 
irregular  indorsers  might  have  been  subjected  to  the  liability  of 
second  indorsers.  Crozvr  v.  Clifunhers.  20  N.  J.  Law,  250.  Rut,  as 
between  the  original  [)arties,  the  (piestion  whether  any  contract  was 
made,  and,  if  so,  what  was  the  character  of  that  contract,  was  to  be 
determined  by  the  intention  of  the  parties  as  ascertained  by  parol 
evidence  of  the  circumstances  under  which  the  indorsement  was 
made;  evidence  of  this  sort  not  being  objectionable  on  account  of  a 
tendency  to  vary  a  written  contract,  when  no  contract  would  arise 
except  for  such  evidence,     (liaddnck  v.  Vanness,  35  N.  J.  Law,  523. 

Even  with  respect  to  negotiable  paper  regular  in  form,  our  decision 
recognized  the  admi.ssibility  of  parol  evidence  as  between  the  im- 
mediate parties  for  (he  [lurpose  of  showincr  that  a  note  or  indorsement 
was  made  for  accommodation,  or  made  without  consideration,  or  upou 


•Hvl  LIABILITY    Oh'    I'AUTIES.  |  ART.    VI. 

n  consideration  that  wass  conditional  and  was  not  performed.  Gilbert 
V.  Dunron.  '30  N.  .7.  l.nw,  i;^T;  Td.  531  ;  Chaddnck  v.  Yanness,  35  N. 
.1.  Law,  530. 

]^ut,  as  a  jjeneral  rule  with  resju'ct  lo  i)aj)er  regular  in  form,  onr 
decisions  did  not,  even  as  helwccn  the  ])arties,  admit  of  the  introduc- 
tion of  parol  evidenie  to  vary  the  commercial  contract  that  was  held 
to  arise  from  the  terms  of  the  iTistrument;  for  instance,  as  hetwcen 
successive  accommodation  indorsers,  Johnson  v.  Ramsci/,  43  N.  J.  Law, 
279  ;  Middlcton  v.  ilrifjith,  57  N.  ,7.  Law,  112,  448  ;  Kliiifj  v.  Kehoe,  58 
N.  J.  Law,  539;  Foley  v.  Emerald  Brewing  Co.,  01  N.  J.  Law, 
428,  431. 

In  other  jurisdictions  the  rule  adopted  in  this  state  with  respect 
to  excluding  parol  evidence  of  the  intent  of  the  parties  to  a  negotiahle 
instrument  regular  on  its  face,  where  such  evidence  would  tend  to 
vary  the  contract  that  the  law  merchant  implies  from  the  form  of 
the  instrument,  was  not  uniformly  adhered  to,  it  hcing  held  in  many 
states  that  in  actions  between  tlie  parties  parol  evidence  was  admis- 
sible to  show  that  they  had  agreed  otherwise  than  as  would  appear 
from  the  face  of  the  note.  1  Dan.  Neg.  Inst.  (6th  Ed.)  §717,  and 
cases  cited;  2  Rand.  Com.  Paper,  ^§710,  741,  778,  779,  and  cases 
cited;  Crawf.  Ann.  ^^eg.  Inst.  Law  (2d  Ed.)  §  118. 

In  this  state  of  the  law  our  new  Negotiable  Instruments  Act  was 
passed,  P.  L.  1902,  p.  583.  Prior  to  its  enactment  a  similar  act,  or 
one  substantially  similar,  had  been  adoj>te(l  in  Ifi  American  states, 
and  had  been  enacted  by  Congress  as  the  law  of  the  District  of  Co- 
lumbia. Crawf.  Ann.  Neg.  Inst.  Law%  prefac^e  to  second  edition. 
We  must  attribute  to  our  Legislature  an  intent  to  render  the  law 
of  this  state  respecting  negotiable  instruments  conformable  to  the  law 
in  these  other  states.  And  at  the  same  time  it  is  obvious  that  the 
act  was  intended  to  do  away  with  some  of  the  distinctions  established 
or  recognized  by  our  adjudicated  cases  respecting  the  form  and  mode 
in  which  a  contract  of  indorsement  might  be  entered  into,  and  the 
effect  of  making  such  an  indorsement,  whether  as  between  the  ))arties 
or  with  respect  to  subsequent  holders  of  negotiable  paper.  By  section 
63*  of  that  act  (P.  L.  1902,  p.  594),  "  a  person  placing  his  signature 
upon  an  instrument  otherwise  than  as  maker,  drawer  or  acceptor,  is 
deemed  to  be  an  indorser  unless  he  clearly  indicates  by  appropriate 
words  his  intention  to  be  bound  in  some  other  capacity."  This,  of 
course,  abrogates  so  much  of  Chaddock  v.  Vanness,  35  N.  J.  Law,  517, 
10  Am.  Pep.  25fi,  as  held  that  an  irregular  indorsement  of  itself  im- 
ported no  implied  or  commercial  contract  whatever. 

Section  64^  is  as  follows: 

("Quoting  it.] 

1  N.  Y.,  §  113.  — C. 
2N.  Y.,  §  114. —  C. 


V     4-1  INDORSEE.  465 

It  will  be  observed  that  this  section  deals  with  the  rights  of  the 
payee  and  subsequent  parties,,  and  has  not  the  etfect  of  defining 
the  rights  and  liabilities  of  several  irregular  indorsers  as  between 
themselves.  These  are  set  forth  in  section  68/  which  reads  as 
follows:  "As  respects  one  another,  indorsers  arc  liable  prima  facie 
in  the  order  in  which  they  indorse;  but  evidence  is  admissible  to  show 
that  as  l)etween  or  among  themselves  they  have  agreed  otherwise,"  etc. 

Thi>  does  not,  by  express  mention,  sanction  parol  evidence:  neither 
does  it  expressly  exclude  any  kind  of  evidence,  whether  written  or 
verbal.  Is  parol  evidence  excluded  by  implication?  If  the  legislative 
design  was  to  admit  only  written  evidence  for  the  purpose  indicated, 
it  would  have  been  unnecessary  to  say  anytliing  upon  the  subject,  for 
by  the  common-law  rules  of  evidence  other  writings  explanatory  of  the 
real  agreement  would,  of  course,  have  been  admissible.  When  we 
recall  that  a  previous  section  had  brought  irregular  and  regular  in- 
dorsers into  a  single  category  in  the  absence  of  an  expressed  intention 
to  the  contrary,  that  the  first  clause  of  section  68  renders  the  mere  act 
of  indorsement  only  prinia  facie  evidence  of  the  contract  as  between 
successive  indorsers,  and  that  by  previous  decisions  parol  evidence  as 
l>etween  irregular  indorsers  was  for  all  purposes  admissible,  and  as 
between  regular  indorsers  was  for  some  purposes  admissible  and  for 
other  purposes  not,  it  is  easy  to  arrive  at  the  conclusion  that  the  sec- 
tion was  intended  to  admit  parol  evidence  in  all  cases  between  indorsers 
for  the  |)urposes  of  showing  what  was  the  agreement  amongst  them- 
selves. This  view  biings  our  state  into  accord  with  tlie  rule  already 
laid  down  in  some  other  jurisdictions  as  the  common-law  rule.  At 
the  same  time  it  does  not  destroy  the  value  of  the  instrument  as  a 
commercial  instrument,  for  it  is  not  against  those  who  subserpiently 
take  the  instrument  in  tlie  course  of  commerce  that  the  explanatory 
evidence  is  admiticd.  When  we  rememher  that  the  rules  of  the  law 
riierclianf  in  this  regard  were  established  es])ecially  for  the  protection 
of  .subsequent  holders  of  the  instrument,  and  that  llic  liability  of  in- 
Hftr^cr  iirisi'S  not  from  any  words  expressed  upon  the  jiajiev  but  fifxn 
implications  that  originated  in  the  necessities  of  trade  and  (omtnercc, 
it  is  reasonable  to  attribute  to  the  Legislature  an  intent  to  leave  the 
paper  open  to  explanation  by  pared  as  between  the  indorsers  them- 
selves. 

This  is  the  elfec.'t  that  was  given  to  sec  t  ion  6H  of  the  act  in  the  recent 
ileirision  of  this  court  in  the  case  of  Morf/an  v.  '/'luuii /ison .  7".*  X.  J. 
Law,  -.Ml. 

In  our  opinion,  therefore,  (he  act  admits  of  the  introduction  of 
j)arol  evidence  to  show  the  actual  agreement  made  between  several  in- 
dorsers, notwithstanding  it  contradicts  the  prima  facie  inference  ap- 
jxaring  from  their  stu'cessive  indorsements.      *     ♦      * 

dudgnient   for  defenilant   reversed  and   a   new  trial  granted. 

8N.  v..  §  118.  —  C. 

NBOOT.  IN8TKDMKNT8— 30 


4GG  LlAlULl'll     OK    TAIMIKS.  [aKT.    VI. 

§  118  LANE  V.  STACY. 

8  Allkn   (Mass.)   41.  — 1864. 

Bill  in  equity  to  comiu'l  .IcfciKlant  to  iissi<!;n  to  plaintiff  one-half 
the  security  given  to  prolect  plaiiitiir  and  dofendant's  intestate  as 
payee-indorsers  of  a  note.  The  note  was  made  l)y  the  mortgagor  to 
plaintiff  and  the  intestate,  and  by  them  indorsed.  The  mortgage  was 
given  to  the  intestate  witlioiit  plaintiff's  knowledge. 

Hoar,  J. —  It  is  not  denied  by  the  defendant  tliat  a  surety  is  en- 
titled to  share  in  the  benefit  of  the  security  taken  by  his  co-surety. 
But  he  contends  that  his  intestate  was  not  the  co-surety  of  the 
plaintiff;  and  relies  uiutn  the  well-settled  rule  that  the  liability  of 
successive  indorsers  upon  a  note  is  fixed  by  the  contract  which  the 
position  of  their  names  upon  the  paper  establishes,  and  that,  unless 
by  express  agreement,  one  is  not  bound  to  contribute  to  a  payment 
of  the  note  by  the  other,  t'vcn  if  both  are  accommodation  indorsers. 
The  principle  is  sound,  hut  has  no  application  to  the  case  at  bar. 
Stacy  and  Lane  are  not  successive  indorsers.  They  are  joint  indors- 
ers. The  note  was  made  payable  to  their  joint  order,  and  could  only 
be  transferred  by  their  joint  act.  Which  name  is  first  put  upon  the 
paper  is  therefore  immaterial,  as  by  the  indorsement  they  incurred 
a  joint  responsibility  for  the  debt  of  the  promisor.  Each  is  therefore 
entitled  to  share  in  the  security  taken  by  the  other. 

Decree  according  to  the  prayer  of  the  plaintiff's  bill.^ 


VI.  Acceptor  for  honor. 

See  §  284,  post,  pp.  701-706. 


VII.  Guarantor. 

1.   (a)  Does  a  Guaranty-Indorsement  p.y  ttie  TTolder  Trans- 
fer TiTT.E? 

Tbu.st  Co.  v.  National  Bank,  101  U.  R.  08,  anlc,  p.  203. 
Elgin  City  Banking  Co.  v.  Zki.cii.  57  Minn.  487,  ante,  p.  265. 
Johnson  v.  Mitchell,  150  Tex.  212,  ante,  p.  289. 

1.   (b)  May  a  Guaranty  he  Written  ahove  a  Blank  Indorse- 
ment ? 

BFxnF.N  V.  Hann,  01  Town,  42,  ante,  p.  209. 
Scott  v.  Calkin,  1.39  Mass.  529,  ante,  p.  270. 
Clabke  v.  Patrick,  00  Minn.  269,  ante,  p.  270. 


1  See  Npg.  Tnst.  L..  §  71.     This  section   (118)  chanpps  the  law  to  the  extent 
of  rendering  the  obligation  joint  and  several  instead  of  joint.  —  H. 


VII.]  GUARANTOR.  467 

2.  Is  A  Transferee  a  Holder  in  Due  Course? 

Trust  Co.  v.  National  Bank,  101  U.  S.  68,  ante,  p.  263. 
EliGiwCiTY  Banking  Co.  v.  Zelch,  57  Minn.  487,  ante,  p.  266. 
Dunham  v.  Petebson,  5  N.  Dak.  414. 


3.  What  is  the  Contract  of  the  Guarantor? 

BROWN  V.  CURTISS. 
2  New  York,  225.  —  1849. 

Action  against  defendant  as  guarantor  of  a  promissory  note. 
Defendant  was  payee  of  the  note.  He  wrote  upon  it,  "  I  guaranty 
the  payment  of  tlie  within;  Charles  Brown,"  and  transferred  it  to 
plaintiff  in  payment  of  a  debt.  No  demand  on  the  maker,  or  notice 
of  non-payment  to  defendant.  Defendant  offered  to  show  that  for 
several  years  after  the  note  fell  due  the  maker  was  solvent;  that  he 
then  failed,  and  was  insolvent  at  this  time.  Evidence  excluded. 
Judgment  for  plaintiff. 

Bronson,  J.  —  It  is  said,  on  the  one  side,  that  the  defendant  is  the 
maker  of  a  promissory  note,  and  liable  as  such;  and  on  the  other 
side  that  he  is  an  indorser,  and  has  been  discharged  for  the  want  of 
demand  and  notice.  And  strange  as  it  may  sooni,  tliore  are  cases  in 
the  books  which  go  to  uphold  both  of  these  positions.  But  they 
are  both  wrong.  The  defendant  is  neither  maker  nor  indorser  of  a 
promissory  note.  On  the  contrary,  he  has  in  very  plain  terms  made 
a  contract  of  a  different  kind  from  either  of  those  —  one  well  known 
to  the  law;  and  by  that  contract  he  must  cither  stand  or  fall.  He 
has  guarantied  the  payment  of  G.  F.  Brown's  note;  and  we  have 
no  right  to  turn  that  contract  into  one  of  a  different  kind.  This  is 
80  plain  a  principle  that  it  would  seem  to  be  enough  to  mention  it, 
without  saying  anything  more.  And  yet  there  are  cases  which  hold, 
that  the  guarantor  of  a  promissory  note  may  sometimes  be  treated 
as  maker,  and  some  times  as  indorser.  This  has  usually  been  allowed 
for  the  i)urpose  of  giving  effect  to  the  supposed  intention  of  the  parties, 
as  ascertained  from  extrinsic  evidence;  though  there  has  not  always 
been  so  fair  an  apology  for  altering  the  contract.  Hiit  on  whatever 
ground  the  courts  may  have  acted,  it  is  a  dangerous  proc-eeding.  At 
the  very  best,  it  violates  the  salutary  rule,  that  all  prior  negotiations 
between  tlie  parties  are  to  be  deemed  merge(l  in  the  final  written  agree- 
ment; and  allows  that  agreement  to  be  overruled  by  the  cf)nversations 
which  preceded  it.  Tf  the  {»arties  have  made  a  mistake  in  drawing 
up  their  contract,  the  instrument  may  be  reformed  in  of|iiity.  by  a 
direct  proceeding  for  that  purpose.  Rut  the  courts  can  have  no  right, 
under  eolor  of  construing  tlif  ngreernent,  to  say  that  it  menus  some- 
thing else  from  what  the  language  of  the  instrument  {)lainly  imports. 


4G8  LlAlULlTV    OV    I'AHTlKS.  (akT.    VI. 

1  liavo  L'ontondod  eariR'stly,  tliDiiyli  nut  always  witli  success,  for  tliis 
doctrine.  (Seabury  v.  11  iinyerford,  2  Hill,  80;  Miller  v.  (laston,  Id. 
188;  Munrow  v.  Durham,  3  Id.  587;  Leygcti  v.  Iicii/moiid,  0  Id.  639.) 
But  the  side  of  trutli  and  principle  will  sooner  or  later  prevail;  and 
the  decisions  of  the  court  of  errors  in  I/aJI  v.  Neivcoinb  (7  Hill,  -lUJ; 
3  Id.  233,  s.  c),  and  of  lliis  court  in  Spies  v.  GUdiovc  (1  Coiust. 
321),  have  greatly  slmkcn.  if  they  have  not  entirely  overthrown  ttie 
cases  in  which  the  courts  have  taken  the  liherty  to  remodel  the  con- 
tract of  the  parties.  Those  cases  have  never  had  any  <2;round  of  i)rin- 
ciple  to  stand  on,  and  1  trust  they  will  never  again  he  cited  as  au- 
thority in  this  state. 

1  do  not  mean  that  the  very  words  of  an  agreement  are  always  to 
be  followed.  Construction  is  often  necessary  for  the  purpose  of 
ascertaining  what  the  parties  intended  by  the  words  which  they 
used.  But  when  the  meaning  of  the  instrument  has  been  ascer- 
tained, the  office  of  construction  is  at  an  end ;  and  the  contract  can 
only  be  enforced  as  the  parties  have  made  it.  The  defendant  has 
very  plainly  contracted  as  a  guarantor.  If  he  is  not  liable  as  such,  he 
is  not  liable  at  all;  and  if  he  is  liable  as  such,  he  cannot  get  rid  of 
the  obligation  by  calling  himself  an  indorser,  or  anything  else. 

The  undertaking  of  the  defendant  was  not  conditional,  like  that 
of  an  indorser;  nor  was  it  upon  any  condition  whatever.  It  was 
an  absolute  agreement  that  the  note  should  be  ])aid  by  the  maker  at 
maturity.  When  the  maker  failed  to  pay,  the  defendant's  contract 
was  broken,  and  the  plaintiff  had  a  complete  right  of  action  against 
him.  It  was  no  part  of  the  agreement  that  the  plaintiff  should  give 
notice  of  the  non-payment;  nor  that  he  should  sue  the  maker,  or  use 
any  diligence  to  get  the  money  from  him.  The  cases  in  Massachu- 
setts. Maine,  and  Pennsylvania,  which  hold  a  different  doctrine, 
{Oxford  Bank  v.  Tiaynes.  8  Pick.  423:  Talhot  v.  Gay,  18  Id.  534; 
damage  v.  ffjdrliins,  23  Maine,  565;  Gibbs  v.  Cannon,  9  Serg.  &  R. 
198;  Isett  v.  Floge,  2  Watts,  128),  are  not  law  in  this  state.  With 
us,  proceedings  against  the  maker  are  only  necessary  where  there  is 
a  guaranty  of  collection.^  The  point  was  decided  long  ago  that  a 
guaranty  of  payment,  like  the  one  in  question,  is  not  conditional,  but 
an  absolute  undertaking  that  the  maker  will  pay  tlie  note  when  due. 
(Allen  V.  Riyhtmere,  20  John.  365.)^     All  of  our  cases  go  upon  that 

2  fiylvpfiter  V.  Doiiyner.  18  Vt.  32:  Foreat  v.  fitewart,  14  Oh.  St.  246.  —  H. 

3  Accord:  Bank  v.  Hopson.  53  Coiin.  453;  fiance  v.  Miller,  21  III.  636;  Htuda- 
baker  v.  Cor/i/.  54  Ind.  580:  Rohevis  v.  Hawkins,  70  Midi.  500;  Clay  v.  Rdger- 
ton,  Ifl  Oh.  St.  549.     \ Elf/in  City  Bking.  Co.  v.  Hall,  119  Tenn.  548.  —  C] 

Contra:  (Contrart  conditional)  Crooks  v.  Tully,  50  Calif.  254;  Rockford 
.V.  B.  V.  (Jaylord.  34  Iowa,  240;  Seirton  Wafjon  Co.  v.  Dicrs,  10  Neb.  284; 
Mizner  v.  Spier,  96  Pa.  St.  533;  cases  from  Mc,  Mass.,  and  Pa.,  criticised  in 
the  principal  ca^e.  P>ut  the  '.'uarantor  may  waive  the  holder's  laches.  Ffirjour- 
ney  v.  Wetherell,  6  Met.   (Mass.)   553;   Pattillo  v.  Alexander,  96  Ga.  60.  —  H. 


ni.]  gUaBanTob.  469 

ground.  Some  of  tliein  go  so  far  as  to  liold,  that  tlie  guarantor 
may  be  treated  as  the  maker  of  a  promissory  note.  {Manrow  v. 
Durham,  3  Hill,  .^Sl;  Luqueer  v.  Prosser,  4  Hill,  420;  1  Id.  256.) 
That  doctrine  cannot  be  defended.  Although  tlie  undertaking  is 
absolute,  it  differs  es.sentially  from  a  promissory  note.  The  guarantor 
does  not  promise  to  pay  himself,  but  that  the  maker  will  pay.  Still, 
such  cases  prove  tliat  our  coiirls  are  far  enough  from  liolding  tlie  con- 
tract to  be  conditional.  It  follows  from  what  has  been  said  that  the 
evidence  offered  by  the  defendant  was  properly  excluded.  Proof  that 
when  the  note  became  due,  and  for  several  years  afterwards,  the  maker 
was  abundantly  able  to  pay,  and  that  he  had  since  become  insolvent, 
would  be  no  answer  to  this  action.  The  defendant  was  under  an  abso- 
lute agreement  to  see  that  the  maker  paid  the  note  at  maturity. 

If  there  had  been  an  indorser  on  the  note  prior  to  the  guaranty, 
and  the  plaintiff  had  allowed  him  to  be  discharged  by  neglecting  to 
demand  payment  and  give  him  notice,  it  may  be  that  the  defendant 
would  have  had  a  good  answer  to  the  action.  But  it  is  not  neces- 
sary to  consider  that  question  ;  for  there  was  no  indorser,  and  nothing 
has  been  done  or  omitted  to  discharge  the  maker.  If  the  defendant 
wished  to  have  him  sued,  he  should  have  taken  up  the  note,  and 
brought  the  suit  himself.  The  plaintiff  was  under  no  obligation  to 
institute  legal  proceedings. 

The  only  remaining  question  is  on  the  statute  of  frauds.  (2  R.  S. 
135,  §  2.)  If  the  ca.se  is  within  the  statute,  it  is  impossible  to  get 
over  the  objection  that  no  consideration  is  expressed  in  the  guaranty. 

\9^c  i\\f  excellent  article  by  Willinni  P.  Rogers.  Esq..  in  0  Col.  T.aw  Rev. 
220  (.April.  111(10),  entitled  "  Demand  on  principal  before  action  apainst  piiar- 
antor,"  where  the  authorities  are  carefully  analyzed. 

On  page  230.  Mr.  Hopers  says:  "Tlie  language  nf  the  court  in  Ihximan  v. 
Poolpjf  et  al.  ((I8!i:?)  77  Md.  102.  Ifi.'Jl  touching  the  subject  of  demand  and 
notice,  accords  with  the  writer's  views  of  the  law  on  this  subject.  The  court 
there  said:  '  It  is  to  he  regretted  that  upon  such  a  question  there  should  be 
such  a  conflict  of  judicial  o|)inion.  This  conflict  has  nutinly  arisen  from  a 
de|)arturc  from  the  firmly  settled  rule  of  the  common  law  in  regard  to  con- 
tracts of  giiaranty.  and  the  attempt  to  engraft  upon  such  contracts,  in  a 
modifierl  form  it  is  true,  the  law  of  demand  and  notice  by  which  the  liability 
of  iin  indorser  of  negotiable  paper  is  gr)v»'rned.  ...  In  the  case  of  an 
absolute  guaranty,  hosvever,  there  is  no  condition  annexed  to  the  contract 
itself,  nor  i-i  any  condition  implied  iiy  law,  ri'ipiiring  the  guarantee  to  notify 
the  guarantor  of  the  default  of  the  [trineipal.  On  tlw  contrary,  his  liability 
is  governed  by  the  same  rules  of  law  by  which  the  ordiiuiry  liability  of  one 
who  has  broken  his  contract  is  determined.  And  this  being  ho.  if  one  giinr- 
nntees  in  absfdute  terms  the  performancf  of  a  specific  act  or  contr.nct  by 
another,  his  liability  being  commensurate  with  that  of  the  principal,  whatever 
proof  is  necessarv  to  su[i[)i>rt  an  action  against  the  principal  will  be  siiflicient 
in  an  action  againnt  the  guarantor.  And  as  demand  ii|)on  the  principal  is  not 
necessary  to  su{)[iort  an  a<'tion  against  him  for  a  breiich  of  his  cf)ntract,  it 
is  not  necessary  to  alle;.'<'  or  prove  notice  of  dcTtiand  upn?i  and  default  of  the 
principal  to  charge  the  guarantor,'"  —  C.l 


470  i.iAiui.irv  1)1'  I'AitTii'rt.  [aut.  vi. 

J  know  it  was  hold  in  Mdnroir  v.  Durluuu  (;5  Hill,  581),  tlmt  a  guar- 
anty like  this  was  a  {noniissory  note,  which  imports  a  consideration, 
and  was  therefore  valid.  But  that  case,  which  lias  been  questioned 
elsewhere  (Storv,  Prom.  Notes,  597),  as  well  as  at  home,  cannot  be 
law.  An  undertaking  that  another  man  will  perform  his  contract  is 
not  a  promissory  note.  It  is  not  within  any  definition  which  was 
ever  given  (tf  a  ]u-()inissory  note,  and  it  cannot  be  held  to  be  such, 
without  confounding  all  legal  distinctions  in  relation  to  the  nature 
of  contracts. 

But  I  think  the  statute  of  frauds  does  not  apply  to  this  case.  Al- 
though in  form  this  is  a  promise  to  answer  for  the  debt  or  default 
of  another,  in  substance  it  is  an  engagement  to  pay  the  guarantor's 
own  debt,  in  a  particular  way.  TTe  does  not  undertake  as  a  mere 
surety  for  the  maker;  hut  on  his  own  account,  and  for  a  consideration 
which  has  its  root  in  a  transaction  entirely  distinct  from  the  liability 
of  the  maker.  The  defendant  was  a  debtor  to  the  plaintiff,  and  gave 
the  note,  with  the  guaranty,  to  satisfy  that  debt.  This  belongs  to 
the  third  class  of  cases  mentioned  by  Kent,  Ch.  J.,  in  Leonard  v. 
Vredenburgh  (8  John.  38,  39).  There  was  a  new  and  distinct  con- 
sideration, independent  of  the  debt  of  the  maker,  and  one  moving 
between  the  parties  to  the  new  promise.  In  such  cases,  where  the 
party  undertakes,  for  his  own  benefit,  and  upon  a  full  consideration 
received  by  himself,  the  promise  is  not  within  the  statute.  Tt  would 
be  good  without  any  writing.  The  point  was  decided  by  the  Supreme 
Court  in  Johnson  v.  Gilbert  (4  Hill,  178),  and  T  do  not  think  it 
necessary  to  refer  to  other  cases  holding  the  same  doctrine.* 

The  case  of  Manrow  v.  Durham  might  have  been  placed  upon  the 
same  ground  on  which  T  have  put  this,  if  Durham  alone  had  signed 
the  guaranty.  He  made  the  promise  upon  a  new  consideration, 
moving  between  the  plaintiff  and  himself.  But  Moulthrop,  the  other 
defendant,  was  a  mere  surety,  "and  as  to  him  the  case  was  clearly 
within  the  statute. 

Stuong,  J.,  also  delivered  an  opinion. 

Jewett,  Cii.  J.,  and  Gardner,  J.,  were  of  opinion  tliat  the  guar- 
anty was  within  the  statute  of  frauds,  and  therefore  void. 

Judgment  affirmed. 


*  "  The  reasoninp  to  take  this  promi-^o  out  of  the  statute  is  (piito  subtle,  and 
T  should  have  nnioh  difliculty  in  yielding  it  my  assent,  but  for  the  authorities 
which  I  think  ought  now  to  control." — Earl,  J.,  in  Milks  v.  Rich,  80  N.  Y. 
200.  271.  Sec  also  Darst  v.  Bates,  95  111.  493;  Sheldon  v.  liutler,  24  Minn. 
51.3:  ^Vyman  v.  Goodrich,  26  Wis.  21;  Hassinger  v.  Newman,  83  Ind.  124;  of. 
Dons  V.  Siictt,  134  Mass.  140. 

One  who  signs  as  surety  with  the  maker  is  liable  as  an  original  promisor; 
the  statute  of  frauds  does  not  apply  to  the  case.  Casey  v.  lirahason,  10  Abb. 
Pr.  (N.  Y.)  368;  Freeh  v.  Yawger,  47  N.  J.  L.  157;  Paul  v.  Htackhouse,  38  Pa. 
St.  302. 


VII.J  GUARANTOR.  471 

4.  Is  THE  Guaranty  Transferable? 

(a)   Is  it  negotiable?  ° 
TRUE  V.  FULLER. 

21  PiCKEBiNG   (Mass.)     140.  —  1838. 

Shaw,  C.  J.,  delivered  tlie  opinion  of  the  court.  The  facts  bear- 
ing upon  this  question  may  he  thus  stated.  Morse  made  three  promis- 
sory notes  to  Elisha  Fuller,  or  his  order,  payable  in  two,  three  and 
five  years,  re.^peitively,  from  date,  and  gave  a  mortgaire  to  secure 
the  payment  of  them.  The  notes  were  indorsed  in  blank  by  the  payee. 
On  the  same  notes  was  indorsed  a  guaranty  in  this  form:  ''I  guar- 
anty the  payment  of  semi-annual  interest  on  this  note,  as  well  as  the 
principal,"  and  signed  by  the  defendant.  The  notes  thus  indorsed 
were  transferred,  and  the  mortgage  assigned.  The  mortgaged  prem- 
ises were  entered  on  for  breach  of  condition,  and  the  mortgage  fore- 
closed.    The  notes  have  regularly  come  to  the  hands  of  the  plaintiff. 

The  court  are  of  opinion  that  the  plaintiff  is  not  entitled  to 
recover,  because  the  guaranty  in  question  was  not  made  to  liim,  or 
whilst  he  was  holder  of  the  note :  that  it  was  not  negotiable  in  itself, 
and  was  not  made  so  by  being  written  upon  and  intended  to  secure 
a  negotiable  instrument.  This  instrument  being  filled  up  and  signed, 
is  complete  in  itself,  and  it  cannot  be  altered  either  by  striking  out 
words  so  as  to  convert  it  into  a  general  indorsement,  or  by  filling  up, 
as  in  case  of  a  blank  indorsement.  In  the  latter  case,  an  indorser, 
by  leaving  a  blank  over  his  name,  tacitly  agrees  that  any  subsequent 
lawful  holder  may  insert  suitable  words  to  render  him  liable  in  the 
same  manner  and  to  the  same  e.xteni,  ini plied  by  his  indorsement  and 
the  usages  of  business. 

Where  one,  not  the  payee  or  holrler.  siprns  a  guaranty  upon  the  instrument 
there  are  two  eases.  (  1  I  If  sijrncd  hcfore  delivery,  it  "  requires  no  otlier  con- 
sideration to  >*iif>pr)rt  if,  ami  need  express  none  other  (ev<!n  where  the  statute 
requires  the  consideration  of  tiie  ;juaraiity  to  he  I'xpres^^ed  in  writiufi).  than 
the  consideration  wliieh  the  note  u|)on  its  face  inqtiies  to  have  passed  hetween 
the  ori(.'inal  parties.  (2)  I'ut  a  '.niaranty  written  upon  a  promissory  nf)te 
after  the  note  has  heen  delivered  and  taken  etTeet  as  a  contract,  rerpiires  a 
distinct  consideration  to  Hiifiport  it;  and  if  snch  a  f;uaranty  does  not  express 
any  consideration,  it  is  void,  when'  the  statute  of  fr.'iuds  rerpiires  the  considera- 
tion to  he  expressed  in  writinir."  —  i/o.ic.v  v.  Luirrmcr  ('nmili/  liiirih.  1  !!•  H.  S. 
298;  cf.  Srntt  v.  Cnlkin.  W.)  Mass.  .'i20.  nttlr.  p.  27«l. 

An  oral  accejitance  withf)ut  <'on«ideration  has  In-en  held  to  he  within  the 
statute.  Mfinhii  v.  Ciminn.  10.'>  Mas-*.  4-t.');  W'nltnn  v.  SUindrriUc.  M  Iowa, 
597.  Contra:  /arris  v.  Wilson.  4(5  Conn.  !)0.  An  oral  acceptance  upon  con- 
Bideration  is  held  not  to  l>e  witliin  the  statute.  MH'utrhrn  v.  Itirr.  .'ifi  Afiss. 
456;  Nrlsnn  v.  First  Hnnk\  4H  III.  'M\:  Louisrilh  Co.  v.  Cnhhrrll.  OK  ln<l.  24.'»; 
Jn  rr  (Uxhlnnl.  m  Vt.  415.  —  II. 

'•  Whether  it  he  a  ;(.iaranty  indorHciiieiit  hy  a  h(dder.  or  he  written  on  the 
bill  by  a  third  party,  seems  immaterial   when  this  queution  is  involved.  —  H. 


4'<2  I.IAIUI.I  11     OK     I'AIM'IKS.  [aUT.     VI. 

'I'liis  guanuity  oxprosscs  lu)  loiisideratioii,  nor  does  it  name  any 
person  as  the  guarantee,  to  wIumm  it  is  made.  Jiut  suppose  these 
could  be  su{)plied  hy  parol  proof,  it  eould  only  enure  to  the  person 
who  was  the  iiolder  at  the  time  the  guaranty  was  given,  who  was  not 
the  plaintiir. 

Mad  the  defendant  intended,  by  the  credit  of  his  name,  to  give  a 
general  currency  to  the  note,  as  a  negotial)le  security,  there  was  no 
reason  why  he  should  not  have  indorsed  it  generally,  in  which  case 
lie  would  have  been  resj)onsible  to  any  i)erson  who  might  afterwards 
become  the  holder.  As  it  is,  it  is  no  more  a  negotiable  promise  than 
if  it  had  been  written  on  a  separate  paper,  refcri-ing  to  the  TU)te,  and 
guarantying  it  to  the  then  holder.  {Tyler  v.  Biniipi/,  7  Miss.  R.  47!) ; 
Lainourieux  v.  Hewit,  5  Wend.  307.) 

l^laiutiff  nonsuit.  " 


(&)   Is  it  assignable? 

COOPER  IK  DEDRICK. 
22  B.\RBOCR  (N.  Y.  Sup.  Ct.)  516.  — 1850. 

By  the  Court,  ]\Iai!vin,  J. — The  action  was  upon  a  guaranty, 
written  upon  a  promissory  note.     The  note  reads  thus: — 

$58.20.       Due   Dedrick   &   Bronson.  or   bearer,   fifty-eight   and   twenty-si.x   one 
hundredths  dollars,  for  value  received. 

J.    S.    Stillman. 
[The  <ruaranty   is,  lliatl 

For  value  received.  I  hereby  guarantee  the  payment  of  the  within  note. 
Feb.  19.  1849. 

(Signed  by  Defendant.) 

Upon  the  trial  the  plaintiffs  produced  the  note  and  proved  the 
guaranty  written  upon  it,  and  reste<1.  |  Defendant  asked  for  nonsuit: 
(1)  That  there  was  no  evidence  of  the  maker's  signature;  ("i)  that 
plaintiffs  showed  lu)  title  or  interest  in  the  guaranty.]  ^  The  justice 
gave  judgment  in  favor  of  the  plaintiffs. 

Several  objections  are  made  to  the  judgment.  It  will  not  be  neces- 
sary to  state  them  particularly,  it  was  not  necessary  to  prove  by  wit- 
nesses the  signature  of  the  maker  of  the  note.  This  was  sufficiently 
proved,  as  against  the  defendant,  by  proving  his  execution  of  the  guar- 
anty.     (Cowen    &    Hill's    Notes,    notes    1G8,    8fifl,    912.)      *      *      * 


".Accord:  M'Doal  *.  Yeomanfi,  8  Watts  (Pn.)  .301:  Irish  v.  Cutter.  31  V\ 
530.  Contra:  Wrhiter  v.  Cnhh.  17  111.  45fl :  Dnnnerherq  v.  fippmheimer,  15 
Wash.  290.     See  2  Daniel  on  Neg.  Inst..  §§  17741784.  —  H. 

[.\ecord:  Edfierly  v.  l.anso)}.  170  Mass.  551:  coniiiuntcd  on  in  14  Marv. 
Law  Rev.  299.  —  <'.i 

7  Other  questions  omitted.  —  H. 


^Il]  GUARANTOR.  473 

As  to  the  evidence  of  their  title  to  the  guaranty,  the  note  was  pay- 
able to  Dedrirk  tS:  Bronson,  or  hearer,  and  the  guaranty  was  written 
upon  it.  The  possession  and  jiroduction  of  the  note  was  iiriiiia  facie 
evidence  of  title  in  the  jdaii'tifTs,  and  a?  the  frnararty  was  upon  the 
note,  in  ni\  opinion,  the  possession  of  the  note  and  the  guaranty  were 
privw  fnrie  evidence  of  right  in  the  [)laintifl's  to  tlic  guaranty.  Since 
the  code,  the  real  j^arty  in  interest  is  to  hi-jiig  the  action.  The  old 
question,  therefore,  whether  the  foiiii  of  the  contract  justifies  the 
action  in  the  name  of  the  plaintilfs,  no  longer  exists;  hut  the  question 
is,  has  the  plaintitl  the  title  oi  light  to  the  conti-act  or  the  cause  of 
action?  If  he  has.  he  may  maintain  the  suit,  u|)on  the  contract,  in 
iiis  own  name.  In  ni}  opinion,  when  a  guaranty  is  written  upon  a 
note  and  the  note  is  transferred,  nothing  being  said  touching  the 
guaranty,  the  contiact  of  guaranty  passes  with  the  note.  In  other 
words,  the  sale  and  delivery  of  the  note  with  the  guaranty  upon  it 
furnishes  prima  facie  evidence  of  a  sale  of  the  contract  of  guaranty. 
In  the  present  case  the  defendant  was  one  of  the  payees  of  the  note, 
and  the  note  was  also  payable  to  hearer.  He  transferred  the  note  and 
guarantied  the  payment.  In  my  opinion,  any  one  who  should  become 
the  holder  of  the  note  could  maintain  an  action  upon  the  guaranty, 
unless  it  should  be  shown  that  the  contract  of  guaranty  was  not  trans- 
ferred at  the  time  the  note  was  transferred.  (See  McLaren  v.  Wat- 
son. 26  Wend.  425.) 

The  statute  of  limitations  did  not  commence  running  in  favor  of 
the  defendant  until  the  cause  of  action  accrued  upon  the  contract 
of  guaranty. 

The  contract  of  guaranty  was  not  within  the  statute  of  frauds. 
The  consideration,  "for  value  received,"  was  sufficiently  expressed 
to  satisfy  the  refpiirements  of  the  statute.  (Pnufjlas  v.  Uowland,  24 
Wend,  '^r^:  Wntsmi's  IC.r'rs  v.  MrLarni,  1!>  Id.  557.) 

The  judgment  should   he  allirmed.'' 


EvF.RSox  V.  CriHF.  12?  N.  Y.  200.-1800.  \.  indorsed  and 
^lelivered  a  negotiable  promissory  note  to  ('..  attached  to  which  was 
nn  aUonqr  containing  this  guaranty:  "For  jtayment  received  of  C, 
wo  flo  hereby  guarantee  to  saifl  (\  the  payment  of  the  note  hereto 
annexed,  etc."  (Signed  by  defenrlatits.)  ('.  indorsed  the  note  to 
plaintiff  "without  recourse,"  ami  executed  and  delivered  an  assiirn- 
ment  of  the  same  and  the  guaranty.  In  an  action  by  plaintiff  against 
defendants  on  the  guaranty,  the  trial  court  granted  a  nonsuit  on  the 
ground   that   the  gtiaranty  was  special,   personal   to  ('.,  and   difl   not 


"Accord:       finrhnrri   v.   Cnnprr.  43   Afinn.    tOO:    f'hrlp.i  v.    f^nrqrnt.  fif)   Minn. 
118. —  H. 


474  LIABILITY   OF   I'AHTIKS.  [  ART.    VI. 

pass  to  plaiiitifT,  and  that  no  cause  of  action  had  accrued  on  the  guar- 
anty at  llie  time  of  tie  ;is^i;jiii;  cnt.  //</»/.  l-'.iM'or.  As  Ihc  note  and 
guaranty  are  to  lie  tousliiu'd  louellu  r,  .mkI  ;is  the  note  is  not  personal 
and  sjH'fial.  hiM  ui'iteial  and  negotinhlr.  the  guaranty  is  also  to  be 
regarded  as  u'cneial  ami  will  lIuTcrore  pass  iiv  assigiiiiient." 


5.  Defunsks  Availablk  to  Guarantor. 

PUTNAM  V.  SCHUYLER. 
4  Hun  (N.  Y.  Sup.  Ct.)   1G6.  —  1875. 

Learned,  P.  J. : — 

ATrs.  Ilenriques,  in  her  lifetime,  made  two  notes  to  Dr.  Allen,  the 
plaintiff's  testator.  After  hor  death  the  defendant  guaranteed  them, 
by  writing  under  each,  as  follows: 

For  value  received  I  hereby  guarantee  the  payment  of  the  above  note. 

L.    W.    SCHUTLEB. 

On  the  trial  the  defendant  offered  to  prove  that  Dr.  Allen  was  the 
medical  attendant  of  Mrs.  Hcnriques;  was  in  the  habit  of  advising 
her  as  to  financial  and  other  matters;  that  she  reposed  confidence 
in  him  in  relation  to  her  affairs;  together  with  certain  other  matters 
tending  to  show  that  the  notes  were  obtained  by  fraud,  and  that  they 
were  without  consideration.  The  evidence  was  objected  to  on  the 
ground  that,  by  executing  the  guarantee,  the  defendant  had  admitted 
the  notes,  and  was  estopped  ;  that  the  defense  of  fraud  was  personal 
to  Mrs.  TTenriques  and  her  representatives;  that  the  defendant  could 
not  impeach  the  settlement  between  maker  and  payee.  The  evidence 
was  excluded,  and  the  defendant  excepted. 

I  assume,  from  the  manner  in  which  the  case  is  presented,  that  it 
was  not  really  claimed  on  tlie  trial  that  these  matters  would  not  have 
been  competent  in  behalf  of  ihe  representatives  of  Mrs.  TTenriques. 
Their  exclusion  was  on  the  ground  that  they  were  not  competent  in 
behalf  of  the  guarantor.  On  this  subject,  of  the  right  of  a  guarantor 
to  set  up  d3fences  which  would  undoubtedly  be  valid  in  favor  of  the 
principal,  there  is  an  apparent  conflict.  But  a  little  discrimination 
will  show  that  the  conflict  is  only  apparent. 

First.  There  i&  -n  class  of  cases  in  whic}^  the  owner  of  a  note  or 
bond  has  a.ssigncd  it,  with  a  guaranty.  Tn  these,  it  has  been  held 
that  the  guarantor  could  not  show  that  the  instrument  was  invalid. 
Jt  would  be  uniust  to  permit  him  to  assign  an  invalid  instrument;  to 


9  For  the  rli-tinetion  between  special  (non-assipnalile)  and  general  (as.sign- 
able)  guaranties,  '^ee  rrnnifrifJp  Xnt.  Bank  v.  Kaufman,  93  N.  Y.  273;  Saioyer 
T,  Bopgood,  13  N.  Y.  St.  Kep.  711.  — H. 


VII.]  GUARANTOR.  475 

guaranty  its  payment  or  collection;  to  receive  the  value,  and  then, 
when  sued  on  his  guaranty,  to  assert  that  the  original  instrument  was 
invalid.  He  is  estopped.  (Rernsen  v.  Graves,  41  N.  Y.  475;  Zabriskie 
V.  C.  C.  and  C.  R.  R.  Co.,  23  How.  [U.  S.]  399.)  The  case  of  Mann 
V.  Eckfnrd's  Executors  { 15  Wend.  503),  is  of  this  character.  The  Life 
and  Fire  Company,  of  which  Eckford  was  president,  assigned  to  the 
Western  Insurance  Company  a  bond  and  mortgage.  Eckford  guar- 
antied the  bond  and  mortgage,  and  the  money  paid  for  it,  expressing 
the  amount.  The  defendants,  his  executors,  were  not  allowed  to  set 
up  usury  in  the  bond  and  mortgage,  against  the  plaintiff,  the  receiver 
of  the  insurance  company. 

Second.  The  guarantor  is  held  liable  in  those  cases  in  Avhich  the 
debt  is  justly  owing,  although,  from  some  defect  or  incapacity,  the 
principal  is  not  liable  in  an  action.  Thus,  where  the  makers  of  a 
note  were  married  women,  incapable  (then)  of  making  a  note,  the 
accommodation  indorser  was  still  held  liable.  (Enrin  v.  Downs.  15 
N.  Y.,  576;  see  Kimball  v.  Newell,  7  Hill,  116.)  The  guarantor  of  a 
lease  is  liable,  although  only  one  of  the  two  lessees  executed  the  lease. 
(McLaughlin  v.  McGovern,  34  Barb.  208.)  In  that  case.  Judge 
Bacon  speaks  of  this  class  of  cases,  mentioning,  among  others,  the 
guaranty  of  goods  sold  to  an  infant.  So  the  guarantor  of  a  note 
purporting  to  be  made  by  two,  where  the  signature  of  one  is  unauthor- 
ized, is  liable.  (Sterns  v.  Marks.  35  Barb.  565.)  In  all  these  cases 
the  debt  is  justly  owing  to  the  plaintiff:  and  through  no  fault  of  his, 
he  is  imable  to  recover  against  the  principal,  or  one  of  the  principals.  ' 

Third.  A  guarantor  cannot  set  up,  by  way  of  set-off,  a  claim  dis- 
tinct from  that  on  whirh  he  is  sued.  The  right  of  set-off  (that  is, 
as  distinguished  from  a  defense  arising  upon  the  claim  itself)  belongs 
only  to  the  principal  debtor,  and  can  be  used  only  at  his  option.  Such 
is  the  doctrine  of  Gillespie  r.  Torrance  (25  N.  Y.  306),  ajid  this  is 
all  which  that  case  decides  on  this  point.  By  indirection,  however,  it 
implies  that  a  defense  to  the  claim  (as  distinguished  from  a  set-off), 
is  available  to  the  guarantor.  To  the  same  effect  is  Lewis  v.  MrMillen 
(11    liarb.  420). 

Fourth.  But  there  are  still  other  cases  which  are  not  embraccMl 
within  either  of  these  prccedijig  classes;  cases  where  the  j)laintiff  is 
the  original  party  to  the  contract,  and  therefore  has  not  received  it 
by  assignment  from  the  guarantor;  where  the  proposed  defense  is  not 
the  inconii)etency  of  the  principal   to  contract;  and   where   it  arises 


'  A  piinrnntor  is  not  fli«p}inref'l  moroly  hrraiisp  tlip  prinripal  Ims  n.  pood 
p«'r«onal  flffonsp,  as  covortiire,  infancy  or  insanity.  Itnvis  v.  Stalls.  4.T  In<l. 
103;  llrnirninfi  v.  (Inrnon.  103  Mass.  201;  \\'i<iiiin's  Appml.  100  Pa.  St.  155; 
l,rf  V,  Ynnrlrll.  09  Trx.  31.  Rnt  a  failure  of  consideration  in  --ufli  a  ca'-c,  as 
tirtwccn  the  prinripal  and  jdainlifT,  discharges  the  snrctv.  Hnh'r  v.  h'rnnctt, 
54  .Mo.  R2.  —  11. 


476  LlAltlLri'Y    OK   TAUTIES.  [aUT.    VI. 

out  of  the  contract  itself,  and  not  by  way  of  set-off.  In  these  the 
guarantor  has  boon  permitted  to  nuike  the  defense. 

lie  lias  thus,  as  to  the  orifjinal  contraet,  been  allowed  to  set  up 
usury  {Morse  v.  Uovnj,  !>  l*ai{^e,  1!)7;  I'arslidll  v.  Lanioreaux,  37 
Barb.  189)  ;  duress  of  his  principal  (Osborn  v.  Eobbins,  36  N.  Y.,  365; 
Strong  v.  (iranttis,  26  Barb.  122)  ;  partial  failure  of  consideration 
{Sntrifcr  v.  Chambers,  13  Barb.  ()22).  And  T  find  no  case  wliich  inti- 
mates that  when  a  person  has  obtained  an  oblifration  from  a  principal 
by  fraud,  he  can  wipe  out  the  fraud  by  obtaining  a  surety  to  the  ob- 
ligation. Assuming  that,  in  justice  and  equity,  the  obligee,  by  reason 
of  fraudulent  acts  on  his  part,  has  either  no  claim,  or  a  less  claim, 
against  the  principal,  1  see  no  reason  why  he  should  stand  in  a  better 
position  against  the  guarantor. 

The  distinction  which  has  been  pointed  out,  viz.,  that  inability  on 
the  part  of  the  principal  to  contract  is  no  defense  to  the  guarantor, 
while  fraud  in  the  contract  is,  may  be  found  in  the  civil  law.  This 
says  that  personal  defenses  do  not  pass  to  others,  but  that  defenses, 
inherent  in  the  thing,  such  as,  among  others,  fraud  and  duress,  are 
available  to  sureties.  (Dig-,  44,  1,  de  exceptionibns,  c.  7,  §  1;  Cod. 
2,  24  [23]  de  fidejuss,  2.)  "  If,  in  the  principal  obligation,  there  is 
any  essential  vice  which  may  annul  it,  as  if  it  has  been  contracted  by 
force,  if  it  is  contrary  to  law,  or  to  good  manners,  if  it  be  founded 
only  on  a  fraud,  or  on  some  error  which  may  suffice  to  annul  it;  in  all 
these  cases  the  obligation  of  the  surety  is  likewise  annulled."  (Sira- 
han's  Domat,  bk.  3,  tit.  4,  §  5,  art.  2  ;  "id.,  bk.  3,  tit.  4,  §  1,  art.  10.) 

The  defendant  offered  to  prove  acts  of  the  plaintiff's  testator,  tend- 
ing to  show  that  he  obtained  the  notes  improperly  from  the  maker; 
that  he  took  advantage  of  her  confidence  in  him,  and  that  she  did  not 
owe  him.  If  these  facts  be  true,  he  ought  neither  to  recover  of  her 
representatives  on  the  notes,  nor  of  the  defendant  on  her  guaranties. 

The  judgment  should  be  reversed,  and  a  new  trial  ordered,  costs 
to  abide  the  event. 

Present  —  Learned,  P.  J.,  Boardman  and  James,  JJ. 

Judgment  reversed,  and  a  new  trial  ordered,  costs  to  abide  the  event.  ^ 


2  Accord:  Bryant  v.  Crnahy,  36  Me.  502  (fraud)  ;  RirAft  v.  Beers,  3  Denio 
(N.  y.)  70  (illf^ality)  ;  (Iriffith  v.  ^ilfjrrorcs.  'M)  Pa.  St..  16]  (dure^is).  For 
an  eniimpration  of  the  circumstances  which  will  discharge  a  surety,  see  Neg. 
Inst.  L.,  §  201.  — H. 


ARTICLE    VIL 

Duties  of  Holder  :   Prese^^tment  for  Payment. 

I.  Necessity  of  presentment. 

1.  Not  to  Charge  Acceptor  or  Maker. 

§  130  HARRISBLTRG  TR^ST  CO.  v.  SPTUFELDT. 

78  Federal  Reportt:r.  292. —  1897. 
[Circuit   Court,  Dist.   Washington,  N.  D.] 

Hanford,  District  Judge.  —  Tliis  is  an  action  to  recover  a  balance 
due  after  deducting]:  partial  payments  upon  a  negotiable  promissory 
note,  made  payable  on  demand.  The  defendant  has  demurred  to  the 
complaint,  his  contention  being  that  the  same  is  insufficient,  for  fail- 
ure to  allege  a  demand  prior  to  the  commencement  of  the  action. 
There  is  a  rule  of  long  standing,  and  supported  by  the  weight  of  au- 
thority in  this  country,  that  the  commencement  of  an  action  is  itself 
a  demand, '  and  that  failure  to  request  payment,  prior  to  the  com- 
mencement of  the  action,  affords  no  ground  of  defense.  (Bank  v.  Fox, 
Fed.  Cas.  No.  2683 ;  5  Am.  and  Eng.  Enc.  Law,  5282*«  [2d  ed.  v.  4, 
p.  35L]). 

It  is  insisted,  however,  that  the  courts  and  the  text-books  in  this 
country  have  fallen  into  error  by  following  early  decisions,  which 
were  controlled  by  peculiar  facts,  and  which  are  insufficient  of  them- 
Belves  to  establish  a  general  rule  upon  the  subject.^  It  is  unwise  to 
depart  from  business  cu.'stoms  and  practices  which  have  been  sanc- 
tioned by  repeated  decisions  of  courts,  and  ac(|uiesced  in  for  a  con- 
siderable time,  and  which  may  fairly  be  supposed  to  have  been  con- 
templated by  the  parties  at  the  time  of  inid<ing  their  contract.  This 
contract  must  be  construed  as  one  having  been  made  sul)jcct  to  the 
rule  above  stated,  and  the  maker  of  the  note  is.  by  the  terms  of  his 
contract,  liable  witiioiit  any  driiiMrul,  |»rior  to  thi'  lonifiieticeiiieiit  of 
an  action. 

I>crniMTer  f)vernded.-'' 


1  "  To  say  that  the  suit  ih  the  dnmnnd  is  to  repont  nn  iinmenninp  phrase  an 
thw*  iiHpd,  which  no  niinihcr  of  ifpftitions  can  niaki-  Hctisildc.  .\  (h-maml  note 
is  duo  ffirtlnvilh.  and  hcnco  can  l>r'  siiod  without  demand."  Whrrlrr  v.  ir<»r- 
nrr.  47  N.  ^'.  51!'.  hfd«!in|r  that  tlic  Htatiitc  of  liniHalions  hr^'ins  fo  rnn  from 
the  Hnto  of  the  note.  —  IT. 

2  Sep  2  .\mo»'  fasos  on  Bills  and  Notes,  p.  HI.  note  2.  —  If. 

'  But  a  certificate  of  deposit  is  not  clue  until  demanfl  is  made  and  the  cer- 
tificate returned  or  tendered.  Slnilr  v.  I'nriOr  \nl.  Ittml .  \'M'<  Mn'--  4S7; 
Bmiley  v.  Fry,  100  N.  Y.  202;   Mrf}nuqh  v.  JamiKon,  107  I'a.  St.  .1.36.     Contra: 

[4771 


47S  rRESiiNTMi'.Ni'  I'di;  iv\^mi:nt.  [art.  vii. 

§  130  MON'rciOMKi;^    V.   I'lLLloTT. 

ti     Al.AliAMA.     701.  ISI  1. 

This  aidtHi  was  fDiiiiiiriui'il  bcroic  a  jusliic  of  I  he  peace,  by  the 
dofoiulant  in  error,  on  two  uod'S,  Tor  twciily  dollars  each,  in  the  fol- 
lowinjx  form  : 

'I'ho  Koal  Estate  Bank.  No.  52.  of  Cali'doiiia.  Mis-issi|i|.i.  promise  to  pay 
•Tolui  Elliott,  or  bearpr,  twenty  dollars,  on  (leniaiid,  at  llicir  liankinj^  house, 
Caledonia.   Mississippi.  —  May  8,   1838. 

W.  0.   WKUiiiT,   I'rcsidcnt. 

R.  DowDLK,  Cashier. 

Judgment  being  rendered  for  the  defendant,  the  plaintilT  appealed 
to  the  circuit  court,  where  judgment  was  rcndcicd  for  the  jilaintilf. 

The  defendant  moved  the  court  to  charge,  that  the  phiintifF,  to 
entitle  himself  to  a  recovery,  must  prove  a  demand  at  the  hanking 
house  of  the  company  —  which  the  court  refused,  and  he  excepted. 

The  assignments  of  error  present  for  revision  rejection  of  the  testi- 
mony and  the  charge  of  the  court. 

Ormond,  J.  —  The  question,  whether  a  demand  was  necessary  be- 
fore suit,  is  one  of  considerable  difficulty.  Upon  this  subject,  a  great 
contrariety  of  opinion  formerly  prevailed  in  England,  as  to  the  neces- 
sity of  averring  and  proving  a  demand  as  a  precedent  condition  to  the 
right  to  recover,  when  the  instrument  was  made  payable  on  its  face 
at  a  particular  time  and  place,  or  where  it  was  accepted,  payable 
at  a  particular  place,  which  was  finally  settled  on  appeal  to  the  House 
of  Lords,  that  such  demand  was  necessary  in  the  case  of  Rowe  v. 
Young  (2  Brod.  &  Bing.  ISO).* 

In  the  United  States  a  different  doctrine  has  generally  prevailed,  it 
being  considered  matter  of  defense,  and  therefore,  not  necessary  to  be 
proved  by  the  plaintiff.     (Wallace  v.  McConnell,  13  Peters,  133.     See 


Cvrren  v.  Witter,  68  Wis.  16;  Lynch  v.  Gohlsmith,  64  Oa.  42;  Hunt  v.  Dimne, 
37  Til.  137;  Tripp  v.  Curlenlus.  36  Mich.  494.  There  is  also  a  eonftict  as  to 
whether  bank  notes  must  be  presented  for  payment  before  suit  brought.  3 
Am.  k  Enp.  ^ne.  Law   (2d  ed.)   p.  778.  —  H. 

fOn  the  conflict  of  authority  upon  the  question  whether  a  demand  is  nec- 
essary to  mature  a  certificate  of  deposit,  and,  if  necessary,  when  the  demand 
must  be  made,  see  the  note  to  Elliott  v.  Capital  City  State  Hank,  128  Iowa, 
275,  in  1  L.  N.  S.  11.30.-0.1 

4  This  was  chanped  by  Onslow's  Act  (1  &  2  Geo.  IV.,  c.  78)  which,  as  con- 
strued, renders  presentment  unnecessary  to  charjie  the  acceptor  of  a  bill,  drawn 
payable  at  a  particular  place  and  accepted  generally,  or  drawn  generally  and 
accepted  y)ayable  at  a  particular  place;  though  not  if  accepted  jiayable  at  a  par- 
ticular place  only.  Selby  v.  Eden,  3  Bing.  Oil.  See  Bills  of  Exchange  Act, 
§  52.  and  Xeg.  Inst.  L..  §  228.  The  same  rule  applies  to  a  promissory  note. 
See  Bills  of  Exchange  Act,  §  87,  subsec.  (1)  ;  Price  v.  Mitchell,  4  Camp.  200; 
Excm  V.  Russell,  4  M.  &  S.  507.  —  H. 


I.]  NECFSSITY    OF   PRESENTMENT.  479 

also,  Cliitty  on  B\\\^  (!)  Am.  ed.]  393,  and  Story  on  Bills,  416;  and 
note,  uiiere  tlie  lases  aiv  collected.)  '' 

In  tl)i.>;  state,  it  lias  always  been  considered  matter  of  defense,  when 
the  suit  is  aijainst  the  maker  or  acceptor.  The  doctrine  is  so  stated  t)y 
Judsre  Satfold,  iii  Irvine  \.  W'llhcrs  (1  Stew.  ■?:;  1 )  ;  and  although  it 
was  not  ai-(|uiesced  in  1)\  the  whole  liench,  it  ha^  licen  considered  and 
acted  on  as  settling  the  law  from  that  time  to  the  i)resent.  {Roberts  v. 
Mason.  1  Ala.  Rep.  37  3.) 

The  (]Ufstion  in  this  case  is.  wliethei  tli(>  same  rule  is  to  he  applied 
where  the  note  is  payahle  on  demand  at  a  particular  place.  We  are 
unahle  to  perceive  any  suhslantial  dilTerence  hetween  the  two  cases. 
The  same  i-easons  which  lead  to  the  ((^iiclu-ion  tliat  it  is  a  matter  of 
defense  when  the  note  is  payable  at  a  specified  time,  at  a  particular 
place,  apply  with  the  same  force  when  it  is  payable  on  demand.  "^  In 
either  case  it  is  impossible  that  the  defendant  can  be  prejudiced,  as 
he  can  always  defend  liimself  by  proving  that  he  was  ready  at  the 
place  appointed  to  pay  the  dclil.  and  if  not  ready  to  ])av.  wliv  should 
the  plainlifl'  be  re(|uire(i  to  do  an  unnecessary  act.  This  (|uestion  is 
considered  at  <ome  length  in  the  case  of  /In.rfKrr  v.  Hisimji  (3  Wend. 
13).  and  the  law  considered  to  be  as  here  staled.  The  rule  would  l)e 
dift'erenl  wlicic  the  suit  is  against  an  indorser,  his  c(;iitiac(  being  con- 
ditional to  !;m.  i!'  the  maker  does  not  on  demand:  a  demand  and 
notice  is.  ll.tulnn,  necessai-y  by  the  terms  ,if  his  contract  to  fix  his 
Iial)ilit\ 


■>S'"f'  ;iUn  Fnrnurs'  Hnvl-  of   \iishrillr  v.  Jnhn.inn.  Kiiui  .f  Co..  OS  S.  "R.    fOa. 
Slip    ft.)    S.5    (Mny.  10)0).  — r. 

0  Accord  :  Faimrrn'  yat.  liiiuh  nj  Afinnpolis  v.  Irnm  r.  1!1'2  Mass.  ,'');n  .  .\t 
p.  .';.T4.  Morton.  .]..  -;iy-:  "ll  i<  sctHcd  ill  tills  stati'.  Ldth  at  cninn'oii  law 
anri  rpocnllv  liv  statute  [  nariiciy.  tlic  Nc<:oti:il)lc  Itistiiiircnls  l.a\v|.  and  l.v  tlio 
woi<T|it  of  aiitlK)?ity  in  this  country,  contrary  to  tic  law  in  I'^nirland.  tliat, 
wlicrc  a  note  or  liili  of  cxcdianirc  is  |iayalilc  at  a  particular  time  and  place,  no 
demand  or  prc-entn;ent  at  tlic  place  named  is  necessary  in  order  to  entitle 
(Ito  )n)!dcr  to  maintain  an  action  upon  tin-  note  or  liill  a'rainst  the  maker  or 
ncoeptor.  Uvqnlra  v.  fnllrv,  S  Afas«.  4H():  Cnih,/  v.  IVnicc.  17  Mass.  .ISO; 
Pai/non  V.  ^yhilrf,vlh.  I  .'i  I'icU.  2 1 2 ;  W'riiihl  v.  \<ri,in)il  his.  Co..  ]M  Mass. 
302.  1!.  L.  c.  ~H.  (5  K7  |N.  \.  §  1301.  For  a  collection  of  case*  sec  Dan.  Xe^. 
Tnstr.  (.Trd  ed.)  5!  (lt.3:  1  Pars.  Notes  an<l  P.ills  (1st  ed.)  .lOf)  rl  srif.:  A  .An'i. 
A  Knp.  Kncy.  of  l,a\v  (2nd  rd.)  .Ty^.  Wc  -ic  nn  valid  di-^t  inctiftn  l)ct\v-en  a 
note  pnyalile  on  time  at  a  particular  place  and  a  note  payahle  nn  demand  nt 
a  pnrticiilar  |dace.  No  d<-mand  is  necessary  hefore  suit,  where  a  note  is  pay- 
able peneially  on  <!"mand,  and  a-*  we  jiave  seen  no  demand  i-*  nece-sirv  when  a 
not"  is  payahle  on  time  at  a  particular  place.  Tt  «eems  to  ns  that  the  f.ict  that 
both  circumstances  are  found  in  tlie  same  note  cannot  operate  to  clrin','e  the 
rule  and  render  a  demaml  necessary  when  it  would  not  otherwise  he  re(|uired. 
ifcKrnfiru  v.  Whipple,  21  Me.  OK  •.  (Uiviwo'i  v.  Fvrrrll.  25  Me.  0(1;  Un.rliin  v. 
Ri.ohnp.  .T  Wend,  l.*?;  Moiilfiowrri/  v.  I'l':-''l  '',  \la.  701;  Dniiiifirrt if  v.  Wrsf 
frn  linnk.  l.T  fla.  2R7  ;  Tinirir  v.  Diiin''.  I  f'l  ^  .1  17.')."  Thi'<  case  i«  reported 
in  7  A.  fi  E.  .Ann.  (a-.  000.  with  no*-  <  iiill-d  ••  i'lCM-nlnien)  and  demand  nt 
place  named  in  note  payahle  on  dcniaiid  ii>  condition  precedent  to  suit  against 
m.ikcr,"  —  C. 


■ISO  VRESENTMKNT   FOU    I'AYMENT.  (  AlfP.    VII. 

ll   rosiilts  from  the  view  hero  taken,  tlmt  there  is  no  error  in  the 
judgment  ol'  the  L'ireiiit  Court,  and  it  is  therefore  al'iirmed.  ' 


2.  PiJKSENTMKNT  Necess.\i;v   io  ('iiaim!!-;  Dhawek  oi{  Indohser. 
S130  LONG  V.  STEPHEN  SON. 

[Rrporird  herein  at   p.    'i'i2.]^ 


II.  What  constitutes  sufficient  presentment. 

1.  By   TToi.dei;   oi;   AuTiioniZEi)    Rim'kicskn'I'Ative. 

§  132  SUSSEX  BANK  r.  l'.Ar.l)\\  IN. 

17  Xkw  .7i:iisi;y  T.aw  [2  IIakui.so.n]    IST.  —  1840. 

Dayton.  ,7. —  This  ease  was  tried  at  the  Sussex  Circuit  of  May, 
A.  D.  1S;ls,  nnd  verdiet  had  for  the  plaintiff.  Sniidiy  reasons  are 
now  7'elied  upon  to  set  the  same  aside,  and  I  will  consider  tliein  in 
their  order. 

Tlie  defendants  are  the  indorsers  of  a  ])roinissoi-y  nolf  made  hy 
Conrad  Teese,  Oet.  24,  183(!,  foi-  five  hundied  and  li\e  dollars  and 
si.\ty-one  eents,  payable  six  months  after  dale  to  the  order  of  Wm. 
A.  Baldwin  &  Co.  (the  defendants),  and  hy  them  indor.-ed  to  tlie 
plaintiff.  The  first  reason  assigned  is,  that  the  note  was  not  duly 
presented  to  the  maker  for  payment.  That  it  was  presented  at  an 
improper  place,  to  wit,  the  oflRee  of  Teese,  the  maker,  and  I»y  nw  im- 
proper person,  to  wit,  one  Dennis,  who  swears  that  he  acted  as  tlie 
clerk  and  under  the  directions  of  AVm.  Tut  tie,  who  was  himself 
merely  the  agcTit  of  James  TTcdden,  the  notary  puhlic. 

As  to  the  place  of  ])resentment,"  the  objection  may  Ite  dis]>osed  of 
very  l)riefly.  It  is  a  point  not  properly  arisinu"  umler  tlx^  evidence 
in  the  case.  Dennis,  the  witness,  swears  that  Tee-c.  the  malcer  of 
the  note,  told  him,  Dennis,  to  present  his  notes  foi'  |»;iyment  at  that 
place,  and  that  he  had  been  in  the  habit  of  doing  so.     This  estops 

'  fioo  for  a  full  Hisoiission  of  tlio  aiitlioritics,  Mnvfpnmrri/  v.  Tiill.  11  f'alif. 
307.  'I  lie  Aniprican  cases  liavp  almost  uniformly  held  that  prescntiintiit  of  .i 
bill  or  note  payable  at  a  paiticular  place  is  unnecessary  in  order  to  maintain 
an  action  against  thf  acce))tor  or  maker;  an  omissinn  to  do  so  ni"iely  stops 
interest  and  damajres  in  ease  the  acceptor  or  maker  was  read\'  at  tlie  time  and 
place  to  pay.  //i7/.s  v.  Place.  48  N.  Y.  520;  Cox  v.  Notional.  liavk,  100  U.  S. 
704,  713:  Klilrrd  v.  Hawes,  4  Conn.  4G5;  Carley  v.  Vance,  17  iMass.  380.  —  H. 

8  pep  (•§  143-144.—  II. 

»  See  §  133.  —  H. 


II.    1.]  BY  WHOM  MADE.  481 

Teese  from  objecting  to  the  place  of  presentment;  and  that  whicK 
IB  good  against  the  drawer,  is  good  against  the  indorser.  (State 
Bank  V.  Ilurd,  12  Mass.  172;  Whitwell  v.  Johnson,  17  Mass.  R.  449.) 
But  it  is  thought  advisable  that  this  point  be  put  at  rest  in  this  State 
by  an  expression  of  opinion  by  this  court. 

It  appears  by  the  evidence  that  the  office  in  question  was  the 
regular  place  of  business  of  the  maker;  and  I  have  no  doubt  where  a 
person  has  an  office  or  a  known  and  settled  place  of  business  for  the 
transaction  of  his  moneyed  concerns — whether  he  be  a  banker,  broker, 
merchant,  manufacturer,  mechanic,  or  dealer  in  any  other  way,  a 
presentment  and  demand  at  that  place  (as  well  as  a  presentment  and 
demand  at  his  residence),  is  good  in  law.  It  must  not,  however, 
be  a  place  selected  and  used  temporarily  for  the  transaction  of  some 
particular  business,  as  settling  up  some  old  books  or  accounts  merely, 
but  his  regular  and  known  place  of  business  for  the  transaction  of 
his  moneyed  concerns.  The  counting  room  of  a  banker  or  merchant 
may  be  a  proper  place  for  a  demand,  though  the  manufactory  or  work- 
shop would  not.  Yet  if  the  manufacturer  or  mechanic  have  an  office, 
or  known  place  of  business  for  the  purpose  aforesaid,  a  good  demand 
may  be  made  there.  (Banl-  of  Columhia  v.  Lawrence,  1  Peters,  582; 
Williams  v.  The  Banl-  of  United  States,  2  Peters,  100;  Byles  on 
Bills,  118;  State  Banl-  v.  'iTvrd,  12  Mass.  173.) 

Nor  is  there  anything  in  the  objection  that  the  presentment  was 
made  by  an  improper  person.  It  appears  by  the  evidence  that  Tuttle 
did  the  business  of  Hedden,  the  notary  public,  and  it  must  have  been 
with  the  consent  and  knowledge  of  the  bank  that  he  employed  and 
directed  Dennis,  who  was  his  clerk,  to  present  the  note  in  question 
to  the  drawers,  and  put  him  in  possession  of  the  note  for  that  }»ur- 
pose.  If  the  note  had  been  paid  on  presentment,  he  could  and  would 
have  delivered  it  up  to  tiie  drawers,  and  that  would  have  exonerated 
them  from  further  liability.  An  authority  to  make  a  demand,  may 
ho  created  liy  parol,  and  the  mere  [)ossession  of  the  paper,  is  evi- 
dence enough  of  such  autliority.  (3  Kent.  C  108;  lianh  uf  Utica  v. 
Smith,  18  J.  K.  230;  Shea  v.  lirett,  1  Pick.  101  ;  Morris  v.  Foreman, 
1  Dal.  1I>3;  Freeman  and  others  v.  Ihn/nlon,  7  MasS.  487.) 

There  is  an  iMi])n'ssion  current  iti  some  degree,  even  with  ihe  har, 
tluit  a  presentment  of  a  note  must  be  by  a  notary,  or  at  least  on  his 
behalf,  and  that  he  must  protest  it  upon  non-payment,  before  the 
indorser  is  liable.  But  this  is  not  so.'  The  re<ord  of  n  demand 
and  notice,  etc.,  by  a  notary,  entered  in  his  book,  according  to  our 
Ptatute,  of  21st  February,  1820,  ITarr.  ('.  210,  may  serve  to  refresh 
his  memory,  or  in  case  of  his  absence  or  dentb  it  may  be  used  as 
evidence  of  the  facts  contained  in  it;  but  such  demand  and  protest 
by  a  notary  are  not  essential  to  a  recovery  against  the  indorser.     It 


1  See  §  189. —  H. 

NKOOT.   INBTRUMKNTB  —  31 


IS?  PRESKNT.MKNT    lOli    I' A  V  M  KNI'.  [aUT.    VII, 

was  uot  so  1)V  the  I'Oinmoii  or  roiiiinL'i\'ial  law,  nor  is  it  required  by 
our  statute.  If  a  notary  act  in  tlie  premises,  and  make  the  protest, 
althougli  sanctioned  by  ueneial  custom,  it  is  not  strictly  an  oflicial 
act  (Mrhol.'i  v.  Webb,  8  Wlieat.  32(5 ;  3  Kent  C.  9:^-4;  1  Saund.  on 
PI.  &  Ev.  295.) 

Any  person  may  present  at  its  maturity,  a  promissory  note  of 
which  he  is  put  in  possession,  and  if  paid  in  the  ordinary  course  of 
business,  and  taken  up,  the  payment  is  good;  and  if  not  paid,  the 
denumd  is  good  as  a  ground  work  for  notice  to  the  indorsers,  and 
that  without  any  protest.^  The  rule  is  otherwise  as  to  foreign  bills 
of  exchange,  which  must  be  protested  by  a  notary,  and  their  oflicial 
seal  is  plenary  evidence  in  all  foreign  courts  and  countries,  of  the 
dishonor  of  the  bill  (ride  cases  above  cited). 

2.  The  next  objection,  is  to  the  notice  to  the  indorsers.^  The 
name  of  James  Iledden,  the  notary  public,  was  printed  at  the  foot  of 
the  notice,  not  written;  and  this  is  assigned  for  error.  There  is 
nothing  in  this  objection.  The  law  prescribes  no  form  of  notice, 
its  object  is  merely  to  appraise  the  party  of  the  non-payment  —  to 
put  him  upon  inquiry,  that  he  may  protect  his  rights.  This  is  as  well 
done  by  a  notice  with  a  printed  as  with  a  written  name. 

The  signature  of  the  notary  would  carry  with  it  in  a  large  majority 
of  cases  no  higher  degree  of  certainty  than  the  printed  name;  for 
it  must  in  most  cases  be  unknown  to  those  to  whom  notices  are  .sent. 
The  notice  in  this  case  came  from  a  proper  source,  and  stated  the 
proper  facts;  that  is  enough.  It  is  needless  to  cite  authorities  upon 
this  point. 

[The  learned  judge  then  decides  that  the  notice  was  sent  in  due 
time,  and  that  there  was  no  usury.  Nevins,  J ,  dissented  on  the 
last  point.] 

Rule  made  absolute.'* 

2Baer  v.  Leppert,  12  Hun   (N.  Y.)   510. —  JI. 

3  See  §  166. —  II. 

*  The  drawer  may  provide  in  the  instrument  tliat  it  shall  not  be  presented  by 
a  speoified  person.'  Com.  Nnt.  Hk.  v.  First  Nat.  Rk.,  118  N.  C.  783.  —  H. 

[In  Farmers'  Bank  v.  Johnson,  Kiyifj  d  Co.,  68  S.  E.  (Ga.)  85.  it  was  held 
that  where  a  check  was  drawn  on  a  bank  located  in  another  town  than  that 
in  wliich  the  drawer  resided,  and  immediately  following  the  direction  to  the 
drawee  bank  there  were  stamped,  at  the  time  when  the  check  was  drawn,  the 
words,  "  Payable  through  [a  named  bank  in  another  city  of  the  same  state]  at 
current  rate,"  this  was  a  material  part  of  the  direction;  and  the  drawee  bank 
was  not  requirerl  to  pay  tlie  check  when  not  presented  through  the  bank  thus 
named,  but  directly  by  a  third  bank.  —  C] 


II.    2.]  AT   WHAT  TIME.  483 

2.  At  THE  Proper  Time.^ 

§  131  JOHNSON  V.  HAIGHT. 

13  Johnson  (N.  Y.)  470. —  1816. 

Action  by  holder  against  iiulorsers. 

Spen'CER,  J.,  delivert'd  tlie  opinion  of  the  court. 

On  the  second  point,  the  defendants  are  entitled  to  judgment. 
The  third  day  of  grace  fell  on  the  29th  day  of  November,  and  pay- 
ment was  not  demanded  of  the  maker  until  the  30th.  The  law  is 
perfectly  settled,  that  a  note  must  be  demanded  on  tlie  tliird  day  of 
grace,  unless  that  falls  on  Sunday,  and  then  it  must  be  demanded  on 
the  second  day  of  grace.  (2  Caines,  34.3;  16  East,  2.50.)  Here 
there  is  no  excuse  for  delaying  the  demand  on  the  malcer,  and  there 
is  a  palpable  want  of  due  diligence,  which  discharges  the   indorser. 

Judgment  for  the  defendant." 


§  131      CO:\rMEIK'IAL  NATIONAL  BANK  r.  ZTMMEEAf AN. 
185  New  York.  210.  —  lOOG. 

AppE/M.  from  a  judgment  of  (hi'  Appellate  Division  of  the  Supreme 
Court  in  the  fourth  judicial  department,  entered  June  .5,  l!t05.  affirm- 
ing a  judgment  in  favor  of  defendant  Zimmerman  eiitei-cd  uj)on  a 
decision  of  the  court  on  trial  at  Special  Term. 

The  plaintiff  bniught  this  action  \o  foreclose  a  lien  on  certain 
bonds  of  a  railroad  company,  which  it  had  held  as  collateral  secui'itv 
for  the  payment  of  a  note  of  the  dcfciidant,  the  Syracuse  ('<uist  iiu  t  io-i 


8  See  also  the  rases  on  tlie  iiroscntation  of  clipoks  for  payment  nmifc  ""' ^'}. 
Inst.  I.iuv.  (i  .322,  p<tst.  —  V. 

«Si'C  Hurt  V.  Hmitli,  1.5  Ala.  807.  Sc-  SJ  1  l.l.  wliirli  aliolislirs  days  nf  ;..i;icc. 
Vn\H-T  [layahlc  witlioiit  praoe  fallin;;  >\\w  on  a  liMraJ  lioiiday  is  jinyahlc  on  Hie 
next  siicrcfdin','  hnsiness  day.     Sall(r  v.  Hint.  20  Wend.    (  \.  Y.)   2().'». 

(Sfi-  I'roffSHor  Wiliislon'H  article  entitled  ".An  .\niliij,Miily  in  tin-  Nim,,!  j;ildi' 
Instrinnenfs  Law."  in  2;{  Haiv.   Law  i!ev.  (!<l.'{-t»()7.  /xisl.  \>.  <     I 

See  S  140.  Days  are  reckoned  exelnslvp  of  the  day  of  dale;  exclusive  of 
tlip  day  of  sight :  and.  where  ^>race  is  allowed,  exclusive  of  (he  nominal  day  of 
payment.  \  mmidmru  v.  Wdniliiinii .  .'( I  Me.  .')H(I ;  Iftn-lnirr  v.  I\  imlyirhoi  hvr 
Co..  infra. 

.Months  in  hills  and  noU^s  are  reckfuied  as  ealemlar  months  acconlini;  to  the 
portion  of  the  calendar  covered  hy  the  instrument.  Tiius,  a  note  dalid  .Janu- 
ary .30.  due  one  month  from  date,  without  ^'race.  is  din'  on  l'"rhrnary  28, 
fxcept  in  leap-year,  when  it  is  duo  on  F'ehruary  20.  A  similar  note  dated 
Fehruary  28  is  due  on  .March  2S.  W'ainur  v.  h<)inir.  2  Itoh.  (  l.a. )  120; 
Kurhner  v.  Knickerbocker  Co.,  03  N.  Y.   100.--  II. 


4St  fRKSKNTiMl^NT    lOlJ    I'AYMDNT.  [aKT.    VH. 

Co.,  indorsed  by  Josojili  Ziiiiiiionnan,  ;hu1  to  recover  a  jiidi^rnent  for 
any  deficiency,  arisini,'  upon  I  he  sale  of  the  bonds,  against  Zimnier- 
nian's  estate.     Tlie  note  i'cjkIs  as  follows: 

"$10,000  Syracusi^.  N.  Y.,  (iept.  16.  1809. 

■'  On  iloniaiid  after  date  we  promise  to  pay  to  the  order  of  .Joseph  Zimnier- 
iiiaii  tin  thousand  dollars  at  C'oniincrcial  Hank.     Value  received  with  inl'_'re^t. 

"  Sykaci.sk  Construction  Co. 

•'  per  J.  S.  Kalfmann,  Treas." 

Upon  the  trial  of  the  issue,  w  liich  was  had  without  a  jui-y,  the  trial 
judge  found,  as  the  facts  of  tlFe  case,  that  the  note  was  indorsed  by 
Ziniinernuin,  without  consideration  and  for  the  acconiino(bition  of  the 
maker;  that  on  September  20,  1809,  the  phiintilt  discounted  the  note 
for  the  maker,  the  defendant  construction  company,  receiving  the 
bonds  of  the  railroad  company  as  collateral  security  for  its  payment; 
that,  in  January,  ino.1,  Zimmcrnnin  died  intestate  and  his  widow, 
this  defendant,  was  appointed  his  administratrix;  that  on  April  9, 
1903,  the  note  was  presented  to  the  nuiker  for  payment  and,  payment 
being  refused,  was  duly  protested  for  nonpayment;  that  "said  note 
was  not  presented  within  a  reasonable  time  after  it  was  issued  and 
that  said  plaintiff  did  not  demand  the  payment  thereof,  or  give 
notice  of  the  dishonor  thereof,  within  a  reasonable  time."  tJpon 
these  facts,  he  reached  the  legal  conclusion  that  the  plaintiff  w^as  en- 
titled to  enforce  a  lien  upon  the  bonds  by  the  sale  thereof;  but  that, 
as  the  "  presentment  of  said  note  was  not  made  within  a  reasonable 
time  after  the  discount,"  the  indorser,  Zimmerman,  and  his  estate 
were  released  from  all  liability  thereon.  Upon  the  plaintiffs  appeal 
from  so  much  of  the  judgment  thereupon  entered,  as  adjudged  that 
it  was  not  entitled  to  judgment  against  the  estate  of  the  indorser  for 
the  deficiency  upon  a  sale  of  the  bonds,  the  Appellate  Division,  in  the 
fourth  department,  by  unanimous  vote,  affirmed  the  judgment  as 
rendered.     The  ])laintiff  now  appeals  to  tbis  court. 

rjRAY,  J.  The  only  question  of  importance,  whicli  this  appeal  pre- 
sents, is  of  the  correctness  of  the  decision  that  the  presentment  of  the 
note  for  payment  had  not  been  made  by  the  plaintiff  within  a  reason 
able  time.  Tliat  must,  necessarily,  turn  upon  the  effect  of  the  ena(  t 
ment  of  the  provisions  of  the  Negotiable  Instruments  Law  of  189T. 
(Laws  of  1897,  chap.  612.)  Section  131  of  that  law  provides  that, 
where  the  instnmient  "  is  payable  on  demand,  presentment  must  be 
made  within  a  reasonable  time  after  its  issue,  except  that  in  the  case 
of  a  bill  of  exchange,  presentment  for  payment  will  be  sufficient  if 
made  within  a  reasonable  time  after  the  last  negotiation  thereof." 
By  section  4,  it  provided  that  "  in  determining  what  is  a  '  reasonable 
time,'  or  an  '  unreasonable  time,'  regard  is  to  be  had  to  the  natnre 
of  the  instrument,  the  usage  of  trade  or  business  (if  any)  with 
respect  to  such  instruments,  and  the  facts  of  the   paiticular  case." 


II.    2.]  AT  WHAT  TIME.  485 

Prior  to  this  legislative  enactment,  the  derision  of  this  court  in 
Merritt  v.  Todd,  (23  N.  Y.  28),  was  regarded  as  having  settled  the 
rule  of  law  applicable  to  the  determination  of  such  cases.  In  that 
case,  the  note  was  payable  on  demand,  with  interest,  and  the  question 
arose  as  to  the  continuance  of  the  indorser's  liability,  where  three 
years  had  intervened  between  the  making  and  presentment  for  pay- 
ment. Chief  Judge  Comstock,  with  the  concurrence  of  the  majority 
of  the  judges,  undertook  to  resolve  what  he  regarded  as  the  existing 
uncertainty  as  to  the  rule,  which  conflicting  decisions  had  brought 
about,  by  referring  the  interpretation  of  the  contract  to  the  adoption 
of  one  of  two  principles.  By  the  one  principle,  a  promissory  note, 
payable  on  demand  with  interest  and  indorsed,  is  to  be  regarded  as  a 
continuing  security  and  no  dishonor  attaches  until  payment  is  re- 
quired and  refused.  By  the  other,  or  opposing  rule,  the  holder,  if 
he  wishes  to  charge  the  indorser,  must  make  his  demand  of  the  maker 
without  delay.  Judge  Co.mstock  finds  no  intermediate  ground  to 
stand  upon  and  holds  "  that  questions  of  this  kind  ought  to  be  deter- 
mined according  to  one  of  the  two  rules  which  have  been  mentioned ; 
in  other  words,  that  the  demand  may  be  made  in  due  season  at  any 
time  so  as  to  charge  the  indorser,  or  else  that  he  is  discharged  unless 
it  be  made  with  due  diligence,  in  the  general  sense  of  the  commercial 
law.  Between  these  alternatives,  we  are  to  select  the  one  which  will 
best  harmonize  with  the  language  of  the  contract  and  the  intention 
of  the  partif's.  A  demand  note  may  be  payable  with  or  without  in- 
terest. If  the  security  be  not  on  interest,  it  may  be  a  fair  exposition 
of  the  contract  to  hold  that  no  time  of  credit  is  contemplated  by  the 
indorser,  and  that  the  demand  should  be  made  as  quickly  as  the  law 
will  require  upon  a  check  or  sight-draft  *  *  *  ]\ut  *  *  * 
we  think  that  a  note  payable  on  demand  with  interest  is  a  lontimiiug 
security,  from  which  none  of  the  parties  are  discharged  until  it  is 
dishonored  by  an  actual  presentment  and  refusal  to  pay.  *  *  * 
If  the  parties  declare  in  the  written  instrument,  which  is  the  only 
evidence  of  their  agreement,  that  the  money  shall  be  paid  on  call, 
with  interest  in  the  meantime,  a  pnwiuctive  investment  of  the  sum 
for  some  period  of  time  is  plainly  intended.  What,  tlien,  is  that 
period?  The  only  answer  whieh  can  be  given  is,  that  it  is  indefinite 
or  indeterminative,  and  ascertainable  only  by  mi  actual  call  for  the 
money;  and  if  that  be  the  meaning  of  the  y)rinei]ial  parties,  the  in- 
dorser must  be  deemed  to  lend  his  name  to  the  contract  witli  the 
Bame  intention.  *  *  *  wv  see  no  good  reason  why  a  note,  like 
the  one  now  in  question,  should  not  be  construed  precisely  according 
to  its  terms  and,  if  we  follow  that  construction,  such  instruments  are 
not  dishonored  by  thf  mere  efTluxinn  of  time."  Although  the  decision 
in  Mrrritt  v.  Tndd  was  suhse(|ueiitly  discussed  and,  in  some  cases, 
criticised,  its  authority  was  not  shaken  as  estahlisliing  a  rule  of  law 
and  it  was  expressly  followed  as  late  as  in   I'arher  v.   Stroud.   (98 


ISr.  PRF.SKNT^MKXT    I'Ol!    TAYMKNT.  [aRT.    VII. 

N.  Y.  370).  (Soo  Uerrirk  v.  W(wlvertou.  -11  N.  Y.  581  ;  Pardee  v. 
Fish.  (50  il).  '3()r);  ('n//;  v.  Sfdrhircatltcr,  SS  ih.  :?:?;).)  JikIkp  Com- 
STOCK  followed  the  doctrine  of  the  Enj^lish  courts,  in  dill'crentiating 
notes  payahle  on  demand  with  interest,  from  those  payable  on  de- 
mand merely.  He  sonsiht  to  ,<;ivc  elTect,  in  the  former  case,  to  what 
seemed  to  be  an  intention  of  the  parties  that,  notwithstandin<]j  the 
terms,  there  should  iv  no  immediate  demand,  and  that  the  time  of 
payment  should  be  future;  thus  niakiuij:  the  instrument  a  continuinj^ 
obliixation. 

The  law  beiiiir  thus  settled  in  this  state,  the  Negotiable  Instru- 
ments Law  was  passed,  in  18!)7,  as  the  outcome  of  a  general  move- 
ment to  bring  about  a  uniform  law  in  this  country,  covering  the 
subject  of  "  Bills  and  Notes."  It  was  a  codification  of  the  law  and, 
in  the  respect  which  we  are  considering,  it  modified  the  rule  as  formu- 
lated in  Merritt  v.  Todd.  It  established  one  rule,  which  was  to  be 
applicable  to  all  cases,  tiiat  where  an  instrument  "  is  j)ayable  on  de- 
maud,  presentment  must  be  inade  within  a  reasonable  time  after 
issue."  No  distinction  was  to  be  made,  as  theretofore,  when  the  in- 
strument was  an  interest-bearing  obligation.  While,  therefore,  it 
must  be  regarded  as  changing  the  rule  upon  tlie  subject  of  the  time 
for  the  presentment  of  such  instruments,  by  placing  them  upon  the 
same  footing,  the  fourth  section  of  the  law  has  to  be  given  effect; 
which  requires,  in  determining  what  is  a  reasonable  time,  a  considera- 
tion to  be  had  of  the  nature  of  the  instrument,  any  usage  of  trade 
and  the  facts  of  the  particular  case.  That  would,  certainly,  be  suffi- 
cient to  authorize  the  differentiation  of  bills,  or  promissory  notes, 
from  other  instruments  for  the  payment  of  money;  but,  even  where 
it  is  a  question  of  the  time  within  which  a  demand  note  must  have 
been  presented,  the  facts  and  circumstances  of  the  case  must  be  re- 
garded. If  a  note  is  payable  on  demand,  it  is  always  mature  and 
may  at  any  time  be  demanded.  The  statute  of  limitations  com- 
mences to  run  against  the  maker  from  its  issue.  (Ilerrich  v.  Wool- 
verton,  41  N.  Y.  587.)  After  its  issue,  what  constitutes  reasonable- 
Dess  of  time  for  its  presentment  cannot  be  determined  by  any  fixed 
rules;  for,  plainly,  the  particular  circumstances  may  be  such  as  to 
evidence  some  intention  of  the  parties  as  to  its  continuance.  And, 
certainly,  they  may  be  sufficient  to  justify  an  inference  of  unreason- 
able delay.  In  my  opinion,  what  the  legislature  intended  to  accomplish 
by  the  provisions  of  the  Negotiable  Instruments  Law,  in  question, 
was  to  do  away  with  the  distinction  between  notes,  or  bills,  payable 
on  demand,  which  Merritt  v.  Todd  had  created,  and  to  leave  the 
question  of  their  reasonable  presentment  for  payment,  in  order  to 
charge  the  parties  to  them,  as  one  for  the  determination  of  the  court 
upon  the  facts.  That  question,  if  the  facts  were  unsettled  and  the 
testimony  was  conflicting,  Tiiight  be  a  mixed  one  of  law  and  fact, 
which  the  jury  should  decide,  under  the  instructions  of  tlie  court  aa 


II.    2.]  AT   WHAT  TIME.  487 

to  the  law;  but,  where  they  are  ascertained  and  are  not  in  dispute, 
the  question  is  one  of  law.  (Aymar  v.  Beers,  7  Cowen,  705,  709; 
Mohawl-  Bank  v.  Brodericl-,  10  Wend.  304,  308;  Carroll  v.  Upton, 
3  N.  Y.  272;  Hinit  v.  Mayhee,  7  ib.  266,  272.)  In  the  present  rase 
the  defendant  offered  no  evidence  and  there  was  no  flispute  about 
the  facts.  The  trial  judcre  had  before  him  the  facts  of  the  discount 
of  a  demand  note,  bearing  interest;  that  the  indorsement  by  Zimmer- 
man was  without  consideration  and  for  the  maker's  accommodation; 
that  its  payment  was  secured  by  the  deposit  of  certain  securities: 
that  notwithstanditio:  that,  some  two  years  after  the  making  of  the 
note  the  plaintiff  had  complained  to  Zimmerman  of  its  non-payment 
and  twice,  a  year  later,  had  written  that  the  maker  was  in  default  as 
to  the  interest,  no  steps  were  taken  to  charge  the  indorser,  by  pre- 
sentment of  the  note  for  payment  and  by  protest  for  non-payment, 
until  more  than  three  and  a  half  years  had  elapsed.  If  the  finding 
that  the  note  was  not  presented  within  a  reasonable  time  depended 
for  its  justification  upon  the  evidence,  we  should  be,  undoubtedly, 
concluded  from  reviewing  it  by  the  rule  of  unanimous  affirmance. 
But  viewing  it,  as  I  think  we  must,  as  a  fpiestion  of  law  to  be  decided 
by  the  court  upon  the  ascertained  facts,  it  depended  upon  the  inter- 
pretation of  the  statute  as  applied  to  the  facts  and,  in  my  opinion, 
the  decision  of  the  trial  court  was  correct. 

It  is  argued  by  the  appellant  that  the  defense,  that  the  note  was 
not  presented  within  a  reasonable  time  after  its  issue,  was  one  which 
should  have  been  specially  pleaded  in  the  answer.  This  objection 
was  not  taken  upon  the  trial;  but.  assuming  that  it  could  properly 
be  raised  upon  the  appeal,  it  is  untenable.  The  burden  is  on  the 
holder  of  a  note,  when  seeking  to  charge  an  indorser,  to  prove  due 
and  timely  presentment  and  the  ffivinir  of  notice  to  the  indorser  of  its 
dishonor.  The  obligation  of  the  indorser  is  conditional  upon  all  the 
steps  having  been  taken  hy  tlie  holder,  wiiich  the  statute  has  pre- 
scribed as  to  jiresentment  and  as  to  notice  of  iKin-payment,  etc.  The 
Negotiable  Instruments  Law  is  the  codification  of  the  law  mrrili.Tnt 
upon  the  subjects  treated  and,  in  settintr  forth  what  is  re(|uire(i  of 
the  holder  of  a  note,  it  casts  upon  him  the  burden  to  prove  that  the 
re(|iiirements  were  all  complied  with.  They  were  necessary  con<li- 
tions  of  his  right  to  recover.  Presentment  of  a  demand  not(>  wilhin 
a  reasonable  time  is  a  re(|uirement  of  t!ie  ^tatule  and  the  linitilily  of 
the  indorser  to  make  good  the  contract  of  the  maker,  unlike  that  of  a 
guarantor,  is  conditional  and  depends  upon- the  holder's  having  n.a<le 
a  case  under  the  statute  of  an  obligation,  which  he  has  caused  to 
mature  and,  by  appntpriate  legal  steps,  to  become  an  ijidebtpdne-«  of 
the  contracting  parties.  (Brmni  v.  Ciirlix.  2  N.  Y.  225.)  Therefore, 
I  think  it  would  be  incorrect  to  hold  of  this  defense  that  it  is  of  an 
afTirmative  nature  an<l,  li'<e  tlic  defcnv;c  of  usiirv.  or  aiiv  other  de- 
fense whicli  avoid.s  an  obligation,  tiiat  it  must  be  pleaded  to  be 
available. 


•488  PRKSKNTMKNT    I'OH    rAVMKNT.  [aUT.    VU. 

No    oflior    (]iiostion    (li'inaiids    cnnpidoriitioii    mid,    for    tlio    reasons 
gi\iMi.   I   advise  tlic  atlirmaiwc  of  lln'  judi^inciil,  with  costs. 

Cri.i.KN,  (Ml.  .1.,  Kdwaui)  T.  IJahtiki  r,  II  AKiirr,  Wii.i.aim)  Bart- 
LETT  and  CilASE,  J  J.,  c'Oiuur;  Vann,  .1  ,  coiiciirs  in  result. 

Jiid<i:nient  aiHrmed.'' 


§  131  PARKER  V.  RRDDICK. 

fif)  MississiPiM.  2-J2.  —  1S87. 

Oy  Sept.  22,  1884,  W.  J.  Parker  bought  from  Snider  &  Son  an 
instrument  as  follows: — 

Bankinc  IIorsK  of  M.  C.  Smdfr  (S:  Sox,  (;Rr:NAnA. 
$200.00  Okknada.  Miss..  Hept.  22,  1884. 

Pay  to  the  order  of  W.  J.  Parker,  two  ImiKhed  dollars. 

J.   li.  SNiuiiR,  Cashier. 
To  L.\T».\M,  Ale.kander  &  Co.,  New  York,  N.  Y. 
No.  50.6G5. 

On  the  same  day  Parker  indorsed  this  instrument  and  forwarded 
it  to  F.  M.  Lamon,  P>rooksviIle,  Florida.  On  October  1,  1881,  Lamon 
indorsed  it  to  J.  M.  Reddick.  On  Oct.  3,  1884,  Reddick  indorsed  it 
to  A.  N.  Cheif.  On  Oct.  13,  1884,  Clielf  indorsed  it  to  ITancoek  & 
Edrington,  who  indorsed  it  to  Witz,  Biddle  &  Co.,  who  indorsed  it  to 
tlie  T"''nion  Rank  of  Baltimore,  wlio  indorsed  it  to  the  "Republic" 
Bank  of  New  York,  who,  on  Oct.  21,  1884,  presented  the  same  for 
payment,  which  was  refused  on  the  ground  that  Snider  &  Son  had 
no  funds  in  the  hands  of  the  drawees.  The  instrument  was  duly  pro- 
tested, and  notice  was  forwarded  to  the  indorser  Parker,  at  Grenada, 
Miss.,  and  also  to  the  other  several  indorsers.  All  the  indorsers  of 
the  paper  in  question  resided  in  the  town  of  P>rooksville,  Florida, 
except  Witz,  Biddle  &  Co.,  and  the  two  banks  referred  to;  and  it 
was  held  in  that  town  until  the  indorsement  to  Witz.  Biddle  &  Co., 
who  resided  in  Baltimore,  Md.  There  were  daily  mails  from  Brooks- 
ville  by  which  a  letter  could  reach  New  York  in  five  days. 

J.  !M.  Reddick,  one  of  the  indorsers,  as  well  as  an  indorsee,  after 
having  i)iiid  the  amount  of  the  check  or  bill  of  c.vcliange  to  his  in- 
dorsee, brought  this  action  against  J.  B.  Snider,  surviving  partner 
of  Snider  &  Son,  and  W.  J.  Parker,  to  recover  the  value  of  said 
instrument. 

On  the  first  trial  the  jury  found  for  the  defendants.  This  verdict 
was  set  aside  by  the  court.  On  the  second  trial  Ihc  jury  found  for 
the  plaintiff.  The  defendant,  Parker,  appealed  from  the  judgment 
of  the  court. 


1  See  also  Turner  v.  Iron  ,Chief  Mining  Co.,  74  Wis.  355,  and  Leonard  v. 
Olson,  99  Iowa,  162.  —  C. 


II.    2.]  AT   WHAT  TIME.  489 

Arnold,  J.,  delivered  the  opinion  of  the  court. 

It  is  uncertain  from  tlie  evidence  whether  the  drawees  of  the  in- 
strument upon  which  appellants  were  sued  were  bankers  or  not ;  but 
whether  the  paper  be  called  a  check  or  bill  of  exchange,  it  expressed 
no  time  for  payment,  and  was,  therefore,  pa3'able  on  demand.  A  bill 
or  check,  payable  on  demand,  must  be  presented  for  payment  within 
a  reasonal)lc  time.  What  constitutes  reasonable  time  in  such  case,  is 
a  question  of  law  to  be  determined  by  the  court,  when  the  facts  are 
ascertained.     (Basl-erville  v.  Harris,  41  Miss.  •'iHS.) 

No  delay  in  making  presentment  of  paper  payable  on  demand,  can 
be  termed  reasonable,  if  it  is  more  than  is  fairly  required,  in  the 
ordinary  course  of  business,  without  special  inconvenience  to  the 
holder,  or  by  the  special  circumstances  of  the  case.  {Phoenix  Ins. 
Co.  V.  Graj/,  13  Mich.  191.)  Such  paper  contemplates  immediate 
payment.  It  cannot  be  said  that  it  is  intended  for  circulation.  One 
who  holds  a  bill  or  check  payable  on  demand,  beyond  the  time  neces- 
sary, in  the  usual  course  of  business,  for  its  presentation  for  pay- 
ment, does  so  at  his  peril.  The  general  rule,  derived  from  the  authori- 
ties, but  subject  to  modification  by  special  circumstances,  is,  that  if 
the  drawee  of  such  paper,  resides  in  a  different  place  from  that  in 
which  it  is  drawn,  and  the  instrument  must  be  sent  by  mail  for  pre- 
sentment, it  must  be  mailed  on  the  day  next  after  that  on  which  it 
was  received  by  the  holder.  (1  Danl.  on  Neg  Inst,  §  605;  2  id., 
§§  1586,  1592;  Byles  on  Bills  f7th  Am.  ed.],  211,  212,  213;  Chitty 
on  Bills  fl3th  Am.  ed.],   133;  Foriner  v.  Pnrhani,  2  S.  S:  M.  151.) 

Paper  payable  on  demaiul,  while  not  commonly  intended  for  that 
purpose,  may  be  put  into  circulation;  but  its  ultimate  presentment 
for  payment  cannot  be  delayed  beyond  a  reasonable  time,  by  transfer 
or  successive  transfers,  any  more  than  it  can  by  being  loi  kcd  iifi.  or 
held  an  unreasonable  time,  by  the  first  or  any  subsequent  bolder. 
(f'bitty  on  Bills  I13th  Am.  ed.],  130:  2  Daniel  on  Neg.  Insts., 
§  159.5;  Story  on  Prom.  Notes,  §  -191.) 

If  the  paper  sued  on  be  regarded  as  a  bill,  (lie  drawer,  as  well  as 
the  indorsers,  would  be  discharged  bv  (lie  neirligence  and  delay  in 
respect  to  (be  presentment;  but.  if  a  check,  indorsers  would  be  <lis- 
chargeri  by  such  laches,  while  (he  drawer  would  not,  unless  he  could 
show  that  he  was  injured  by  (he  defaiiK.  lie  would  be  eii(i(Icd  otdy 
to  such  presentment  and  notice  as  would  save  lii?ii  from  loss.  (2 
Danicd  on   Neg.  Insts.,  g   15H7.) 

No  excuse  is  shown  by  the  record  f(»r  (he  delay  which  inlervened 
in  presenting  the  paf»er  in  (luestifui  for  |)aynicn(,  and  the  loss  thereby 
occaRioned  cannot  be  imposed  on  the  indorser,  Parker.  As  (o  him, 
the  last  verdict  was  contrary  to  the  law  and  the  evidence.  The  court 
below  erred  in  instruc(ing  the  jury  that  the  presentment  was  made 
within  a  reasonable  lime,  and  in  refusing  to  instruct  the  jnrv  (o  the 
contrary.     The  judgment  is  allirmcd  as  to  the  drawer,  Snider,  who 


490  riUlSKNTiMI-Nr    I'OU    |•A^MI■:NT.  [AliT.    Vll. 

tniulo  no  clof(MiiJo  lu>!o\v  mik]  Mssii^ns  no  error  licrr;  Inil  it  is  reversed 
as  to  tlu'  iiulorsi'r,  I'tirkn,  aiitl  llir  hi.'^l  xrrdii  I  as  to  liiiii  is  set  aside, 
and  tlie  lirsl  \ertliit  as  to  him  is  I'cslorrd,  and  jiulginent  rendered 
tliereon,  lieie,  in  liis  TaNor." 


§131      (OLIMIUAN  r.A.NKIMi  COMl'ANY  i;.  BOWEN. 

|:!l    \\  iscoNsiN,  218.—  1908. 

JrNiv  in.  r.'ii:;.  !!■(■  liaiikiiiLT  Unn  known  as  Mie  Farmers'  &  Mer- 
eliants'  l^aids".  of  Kan'jor.  Wis.,  sold  to  the  defendant  a  $100  draft, 
dated  on  that  dav,  |)ayal)le  to  defendant's  order,  and  drawn  hy  such 
firm  on  tlie  National  l-5aTd<  of  North  America,  at  Chica.ijo,  111.  The 
draft  was  sent  to  the  defendant  at  Barron,  Wis.,  and  was  indorsed  by 
him  to  A.  K.  Tabbert,  to  whom  it  was  forwarded  by  mail,  at  Spokane, 
Wash.,  June  16,  li»03,  and  was  there  received  by  him  June  30th 
thereafter.  He  was  at  Spokane  tenijjorarily  and  was  on  his  way  to 
the  eity  of  San  Francisco,  Cal.  July  14,  1903,  he  indorsed  the  draft 
and  sold  the  same  to  the  plaintiff  at  such  city,  receiving  $400  therefor. 
On  that  day,  in  due  course,  plaintiff  sent  the  draft  by  mail  to  the 
Bankers'  National  Bank,  of  Cliicago,  111.,  by  which  it  was  received 
July  18th  thereafter,  and  was  then,  as  requested,  duly  presented  to 
the  drawee  for  paymenf,  whidi  was  refused,  whereupon  it  was  duly 
protested  for  nonpayment  by  a  duly  authorized  notary  public,  who 
forwarded  a  manifest  thereof  with  notices  of  protest  for  A.  E.  Tabbert, 
the  plaintiff  and  the  defendant,  to  the  plaintiff  at  San  Francisco,  Cal., 
and  also  sent  due  notice  to  the  National  Bank  of  North  America  at 
Chicago,  111.,  and  to  the  drawer  at  Bangor,  Wis.,  July  19,  1903. 
Plaintiff  upon  receipt  of  the  manifest  and  notices  duly  sent  the  one 
for  defendant  to  him  at  Barron,  Wis.,  by  whom  it  was  duly  received, 
and  sent  the  one  for  Tabbert  by  mail  to  his  post-office  address  and 
reputed  place  of  residence,  that  being  San  Francisco,  Cal.  There- 
after due  demand  was  made  on  defendant  for  payment  of  the  draft, 
and  the  same  was  refused.  July  28,  1903,  the  property  of  the  drawer 
was  placed  in  the  possession  of  a  receiver,  who  duly  paid  upon  the 
draft  $144.49,  January  6,  1904,  $61.93,  May  20th  thereafter,  and 
$30.96,  June  5th  following.  Plaintiff  was  the  owner  of  the  draft  at 
the  time  of  the  commencement  of  the  action,  and  at  the  time  of  the 
trial  thereof  there  was  due  thereon  $210. 


8  A  note  indorsed  when  overdue  must  be  presented  within  a  reasonable  time. 
Liflht  V.  h'iiifishuri/.  .50  Mo.  331.  nntr.  p.  07. 

For  presentment  for  aereptanoe.  see  §  241.  For  presentment  of  cheeks  see  § 
322.  The  Nepotiable  Tn'tniments  T.aw  has  abolished  the  distinction  between 
bills  payable  on  demand  and  bills  payable  at  si^'lit.     See  §  2('>. 

See  on  rea.sonable  and  unrcasnnalde  dr-lav.  2  Ames'  Cases  on  Bills  and  Xotcs, 
277,  note.  — Hr 


n.    2]  AT    WHAT    TIME.  491 

The  pleadings  presented  issues  for  decision  involving  facts  as  above 
detailed.  The  cas«i  was  tried  by  the  court  resulting  in  findings  of 
fact  in  accordance  with  the  statement,  and  a  conclusion  of  law  that 
plaintiff  became  the  owner  of  the  draft  in  due  course,  and  was  en- 
titled to  judgment  for  ^'2\0,  with  costs.  Judgment  was  accordingly 
rendered. 

Marshall,  J.  (after  stating  the  facts  as  above).  Counsel  for 
appellant  have  presented  quite  an  extended  argument,  rt'ferring  to 
many  authorities,  as  to  the  law  antedating  and  indopendentlv  of  the 
negotiable  instrument  statute  (chapter  H^fi,  p.  fiSI.  Laws  ISOO)  to 
support  the  proposition,  that  appellant  was  released  from  liability 
on  the  instrument  in  question,  because  of  the  period  intervening 
between  his  parting  therewith  and  the  presentation  thereof  to  the 
drawee  for  payment.  Such  statute  was  enacted  for  the  purpose  of 
furnishin<«  in  itself,  a  certain  guide  for  the  determination  of  all 
questions  covered  thereby  relating  to  commercial  paper,  and.  there- 
fore, so  far  as  it  speaks  without  ambiguity  as  to  any  such  (piestion, 
reference  to  case  law  as  it  existed  piior  to  tlie  enactment  is  unneces- 
sary and  is  liable  to  be  misleading. 

The  Negotiable  Instruments  Law  is  not  merely  a  legislative  codifica- 
tion of  judicial  rules  previously  existing  in  this  state  making  that 
written  law,  which  was  before  unwritten.  Tt  is,  so  far  as  it  goes,  an 
incorporation  into  written  law  of  the  common  law  of  the  state,  so  to 
speak,  the  law  merchant  generally  as  recognized  here,  with  stub 
changes  or  modifications  and  additions  as  to  make  a  system  harmoniz- 
ing, so  far  as  practicable,  with  that  prevailing  in  other  stntc<.  That 
it  contains  some  quite  material  changes  in  previous  rules  governinc: 
(ommercial  papnr  we  have  had  oci^asion  hcn^tofore  to  ])oint  out. 
f^ofJgc  V.  Swilh.  130  Wis.  .320:  Avl.-hnnl  v.  Anmhl.  1-31    Wis.  fil. 

The  primary  question  discussed  bv  nii|ii'llan("s  (nunsfl,  it  is  bclimed 
1-1  fully  covered  by  the  Negotiable  Instruments  F^aw.  TIkm-c  are  a 
iMultitude  of  decisions  regarding  the  character  of  n  bill  of  ovchnnije 
.'Mid  that  of  a  check,  as  those  tcrjns  arc  usc(|  iti  Inisiui-ss  I  riiiisactnuis. 
^^l^(\  to  what  <'\tciit  |lic  iucidciils  of  one  arc  iilciii  kjiI  wiih  those  of 
the  other,  which  decisions  are  so  variant  in  I  heir  phrasiiiii  of  the 
matter  as  to  produce  more  or  less  coiifusion  in  lespcd  thereto  with 
many  apjiarr-nt,  and  some  re;il,  conllids,  to  iemc(ly  which  was  one  of 
llie  principal  objects  f)f  the  law. 

To  that  eufl  it  was  provided  in  section  KiSd."  "A  bill  .i|"  e\(  hange 
is  an  unconditional  f»rrlcr  in  writim:  addressed  bv  one  person  In  an- 
other, sigruMl  by  the  person  giving  it,  rc<piiring  the  person  to  whom 
it  is  addressed  to  pay  on  demand  or  al  a  fixed  or  determinable  future 
time  a  sum  certain  in  money  to  orrler  (tr  bearer,"  and  it  was  further 


9  N.  Y.  §  2in.  —  f". 


'^n?  fRIilSKNTMKNT    KOI!    r\VMl';NT.  [aHT.    VII. 

provided  in  seclion  l(5S|-l,'  "A  clu'ck  is  a  hill  of  ox(liaiif:;e  drawn 
on  a  hank.  |)aval)l('  on  ih-niand."' 

As  to  wiu'tlicr  liii>  inrich'iits  of  tho  species  of  hills  of  exchange!  last 
mentioned  are  the  same  as  those  of  hills  of  exelianfife  generally,  it 
was  further  j)rovided  in  the  seclion  last  referred  to,  "  Except  as  herein 
otherwise  provided,  I  he  ]iro\isions  of  this  act  applicahic  to  a  hill  of 
exehanc[e  payiihle  on  demand  a])[)ly  to  a  check."  The  only  exception 
referred  to  material  to  this  case  is  contained  in  section  1(181-2,^  in 
these  words:  ''A  check  ninst  !)e  ])resented  for  payment  within  a 
reasonahle  time  after  its  issue  or  the  drawer  will  be  discharged  from 
liability  thereon  to  the  extent  of  the  loss  caused  by  the  delay." 

Keepinj;  in  mind  that  the  discharge  from  liability  above  referred 
to  because  of  unreasonable  delay  after  the  issuance  of  a  check  in 
presentine:  it  for  payment,  is  of  the  drawer  only,  and  that  tliis  action 
is  against  the  payee  who  indorsed  the  instrument  in  question  without 
qualification  and  put  it  in  circulation,  we  turn  to  sei^tion  1678-1,'' 
which  provides,  as  to  a  bill  of  exchange  payable  on  demand,  which 
from  the  foregoing  ohviously  includes  a  check  or  draft  on  a  hank  of 
the  character  of  the  one  in  question,  "  presentment  for  payment  will 
be  sufficient  if  made  within  a  reasonable  time  after  the  last  negotiation 
thereof." 

From  the  foregoing  it  seems  plain  that  as  regards  the  payee  of 
such  an  instrument  as  we  have  here,  who  puts  the  same  in  circulation 
with  his  unqualified  indorsement  thereon,  and  all  subsequent  parties 
thereto  so  indorsing  the  same,  presentment  for  payment  is  sufficient, 
as  regards  their  liability,  if  made  within  a  reasonable  time  after  tho 
last  negotiation.  .'\  bill  of  exchange  payable  on  demand,  regardless 
of  its  character,  put  in  circidation,  so  long  as  its  circulating  character 
is  preserved  may  be  outstanding  without  impairing  the  liability  of 
indorsers  thereof.  P"'ormerly  the  length  of  time  within  which  a  hill 
of  exchange  might  circulate  without  impairing  such  liability  was 
more  or  less  uncertain,  rendering  it  very  difficult  to  determine  any 
one  case  by  the  decision  in  another.  '^JMiat  difficulty  was  removed,  so 
far  as  practicable,  by  the  provision  that  only  the  time  need  be  con- 
sidered intervening  between  the  last  negotiation  and  the  [)resentment. 
That  is  rpcognized  as  a  radical  change  in  the  law  as  it  formerly 
existed.     Section   195,  Selover's  Negotiable   Instruments  Law. 

As  to  an  ordinary  bill  of  exchange  put  in  circulation,  it  was  quite 
anciently  held  that  the  period  between  July  18th  of  one  year  and 
January  Ifith  of  the  next  year  was  not  necessarily  unreasonable. 
Gowan  v.  Jarkson,  20  Johns.  ("N".  Y.)  176.  Perhaps  one  might  now 
keep  a  bill   of  exchange  for  such  length  of  time  as  to  destroy  its 

1  N.  Y.  §  321.  —  C. 
2N.  Y.  §  322. —  C. 
3N.  Y.  §   131.  — C, 


H.    2]  AT    WHAT   TIME.  493 

circulating  character  notwithstanding  he  ultimately  passed  it  along 
to  another  person,  hut  thai  situation,  as  we  view  the  case,  does  not  exist 
here. 

Applying  tlie  law  as  afoiesnid  to  the  facts  of  tliis  case  it  is  readily 
seen  that  the  delay  in  presenting  the  paper  for  payment  hetween  its 
date  and  the  negotiation  to  the  hank  at  San  Francisco  is  immaterial. 
Appellant  unqualifiedly  indorsed  the  paper  and  put  it  in  circulation 
by  sending  it  to  Tahhert  at  a  distant  part  of  the  country,  prohahjy 
knowing  that  he  was  a  traveler.  Tahhert  received  the  paper  while 
journeying  with  the  intention  of  going  to  iSan  Francisco  and  held'  it 
till  he  arrived  there  and  then  negotiated  it.  It  was  promptly  pre- 
sented for  payment  thereafter  and  so  in  time,  as  regards  that  cir- 
cumstance, to  preserve  the  liability  of  appellant. 

The  court  decided,  as  indicated,  that  Tabbert  was  a  traveler  with 
San  Francisco  as  his  destination  and  properly  held .  that  such  cir- 
cumstance sufficiently  explained,  if  any  explanation  were  necessary, 
the  lapse  of  time  between  his  reception  of  the  paper  and  his  negotia- 
tion thereof,  preserving  its  circulating  character  and  warranting  the 
finding  that  the  respondent  came  thereby  in  due  course. 

The  point  is  made  that  the  instrument  was  not  presented  to  the 
drawee  for  payment  during  hanking  hours.  The  Negotiable  Instru- 
ment Law  at  section  1078-2.'*  provides  that  "Presentment  for  pay- 
ment to  be  sufficient,  must  he  made:  *  *  *  at  a  reasonable  hour 
on  a  business  dav.  *  *  *  "  The  evidence  shows  that  the  paper, 
after  taking  its  course  through  the  clearing  house,  was  presented  to 
the  drawee  for  payment  on  the  afternoon  of  the  same  day  between 
the  hours  of  3  and  6  o'clock.  The  proof  is  to  the  effect  that  such 
was  the  customary  way  of  doing  such  business  in  Chicago,  where  the 
flrawee  was  located.  That  is.  as  we  understand  it.  tliat  the  business 
day  of  the  bank  continued  after  the  closing  of  the  clearing  house 
transactions  so  as  to  enable  banks  holding  paper  for  collection,  re- 
fu.'ied  recognition  in  such  transactions,  to  be  presented  for  payment 
as  wns  done  in  this  case.  That  satisfies  the  statute.  What  constitutes 
business  hours  of  a  bank,  within  the  meaning  of  the  statut(\  has  refer- 
ence to  tlie  general  custom  at  the  place  of  the  particular  tran.saction  in 
question.  In  case  of  a  transaction  occurring  in  a  foreign  jurisdic- 
tion, as  in  the  instance  in  (picsfion,  the  court  cannot  take  judicial  no- 
tice of  what  constitutes  reasonable  hours  on  a  business  day.  nanicl 
on  Negotiable  Instruments  (r)th  ed.)  g  fiOI.  If  is  a  matter  of  prodf, 
though  in  case  of  the  notarial  certificate  of  the  transaction,  as  here, 
being  regular  so  as  to  furnish  prima  farir  proof  that  the  paper  was 
duly  presented  for  payment,  that  raises  the  presumption  that  the  pre- 

4N.  Y.  §  132. —  C. 


4i>4  PRKSENTMIAT    I'Ol!    I'A  V  M  KNT.  |aI{T.    VII. 

BCiitinoiit  was  made  at  a  j)i'oi)i'i-  tiino.     i'ayiuja  Coiiiily  Ihinh-  v.  Hunt, 
2  Hill  (N.  Y.)  G;55. 

Judgment  allirmed.' 


§  131  ROBINSON  V.  AMES. 

[Iicportal  lurcin  at  p.  633.] 


§132  FAKNSWOirrrT  r.  ALLEN. 

4  Gray   (Maxs.)   453.  —  1855. 

Action  h^'  holder  n^ninst  indorscr.  Defense,  presentment  and  de- 
mand insufficient.  Verdict  for  plaintiff.  Defendant  alleges  excep- 
tions. 

The  agent  of  the  holder  did  not  know  the  maker's  place  of  residence. 
After  inquiring  it,  he  gave  the  note  to  a  notary,  who  went  to  the  house 
of  the  maker  and  arrived  there  ahout  nine  o'clock  in  the  evening.  The 
maker  and  his  family  had  retired  for  the  night,  hut  the  maker  an- 
swered the  hell,  and,  upon  the  note  hcing  jjresented,  refused  payment. 

BiGELOW,  J.  —  The  note  declared  on,  not  heins^  ])ayahle  at  a  hank, 
or  at  any  place  where  husiness  was  transacted  during  certain  stated 
hours  in  each  day,  was  properly  presented  to  the  maker  at  his  place 
of  residence.  It  was  also  the  duty  of  the  holder  to  present  it  within 
reasonable  hours  on  the  day  of  its  maturity.  No  fixed  rule  can  he 
established  by  which  to  determine  the  hour  beyond  which  a  present- 
ment, in  such  case,  will  be  unreasonable,  and  insufficient  to  charge 
an  indorscr.  Generally,  however,  it  should  bo  made  at  such  hour 
that,  having  regard  to  the  habits  and  usages  of  the  community  where 
the  maker  resides,  he  may  be  reasonably  expected  to  be  in  a  con- 
dition to  attend  to  ordinary  business.  In  the  present  case,  taking 
into  consideration  the  distance  of  the  place  of  residence  of  the  maker 
from  Boston,  where  the  note  was  dated,  and  where  it  was  held  when 
it  became  due;  the  means  that  were  taken  to  ascertain  the  residence 
of  the  maker,  and  the  season  of  the  year  at  which  the  note  fell  due, 
we  are  of  opinion  that  a  presentment  at  nine  o'clock  in  the  evening 
was  seasonable  and  sufficient.  It  is  quite  immaterial  that  the  maker 
and  his  family  had  retired  for  the  night.  The  question  whether  a 
presentment  is  within  reasonable  time  cannot  be  made  to  depend  on 
the  private  and  peculiar  habits  of  the  maker  of  a  note,  not  known 
to  the  bolder;  but  it  must  be  determined  by  a  consideration  of  the  cir- 
cumstances which,  in  ordinary  cases,  would   render  it  seasonable  or 


5  See  also  Plover  Hav.  Jinnk  v.  Moodic.  1.35  Iowa,  685,  post,  under  §  322.  —  C, 


11.    S]  AT    WHAT    TIME.  405 

otherwise.  {Barclay  v.  Barley,  2  Campb.  527;  Triggs  v.  Newnham, 
10  Moore,  240,  1  Car.  &  P.  6:^  ;  ^TUl■ins  v.  Jadis.  2  B.  &  Ad.  188; 
Cayuga  County  Bank  v.  Hunt,  2  Hill  [N.  Y.],  635.) 

Exceptions  overruled.^ 


§  135    NEWARK  INDIA  RUBBER  MFG.  CO.  v.  BISHOP. 

3  E.  D.  Smith    (N.  Y.  City  C.  P.)    48.  —  1854. 

Action  by  holder  ajjainst  two  indorsers.  Jnd,s:ment  for  plaintiff. 
Defendants  move  for  a  new  trial,  which  is  granted  as  to  Griffin,  but 
denied  as  to  Bishop.    Bishop  appeals. 

The  note  was  payable  at  the  Bowery  Bank.  On  the  day  of  maturity 
Bishop  left  his  check  with  the  teller  to  take  up  the  note.  The  note 
was  not  presented  durinj?  banking  hours  and  at  the  close  of  banking 
hours  the  teller  left  the  bank  having  the  check  still  in  his  custody. 
After  banking  hours  the  note  was  presented  to  a  clerk  who  was  at 
the  bank  and  who  examined  the  ledger  and  said  there  were  no  funds. 
Due  notice  was  given. 

At  the  trial  the  jury  were  instructed  as  follows: 

"  If  funds  were  provided  and  set  apart  to  pay  the  note,  and  if  it 
was  not  paid  for  the  reason  that  the  note  was  not  presented  for  pay- 
ment in  the  usual  business  hours  of  the  bank,  the  indorsers  are  dis- 
charged. 

"  A  presentment  of  the  note  for  payment  at  the  bank,  but  not 
within  the  usual  business  hours,  to  a  clerk  who  could  not  pay  the  note, 
is  not  a  good  presentment  which  will  hold  the  indorser. 

"  It  is  not  enough  that  the  clerk  to  whom  at  such  a  time  the  pre- 
sentment is  made,  have  power  to  hind  the  bank  to  pay  the  note  by 
certifying  in  writing  on  the  note  that  it  is  good. 

"  In  order  to  make  a  presentment  at  such  a  time,  a  sufficient  one, 
the  pfTHon  to  whom  it  is  made  uinst  have  the  power  to  pay  ilic  note 
and  take  it  up,  by  actual  payment  to  its  holder  r»f  funds  that  arc  pro- 
vided in  the  bank  for  that  purpose.  " 

WooiHiUFF,  J.  —  I  did  not  fed  cMllcd  upon  to  order  a  new  trial  in 
this  case  in  favor  of  the  ap[>ellaMt  liishof),  who  had  himself  with- 
drawn the  money  })rovided  to  meet  the  note.  He  knew  that  the 
maker  woidd  not  pay  the  note  as  early  as  the  morning  of  the  day  it 
became  due,  for  he  had  himself  undertaken  to  provide  funds  for  its 
payment.  On  learning  that  the  note  was  not  presented  till  after 
business  hours,  he  himself  takes  the  money  wliich  had  been  set  apart 
for  the  u.se  of  the  plaintiff,  and  af)propriates  it.  Under  such  circum- 
stances, the  jury  having  rendered  a  verdict  against  him  on  tlie  trial, 


1  Ck>mpare  Dana  v.  Nawycr,  22  Me.  244,  hnlfiing  tlif  lioiir  iinrraRonable.  —  H. 


■\b6  rRESENTMKNT    VOU    r.WMKNT.  [aRT.    VII. 

I  did  not  tliink,  and  I  do  not  now  (liiiik,  tliat  the  court  should  set 
that  verdict  aside  as  against  cvidcinc  foi-  liis  honefit,  and  to  enable 
him  to  keep  that  nioncv,  when  lie  has  not  been  in  any  manner  or  by 
any  possibility  injured  by  any  defect  in  the  presentment. 

The  case  of  the  defendant  Griffith  is  very  difTerent.  Tt  is  an  undis- 
puted fact  that  if  the  note  had  been  presented  at  the  bank  within  the 
usual  business  hours  it  would  have  been  paid.  It  is  equally  clear 
tliat  at  the  time  the  note  was  presented,  there  was  no  person  in  the 
bank  who  could  pay  it.  The  undertaking  which  the  note  and  its  in- 
dorsements imported  was,  that  there  should  be  at  the  bank  during 
the  usual  hours  of  business  on  that  day,  funds  in  the  hands  of  proper 
persons  competent  to  pay  them  over,  sufficient  and  ready  to  meet 
that  note.  Not  that  every  person  who  might  be  employed  about  the 
bank,  from  the  president  down  to  the  porter,  and  who  might  happen 
to  be  in  the  bank  after  it  was  closed,  should  at  all  hours,  so  long  as 
the  door  was  unlocked,  be  ready  to  pay  the  note. 

T  do  not  question  that  there  may  be  a  good  presentment  at  bank 
after  banking  hours,  by  which  I  mean  after  the  hour  until  which 
banks  are  open  for  the  purpose  of  paying  notes  which  may  be  pre- 
sented. But  I  think  that  he  who  delays  presentment  until  after  that 
hour  takes  the  risk  of  finding  at  the  bank  a  person  who  can  pay  the 
note  if  the  funds  are  provided,  or  who  is  authorized  to  refuse  if  they 
are  not. 

The  case  of  Garnett  v.  WoodcocJc  (1  Stark.  475),  which  has  been 
referred  to  in  support  of  the  sufficiency  of  this  presentment,  pro- 
ceeds upon  the  distinct  ground  that  if  a  banker  appoint  a  person  to 
attend  in  order  to  give  an  answer,  a  presentment  would  be  sufficient 
if  made  before  13  o'clock  at  night,  and  that  in  that  case  it  did  not 
appear  but  the  person  was  stationed  there  for  that  express  purpose; 
while  the  general  rule  that  presentment  must  be  made  within  the 
usual  hours,  is  not  at  all  repudiated  but  rather  affirmed  by  that  same 
case.  And  see  Parler  v.  Gordon,  7  East,  385 ;  Barclay  v.  Bailey,  2 
Camp.  527;  Wilkins  v.  Fadis,  2  B.  &  A.  188;  Elford  v.  Teed,  1  M. 
&  S.  88 ;  Banl-  of  Utica  v.  Sjiiith,  18  J.  R.  230.) 

In  this  case  it  does  affirmatively  appear  that  the  person  to  whom 
the  presentment  was  made  was  not  stationed  there  to  give  an  answer. 
The  funds  were  there,  but  he  could  not  pay  the  note.  Had  he  known 
that  the  funds  were  there,  provided  for  the  express  purpose,  still  he 
could  not  pay  the  note,  so  that  it  was  by  reason  of  the  omission  to 
present  within  the  usual  hours,  and  for  that  cause  alone,  that  the  note 
was  not  paid  at  its  maturity.  T  think  that  the  charge  was  in  this 
respect  correct. 

[Tngraham,  p.  J.,  also  wrote  an  opinion  for  affirmance.] 

Daly,  J.,  concurred  in  affirming  the  order,  but  wrote  no  opinion. 

OrdfT  affirmed  and  a  new  trial  denied.* 

2  Approved  in  Salt  Upringa  A'.  B.  v.  Burton,  58  N.  Y.  430,  436. 


II.    2]  AT    WHAT    TIME.  497 


§  135  GERMAN-AMERICAN  BANK  OE  ROCHESTER  v.  MILLI- 

MAN. 

31   MiSCEXXANEOUS    ( MONBOE  COUNTY   CouRT,   N.    V.)    87.  —  1900. 

Sdtheeland,  J.  —  This  action  was  brought  upon  a  promissory 
note  dated  January  C,  1899,  made  by  the  defendant,  payable  three 
months  after  the  date  thereof  to  the  order  of  \V.  E.  Williams,  at 
the  Central  Bank.  Rochester,  N.  Y.,  for  $39  and  interest.  Before 
maturity  the  note  was  indorsed  by  Williams,  the  payee,  and  trans- 
ferred to  the  plaintiff.  The  day  the  note  became  due  (April  C^,  1S09), 
shortly  after  10  o'clock,  a  messencfer  from  the  plaintiff  presented  the 
note  at  the  Central  Bank,  and  requested  payment,  whieh  was  re- 
fused because  the  defendant's  account  was  not  good.  The  banking 
hours  at  the  Central  Bank  are  from  10  a.  m.  until  4  p.  m  :  the  bank- 
ing hours  of  the  plaintiff  are  from  10  a.  m.  until  3  p.  m.  At  about 
half  past  3  of  the  afternoon  of  the  same  day  the  assistant  cashier 
of  the  plaintiff,  who  is  a  notary  public,  presented  the  note  at  the 

If  the  bill  or  note  is  presented  at  a  business  office  or  a  bank,  it  must  be  pre- 
sented during  customary  business  hours.  Parker  v.  Gordon,  7  East  (K.  B.) 
385.  But  if  the  holder  finds  a  person  at  such  office  or  bank  after  business 
hours  upon  whom  demand  may  properly  be  made,  such  demand  is  pood.  Gar- 
nett  V.  Woodcock,  6  Maule  &  Selwyn  (K.  B.)  44;  Salt  Springs  Nat.  lik.  v. 
Burton,  58  N.  Y.  430.  See  post,  §  135.  A  notary's  certificate  need  not  name 
the  time  of  day  when  presentment  was  made,  for  it  will  be  presumed  to  be  a 
reasonable  hour.  Cayufjn  Count;/  lik.  v.  Hunt,  2  Hill  ( N.  Y.)  G35.  But 
where  the  notary's  certificate  states  that  he  presented  the  instrument  at  the 
office  of  the  maker  at  5:20  p.  ni.,  and  found  the  door  locked,  it  is  error  to 
refuse  to  hear  evidence  that  this  is  not  within  the  customary  business  lioura. 
Clough  V.  Ilolden,  115  Mo.  330. 

Where  an  instrument  is  payable  at  a  bank  it  is  sufiicicnt  that  the  instru- 
ment be  in  the  bank  on  the  day  of  maturity;  the  formal  demand  is  made  by  the 
bank  upon  the  maker's  account,  and  if  that  bo  not  sulHcient  to  meet  the  note 
or  bill,  the  instrument  is  dishonored.  1  Daniel  on  Nep.  Inst.,  §  05(5.  Hut  it 
is  held  that  the  physical  presence  of  the  instrument  in  the  bank,  unknown  to 
the  officers  (as  where  the  letter  in  which  it  was  sent  was  mislaid  unopened), 
is  not  a  presentment  ami  demand.  Vhicopec  Hank  v.  I'hilatli  Iphia  Hank,  8 
Wall.   (V.  S. )   041. 

S  147.  Whether,  if  a  note  is  payable  at  a  bank  anil  is  there  |)resciit('d, 
the  bank  is  bound  to  pay  it  in  case  the  maker  has  a  sufficient  deposit,  has  l)con 
a  matter  of  much  doubt.  See  .Morse  on  Hanks  and  Bankinp  (3(1  ed. ) ,  ijtj  55ft- 
664.  It  has  been  held  that  it  is  authorized,  but  not  bound,  to  pay.  Bedford 
Bank  v.  .\roam,  125  Ind.  5H4.  Contra:  Grissom  v.  Cowinrrcial  \.  B.,  87 
Tenn.  350.  It  has  l>een  held  that  it  is  bound  to  pay  out  of  the  deposit  if  the 
bank  itself  holds  the  note.  German  V.  B.  V.  Foreman,  138  I'a.  St.  474.  Mut 
not  out  of  the  deposit  of  an  indorscr,  though  he  is  known  to  be  the  principal 
debtor.  Fimt  .V.  B.  v.  Pelt-:,  170  Pa.  St.  513;  though  it  may  do  so,  Meehnnies', 
etc..  Bank  v.  Seitz.  150  Pa.  St.  032.  See  Aetna  Y.  B.  v.  Fourth  Y.  /?..  40  N.  Y. 
82;  Indift  v.  \ntinnal  City  Bank,  80  N.  Y.  100;  National  Bank  v.  Smith,  06 
N.  Y.  271.— H. 

NEOOT.  IN8TRUMEKTB  —  32 


4y8  rilESLiSTAlK.NT    lOK    TAYMKNT.  [ahT.    VII. 

Ci'iitral  Hank,  and  iK'inaniU'd  i>aynu'nt,  uliiili  was  n'Tust'd  because 
tlio  dofemlanl's  airouiil  was  mA  ^^ood.  '\'\\v  notary  ininiediately  pro- 
tested the  note,  and  about  }  o'cloek  mailetl  notices  of  protest  to  the 
indorse!'  and  maker.  After  the  notary  had  presented  the  note,  and 
payment  had  been  refused,  Millinian  deposited  in  the  Central  Iknk 
cash,  and  a  check  which  was  treated  as  cash,  sullicient  in  amount  to 
make  his  account  good  for  thi'  note  in  suit.  About  5  minutes  before 
4  o'clock  Milliinan  deposited  cnou-,^li  in  the  Central  Bank  to  pay  the 
note,  and  then  went  to  the  (Jcnnan-.Vinerican  Bank,  and  told  its 
cashier  that  lie  lia.l  made  his  account  ii:()od.  The  cashier  told  him 
that,  as  the  note  had  alivady  iroiic  to  protest,  ho  would  have  to  pay 
the  face  of  the  note  and  inl.Mvst,  and  $1.50  protest  fees,  which  pro- 
test fees  the  defendant  declined  to  pay.  The  correct  amount  of  tli(.' 
protest  fees  was  $1.1  1. 

This  action  was  commenced  April  IT),  1899.  The  defendant's  ac- 
count remained  oood  for  the  amount  of  the  note  from  5  minutes  of 
4  p.  m.  of  April  (Jth  until  the  morning  of  the  day  when  the  summons 
was  returnable  in  this  action,  when  defendant  withdrew  from  the 
bank  the  amount  of  the  note,  with  interest  up  to  the  date  of  its  ma- 
turity, which  amount  he  at  once  paid  into  court  when  he  filed  his 
answer  pleading  a  tender.  The  municipal  court  gave  judgment  for 
the  face  of  the  note  and  interest  to  the  date  of  the  judgment,  besides 
$1.14  protest  fees  and  the  costs  of  the  action. 

The  defendant  insists  that  by  making  his  account  good  for  the  note 
and  accrued  interest  before  the  close  of  banking  hours  at  the  Central 
Bank  he  fulfilled  his  contract,  and  that  the  two  demands  and  refusal:, 
which  had  been  made  earlier  in  the  day  did  not  put  upon  him  the  duty 
either  of  making  a  tender  of  the  amount  at  the  (Jerman-American 
Bank,  or  of  paying  the  protest  fees,  and  that  the  judgment  appealed 
from  is  e.xcessive  in  awarding  plaintiff  interest  from  the  maturity  of 
the  note  to  the  date  of  judgment,  with  protest  fees,  and  that  defendant 
not  plaintiff,  should  have  been  awarded  costs. 

The  respondent  contends  that  it  was  not  necessary  for  the  notary 
to  wait  until  the  close  of  banking  hours  at  the  Central  Bank,  but  that, 
the  note  having  been  once  presented  there  for  payment  within  banking 
hours,  and  payment  being  refused  because  of  the  want  of  funds,  the 
note  was  thereby  immediately  dishonored,  and  was  properly  ])rotested 
before  4  o'clock;  and  that,  if  the  maker  desired  to  fulfill  his  obliga- 
tion after  one  presentment  and  refusal,  he  was  bound  to  bring  the 
money  to  the  plaintiff's  bank,  and  there  tender  the  amount  due,  with 
the  protest  fees. 

The  question  thus  presented  is  not  free  from  doubt,  and  there  is 
no  reported  case  in  this  state  which  is  precisely  analogous  to  the  one 
at  bar.  Numerous  expressions  may  be  found,  however,  in  the  opinions 
of  the  courts  pronounced  during  a  long  series  of  years,  which,  al- 
though obiter  dirAa,  deserve  respect,  and  serve  to  indicate  with  some 


II.    2]  AT    WHAT    TIME.  499 

degree  of  ceilaiiity  the  views  of  the  judges  on  the  point  involved  here, 
lii  Llnciia^-c  V  Ladd,  4-1:  Barb.  GU,  decided  in  1865,  the  Supreme 
(  ourt  l.tht  that,  where  n  note  was  made  payable  at  the  store  of  one 
Child,  and  a  demand  was  made  between  8  and  9  a.  m.,  during  the 
ordir.ary  business  liours  at  the  store,  the  holder  was  at  liberty  at 
0!ue  to  treat  the  note  as  dishonored,  and  immediately  give  notice  of 
nonpayment  to  the  indorser,  without  waiting  until  the  close  of  busi- 
ri'ss  hours  of  that  day.  Judge  Bockes,  in  the  opinion,  refers  to  the 
general  rule  that:  '' Tf  payment  be  refused  during  the  last  day,  the 
hohle-  may  give  notice  of  its  dishonor;  yet,  if  payment  be  subsequently 
mode  ov.  that  day,  such  notice  becomes  of  no  avail.  True,  the  maker 
has  tlie  whole  of  the  last  day  of  grace  within  which  to  pay;  but,  after 
due  denuind  and  refusal,  followed  by  notice  to  the  indorser,  the  maker, 
)f  he  wishes  to  make  paynient,  must  seek  the  holder  for  that  purpose.  " 
lie  recognizes,  however,  that  more  latitude  is  allowed  the  maker  of 
a  note  payable  at  i»ank  tliaii  is  permitted  the  maker  of  a  note  pay- 
able at  some  other  place,  for  at  page  72  he  says:  "  ITe  [the  holder] 
was  not  re<|uired  to  remain  all  day  at  the  place  to  receive  payment;  nor 
was  he  bound  l)y  any  custom — as,  perhaps,  he  might  have  been  had  the 
note  been  payable  at  a  l)ank — to  leave  the  note  until  the  close  of  the 
day.  But  his  duiy  v.as  at  an  end  when  he  made  presentation  of  the 
not<  for  ))ayment,  at  the  proper  place,  at  a  reasonable  hour,  followed 
by  ininicdialc  notice  to  the  indorser."  Again,  at  page  73,  he  says: 
''  There  is  a  custom  at  banks  which  gives  to  the  maker  all  of  bank 
hours  witliin  v.hich  to  pay,  and,  in  order  to  meet  this  custom,  the  note 
when  pavable  nt  a  bank,  is  usually  left  there,  and  demand  is  made  at 
the  close' of  tlic  day."     *      *      *     ' 

[After  discussing  liatilr  v.  EUhrkin,  25  N.  Y.  178,  the  court  con- 
tinues:] 

Heferonce  is  made  in  the  opinion  to  the  case  of  CUleil  v.  Arerill, 
5  Denio,  H5,  in  which  latter  case,  in  the  opinion  of  Justice  Whittlesey, 
written  in  18  17,  it  is  said:  "It  is  imderstood  to  be  the  custom  of 
baidss  holding  f>i-omi<sory  notes  payable  at  their  own  counter  to  wait, 
on  the  ilay  of  the  inalurity  of  tlie  note,  until  the  close  of  business 
hours,  arui  then,  if  llie  maker  has  no  funds,  to  give  notice  of  n(»n])ay- 
nient,  without  making  any  other  demand  of  paynient."  This  custom 
is  sanctioned  by  the  judicial  decisions."     *     *     ♦ 

In  none  of  these  cases  was  the  precise  ])oint  adjudicated  which  is 
involved  in  the  case  at  liar,  but  the  numerous  obilrr  dicta  of  these 
learned  jurists  command  attention  so  far  as  they  recogni/e  an  excep- 
tion to  the  general  rule,  fo\mded  on  iiank  custotn  and  common  usage, 
giving  the  maker  of  a  note  payable  at  a  bank  until  the  close  of  bank- 
ing hours  to  dejKtsit  money  there  to  meet  it,  notwithstanding  a  pre- 
sentation bv  the  holder  and  refusal  earlier  in  the  day. 

a  Referring  tu  Hank  v.  Criltrndvu.  2  Tlinnip.  &  C.  118;  Hills  v.  Place  48  N. 
Y.  520:   OnUnrn  v.  h'nrirrx,  112  N.  Y.  573. — C. 


5U0  PKESliNTMliNT   l-'OK    rAVMENT.  [AHT.    Vll. 

Some  of  tho  toxl-book  w  rilers  say  this  bank  usaye  iiiusl  be  recognized 
and  enforced  by  the  eoiirls.  iMr.  Tiedeinaii,  in  his  work  on  Hills  and 
Notes  (published  in  181)8,  which  eoutains  a  discussion  on  the  Negoti- 
able Instruments  Law  passed  in  New  York  in  1897),  at  section  121, 
says:  "The  acceptor  or  maker  has  the  wliole  day  in  which  to  make 
payment.  But  a  second  demand  cannot  be  re(juire(l  of  the  holder.  If 
the  paper  is  payable  in  a  hank,  it  would  seem  to  be  necessary  to  keep 
the  bill  or  note  at  the  bank,  so  that  the  acceptor  or  maker  may  make 
payment  there  at  any  time  during  the  business  hours  of  the  day. 
If  it  is  payable  at  tlie  place  of  business  or  residence  of  the  obligor,  he 
must  seek  the  liolder,  in  order  to  make  payment,  where  he  fails  to  pay 
when  the  presentment  is  made.'' 

Mr.  Tiedeman  refers,  in  a  note  to  this  section,  to  Harrison  v. 
Crowder,  6  Smedes  »&  M.  4G4.  In  that  case  it  was  allirmatively  proven 
upon  the  trial  that  the  bank  where  the  note  was  payable  had  a  custom 
by  which  makers  had  until  the  expiration  of  banking  lionrs  to  pay, 
and  that  no  note  was  considered  dishonored  if  payment  was  made  at 
the  last  moment.  The  court  there  says:  "The  law  undoubtedly  is 
that,  by  making  a  note  payable  at  a  particular  bank,  the  parties  are 
presumed  to  consent  to  be  governed  by  such  customs  as  may  prevail 
in  the  bank,  with  regard  to  making  demand  of  payment.  A  greater 
strictness  must  be  observed  in  making  these  constructive  demands  than 
is  necessary  in  personal  demands.  A  personal  demand  may  be  made 
at  any  time  during  the  third  day  of  grace,  but  a  constructive  denumd 
at  bank  having  regular  business  hours  must  be  made  at  the  close  of 
the  business  hours,  for  the  maker  has  until  that  time  to  deposit  the 
money  for  the  payment  of  the  note." 

The  same  court,  in  a  previous  case  {Banl-  v.  Marl'ham,  6  Miss.  397), 
said,  where  bank  usage  had  been  proven  ;  "  It  follows,  as  a  necessary 
consequence  of  this  doctrine,  that  a  note  or  other  security  thus  payable 
at  a  bank  cannot  be  considered  as  due  until  the  expiration  of  the  hour 
allowed  for  payment  by  the  invariable  usage  of  the  bank,  and  tliat  it 
must  be  left  at  the  bank  until  the  completion  of  the  allotted  period." 

Obiter  dicta  may  be  found  in  reported  cases  u])on  the  other  side  of 
the  question.  McFarland  v.  Pico,  8  Cal.  62G  (opinion  written  by 
Judge  Field);  Thorpe  v.  Pecks,  28  Yt.  127.  But  in  McFarland  v. 
Pico  the  note  was  not  payable  at  the  bank,  and  in  Thorpe  v.  Peels  no 
money  was  ever  put  in  the  bank  to  meet  the  note,  and  the  note  was 
protested  about  Die  time  the  bank  closed;  presenting  facts  quite  sim- 
ilar to  those  in  Pjank  v.  Elderkin,  25  N.  Y.  1 78,  supra. 

In  the  case  at  bar  the  teller  of  the  Central  Bank  was  called  as  a 
witness  and  gave  this  testimony:  "  Q.  At  what  hour  does  the  Central 
Bank  protest  promissory  notes  in  the  possessio?)  of  the  bank  and  pay- 
able at  the  Central  Bank?    A.  At  four  o'clock." 

But  the  claim  is  made  in  this  case  on  behalf  of  the  plaintiff  that 
the  Negotiable  Instruments  Law  of  1897  has  enacted  that  a  demand 


II.    2.]  AT    WHAT   TIME.  501 

made  at  the  bank  where  the  note  is  payable  at  any  time  during  bank- 
ing hours  on  the  day  of  maturity  is  sufficient,  and  that  the  note  may 
be  protested  at  onto,  if  not  immediately  paid,  and  the  protest  feea 
charged  to  tlie  maker  of  the  note;  and  that  the  maker  must  seek  the 
holder  of  the  note  after  such  presentment  to  make  a  legal  tender  of 
the  amount  due,  even  before  the  bank  closes.  But  I  do  not  think  the 
statute  discloses  any  intent  to  modify  existing  rules  in  this  respect. 

Section  130  provides  that  presentment  for  payment  is  not  necessary 
in  order  to  charge  a  person  primarily  liable;  and,  if  the  note  is  pay- 
able at  a  special  place,  the  ability  and  willingness  to  pay  it  there  at 
maturity  are  equivalent  to  a  tender  of  payment.  Section  131  provides: 
"  Presentment  of  an  instrument  not  payable  on  demand  must  be  made 
on  the  day  it  falls  due."  Section  132 :  "  At  a  reasonable  hour  on  a 
business  day."  Section  133:  "At  the  place  of  payment  specified 
in  the  instrument."  Then  comes  section  135,  which  is  relied  upon  as 
establishing  the  rule  contended  for  by  plaintifE:  "Where  the  instru- 
ment is  payable  at  a  bank,  presentment  for  payment  must  be  made 
during  banking  hours,  unless  the  person  to  make  payment  has  no 
funds  there  to  meet  it  at  any  time  during  the  day,  in  which  case  pre- 
sentment at  any  hour  before  the  bank  is  closed  on  that  day  is  suf- 
ficient." In  my  opinion  it  was  not  the  intention  of  the  legislature, 
by  section  135,  to  change  the  law  as  it  stood  up  to  that  time,  giving 
the  maker  of  the  note  all  of  the  banking  hours  to  meet  his  note  payable 
at  the  bank.  The  language  of  section  135  is  taken  almost  word  for 
word  from  the  opinion  of  the  Court  of  Appeals  in  Batih  v.  Burton, 
58  N.  Y.  430,  in  which  case  no  funds  were  left  in  the  bank  to  meet 
the  note,  and  the  note  was  not  actually  presented  during  banking 
hours,  but  an  hour  after,  when  the  holder  was  admitted  into  the  bank, 
where  he  found  the  cashier,  of  whom  he  demanded  payment,  who  re- 
fused, on  the  ground  that  no  funds  had  been  left  with  which  to  pay. 
The  indorser  defended  upon  the  ground  that  this  presentation  was  in- 
sufficient to  hold  liirri,  and  that  was  the  whole  fontrovorsy.  The  court 
was  not  called  uf)()n  to  deeide  at  what  time  during  banking  hours  pre- 
sentation should  be  made.  And  section  135,  it  seems  to  me,  was  in- 
corporated into  the  Negotiable  Instruments  Law,  not  for  the  purpose 
of  declaring'  that  presentiiient  at  any  time  during  banking  hours  is 
siifhcienl,  hut  to  codify  the  rule  aiiiionnced  by  tli(>  court  in  Hani,-  v. 
liiirlon,  that,  even  though  no  demand  be  made  during  banking  hours, 
if  no  funds  are  left  to  meet  the  note,  a  demand  will  hold  an  indorser, 
if  made  upon  a  bank  officer  at  the  bank  on  the  same  day  before  the 
outer  doors  an'  closed.  Section  132,  rcfpiiring  presentment  in  general 
to  be  "at  a  reasonable  hour  on  a  business  day,"  is  intended  to  prevent 
demands  at  unreasonable  hours;  for  instance,  1  a.  m.  on  the  day  of 
maturity.  It  does  not  declare  what  is  a  reasonable  hour,  and,  n?ilc88 
the  maker  has  until  the  close  of  bnnkintr  liours  to  make  Iii<  depo^^it, 
any  time  during  b  iiking  hours  must  be  considered  reasonable.     Fif- 


r»0'i  i'ui;si:\iMi:Nr  roi;  i'avmkn  r.  [aut.  vii, 

tot'ti  miiiutt's  aftiT  llu'  hank  opens  is  as  rcasonaMc  lime  for  present- 
jnent  and  [)ri)test  as  lll'toen  niinutt's  liel'ure  llu'  bank  closes.  Tliis  sec- 
tion works  110  eluiiige  in  the  law. 

Seetioii  1  13  says:  "The  inslruineni  is  dislioiiored  by  non-payment 
when:  (1)  It  is  duly  prt'sented  for  paynicnl  and  payment  is  refused 
or  cannot  he  ol>lainc(l."  That  section,  howe\ci-,  is  entirely  consistent 
with  the  ))i'oposilion  that  a  note  i)ayahle  at  a  hank  is  not  dishonored 
proviiled  funds  to  meet  it  are  deposited  before  the  close  of  hankin,ii; 
hours. 

Sei'tion  144  says:  ''  Subject  to  the  provisions  of  this  act,  when  the 
instrument  is  dishonored  by  nonpayment,  an  immediate  right  of  re- 
course to  all  parties  secondarily  liable  tlu'n>on  accrues  to  tlie  liolder." 
This  section  is  not  inconsistent  with  the  defendant's  position,  because 
the  note  is  not  dishonored  absolutely  if  the  de))Osit  is  made  before 
the  close  of  bankins:  hours.  If  section  Ml  is  to  be  construed  as  ap- 
plying to  notes  payable  at  a  hank,  it  might  be  argued  with  much 
force  that  the  legislature  intended  to  permit  an  indorser  to  be  sued 
on  the  day  the  note  falls  due,  and  even  before  the  close  of  banking 
hours,  provided  an  early  demand  be  made.  I  hardly  think  any  such 
startling  innovation  was  intended.  Stiiith  v.  Aylesworth,  40  Barb. 
104. 

Section  173  says:  "Notice  [of  protest]  may  be  given  as  soon 
as  the  instrument  is  dishonored."  In  Crawford's  Ann.  Neg.  Inst.' 
Law,  the  editor  says,  in  a  note  to  this  section:  "The  holder  need 
not  wait  until  the  close  of  business  hours,  but  may  send  notice  at 
once;''  and  cites  BanTc  v.  Swann,  9  Pet.  3,'?;  Lenox  v.  Roberts, 
2  Wheat.  373,  and  Er  parte  Moline,  19  Ves.  21  fi.  But  T  do  not  think 
the  learned  author  in  this  note  intended  to  include  promissory  notes 
payable  at  a  bank,  for  the  cases  cited  by  him  are  quite  inap])licahle 
to  such  paper. 

In  Bank  v.  Swann,  9  Pet.  33,  9  L.  Ed.  40,  the  question  was  as  to 
tlu!  form  of  notice  of  protest,  and  as  to  whether  notice  of  protest 
should  have  been  mailed  on  the  evening  of  the  day  of  the  maturity  of 
the  note,  or  the  following  day.  In  fact,  the  note  in  that  case  was  in 
the  bank  during  the  whole  of  the  baid<ing  hours,  and  was  not  protested 
until  after  the  bank  closed.  Tiie  court  does  not  intimate  that  notice 
of  protest  can  be  sent  out  on  such  a  note  before  the  close  of  l)anking 
hours  on  the  day  of  maturity.  In  Lenox  v.  Roberts,  2  Wheat.  373, 
4  L.  Ed.  264,  the  note  was  not  payable  at  the  bank,  and  there  is 
nothing  in  the  opinion  or  decision  touching  the  point  at  issue  here. 
In  Ex  parte  Moline,  19  Ves.  210,  the  acceptor  of  a  bill  of  e\'{;hange, 
when  tiie  bill  was  presented  to  him  at  11  o'clock  on  the  morning  of 
the  day  it  became  duo,  refused  payment,  and  declared  that  it  never 
would  be  paid.  The  drawer  had  become  bankrupt.  The  indorser 
immediately  gave  personal  notice  to  t^'c  drnwor.  Assignees  were 
thereafter,  and  on  the  same  day,  appointed  for  the  bankrupt,  and  the 


II.   1]  AT  WHAT  TIME.  503 

assignees  objected  to  the  allowance  of  the  claim  against  tlie  drawer 
on  the  ground  that  he  had  been  disoliarged  because  the  notice  of 
dishonor  was  premature.  Lord  Chancellor  Eldon  said :  "  T  do  not 
recollect  any  decision  that,  if  an  acceptor  declares  at  eleven  o'clock 
in  the  morning  that  he  will  not  pay,  notice  of  that  to  the  drawer  is 
not  good.  If  the  law  does  not  impose  on  the  holder  the  duty  of  in- 
quiring again  before  five  o'clock,  it  would  be  extraordinary  tliat  this 
information  to  the  drawer  of  an  answer,  ])re(luding  any  hope  of  ob- 
taining anvthing  by  calling  again,  should  not  have  ell'ect.  Tf  a  Ijankor 
says  he  will  not  accept,  1  cannot  imagine  that  the  holder  is  obliged 
to  apply  again  at  ten  minutes  before  five." 

Now,  there  is  nothing  in  that  decision  or  in  the  words  of  the  lord 
chancellor  militating  against  the  contention  of  the  defendant  here. 
The  bill  of  exchange  in  that  case  does  not  appear  to  have  been  made 
payable  at  a  bank.  Lord  Eldon's  reference  to  a  banker  is  by  way 
of  illustration  only ;  and  probably  he  refers  to  a  banker  who  re- 
fuses to  honor  a  check  when  it  is  presented.  Of  course,  the  check 
can  be  protested,  and  an  action  commenced  immediately  against  the 
<lrawer  on  behalf  of  the  holder. 

The  language  of  Mr.  Justice  Story  in  Mills  v.  Banl-,  11  Wheat,  131, 
would  seem  to  indicate  that  in  the  opinion  of  that  learned  jurist  the 
parties  to  a  note  made  payable  at  a  baid<  are  bound  by  the  usage  of 
that  bank  as  to  the  time  given  to  the  maker  of  the  note  to  pay  the 
same,  without  having  the  note  go  to  protest. 

My  conclusion  is  that  the  maker  of  this  note  in  suit  was  allowed, 
fty  commercial  usage,  until  4  o'clock  to  deposit  at  tlie  Central  Bank 
the  money  necessary  to  cover  the  note;  and,  such  deposit  having  been 
made  fifteen  minutes  before  4  o'clock,  the  maker  is  not  in  default. 
Although  demand  for  the  payment  of  the  note  was  previously  made, 
and  the  note  protested  for  non-payment,  flic  ])rotest  became  of  no 
avail  on  deposit  of  the  anioiml  of  the  note  and  interest,  ami  I  he  maker 
cannot  be  compelled  to  pay  the  protest  fees  thus  incurred.  I  think 
this  should  be  held  to  be  the  rule  whether  we  regard  the  protest  of 
the  note  earlier  in  the  day  as  wholly  bad  or  condit iniinllv  good  — good 
on  condition  that  the  maker  di<l  not,  before  the  close  of  liaiiking  hours, 
fulfill  his  engagement  by  making  bis  aeronnt  good  at  the  liaiik  where 
l!ie  note  was  i»ayable.  In  Daniel,  Neg.  Inst,  ij  WM'*,  it  is  said:  "It 
would  seem  that  in  these  cases  of  notice  of  dishonor  given  on  the 
day  on  which  the  bill  is  payable  the  notice  will  be  good  or  bad,  as  the 
acceptor  may  or  may  not  afterwards  pay  the  bill.  Tf  he  does  not  after- 
wards pay  it  on  that  day,  the  notice  is  good;  ami.  if  he  does,  it.  of 
course,  comes  to  notliirig." 

T  think  the  municipal  court  should  have  rendered  judgment  against 
the  defendant  for  the  amount  of  the  note,  with  interest  to  the  day  of 
its  maturitv  onlv;  and  that  the  jud<'iiieTit  appealed  from  i«  eveessive  in 
BO  far  as  it  adjudges  defendant  liable  for  interest  after  the  maturity 


501  PRESENTMENT    KOK    I'AYMICNT.  [aHT.    Vlt 

of  the  note,  or  protest  fivs,  or  cosls  ol'  tlie  lution.  Tlu'  judgment  ap- 
pealed from  is,  therefore,  modified  so  that  j)ljuntiir  shall  recover  of 
the  defendant  $39.50  damages  as  of  May  5,  1809,  and  no  more;  and 
by  striking  out  the  allowiuue  for  costs,  $!).00.  The  defendant  (aj)pel- 
lant )  is  allowed  on  this  appeal  $10  costs,  besides  disbursements. 

Jmlgment  modified,  with  $10  costs  to  appellant. 


§  145  AN  AMBIGUITY  IN  THE  NEGOTIABLE  INSTRUMENTS 

LAW.* 

[23  Harvard  Law  Review,  603-607.1 

When  it  is  considered  how  carefully  the  Negotiable  Instruments 
Law  has  been  examined  by  critics,"'  and  how  long  the  practical 
working  of  the  act  has  been  tested,  it  may  seem  odd  to  discover  now 
an  ambiguity  in  a  section  of  the  statute  which  involves  a  question 
arising  every  week  in  the  business  of  every  large  bank.  But  such  a 
discovery  emphasizes  tlie  difficulty  under  which  the  draftsman  of  a 
statute  labors  in  attempting  to  foresee  all  questions  that  may  arise  and 
in  expressing  clearly  the  rule  which  he  washes  to  have  enacted. 

A  section  of  the  Negotiable  Instrumeuts  Law  which  has  recently 
been  found  to  be  either  ambiguous  or  to  mean  something  which 
bankers  have  not  suspected  until  recently  is  section  85.  This  section 
is  as  follows: 

"  Section  85.  Every  negotiable  instrument  is  payable  at  the  time 
fixed  therein  without  grace.  When  the  day  of  maturity  falls  upon 
Sunday,  or  a  holiday,  the  instrument  is  payable  on  the  next  succeed- 
ing business  day.  Instruments  falling  dve  on  Saturday  are  to  be 
presented  for  'payment  on  the  next  succeeding  business  day,  except 
that  instruments  payable  on  demand  may,  at  the  option  of  the  holder, 
be  presented  for  payment  before  twelve  o'clock  noon  on  Saturday 
when  that  entire  day  is  not  a  holiday."  ® 

The  words  in  the  section  which  have  been  italicised  are  those  to 
which  the  following  discussion  relates;  they  are  contained  in  the  draft 
as  recommended  by  the  Commissioners  of  Uniform  State  Laws,  and 
have  been  adopted  in  the  law  as  enacted  in  most  of  the  states.^ 

*  This  article  is  liv  Professor  Samuel  Williston  of  the  Harvard  Law  School. 
—  C. 

5  See  the  articles  by  Professor  Ames,  14  Harv.  L.  Rev.  241,  442,  and  the 
article  by  Mr.  McKeehan,  41  Amer.  Law  Reg.  N.  S.  437,  439,  501.  These 
articles  togetlir-r  with  defen'^f's  by  Judge  Brewster  on  the  points  criticized  are 
reprinted  in  Proffssor  Brannan's  work  on  the  Negotiable  Instruments  Law. 

6  This  section  in  nnnibered  as  section  145  in  the  New  York  Statute,  and 
in  Mr.  Crawford's  book  which  reprints  the  statute  as  enacted  in  New  York. 
It  is  enacted  in  the  Massachusetts  Revised  Laws  as  section  102  of  Chapter  73. 

7  In  a  few  states  changes  have  been  made.  Arizona,  Kentucky,  and  Wis- 
consin  omit    the   clause   altogether.      In    Colorado   the    following   words    have 


II.    2.]  AT    WHAT   TIME.  605 

It  has  been  the  practice  of  banks,  at  least  in  the  cities  of  New  York 
and  Boston,  since  the  enactment  of  the  Negotiable  Instruments  Law, 
to  present  on  the  following  Monday  all  notes  or  bills  whose  date  of 
maturity  falls  on  Srturday.  No  presentment  of  such  paper  has  been 
made,  customarily,  on  Saturday.  The  propriety  of  this  procedure  was 
called  in  question  in  a  case  which  arose  not  long  ago  in  Boston.  A 
large  issue  of  interest-bearing  notes  of  a  railroad  company  was  held  by 
a  trust  company.  By  their  terms  these  notes  matured  on  Saturday 
and  were  payable  at  a  specified  bank  in  Boston.  On  the  Saturday 
when  the  notes  matured  the  railroad  company  had  on  deposit  in  the 
bank,  where  the  notes  were  payable,  sufficient  funds  for  their  payment. 
The  notes  were  not  presented  until  the  following  Monday,  and  when 
presented  interest  was  demanded  to  the  day  of  presentment.  The  bank, 
however,  declined  to  pay  interest  for  the  interval  between  Saturday  and 
Monday. 

By  the  provisions  of  the  Negotiable  Instruments  Law,®  where  an  in- 
strument is  made  payable  at  a  bank  it  is  equivalent  to  an  order  to  the 
bank  to  pay  the  same  for  the  account  of  the  principal  debtor,  and  fur- 
ther, by  another  section," 

"  If  tlie  in.<trunient  is  by  its  terms  payable  at  a  special  place  and  he 
[the  person  primarily  liable]  is  able  and  willing  to  pay  it  there  at 
maturity,  such  ability  and  willingness  are  equivalent  to  a  tender  of 
payment  upon  his  part." 

It  was  claimed  by  the  bank  at  wliich  the  notes  in  question  were  pay- 
able that  the  notes  were  due  on  Saturday  and  that  the  presence  of 
funds  in  the  bank  where  the  notes  were  payable  operated  as  a  tender  of 
payment  and  therefore  stopped  the  running  of  interest.  The  large 
amount  of  the  notes  involved  made  the  question  of  interest  for  even 
two  days  one  of  consequence,  but  even  more  serious  cases  may  be  sup- 

heen  subHtituted :  "Instruments  falling  due  on  any  day,  in  any  place  where 
any  part  of  such  day  is  a  holiday,  are  to  be  presented  for  paynieiit  on  the 
next  Hiicceffjinf;  business  day."  In  New  York  the  year  after  the  eiiaelnient 
of  the  Nej,'r)tiab!e  In^tnirnentH  Law  the  words  "or  beeominp  payable"  were 
inserted  after  the  words  "  fallinf;  due."  This  chanpe  has  been  copied  in 
Kansas.  In  Massachusetts  this  clause  of  the  statute  as  orininally  passed  was 
identical  with  the  draft  recommended  by  the  Commissioners  on  rnifortn  State 
Laws,  but  the  commissioners  who  prepared  the  F?evised  Laws  of  Massachu- 
setts inserted  the  words  "or  payable"  after  the  words  "falling  due,"  and 
the  New  Hampshire  statute  has  followed  the  form  of  the  Massachusetts 
Reviwd  Laws.  The  insertion  of  the  worris  "becoming  payable,"  or  "or 
payal)le,"  seems  to  have  bt-en  made  on  the  assumption  that  tlie  words  "  fallinf^ 
due  "  meant  something  other  than  "  becoming  payabb-."  This  assumption 
Beems  unfounded.  —  See  Mr.  (rawfortl's  note  to  section  Mf)  of  bis  book  on 
th*>  Negotiable  Instruments   Law. 

"Section  87;  Crawford's  Nep.  lust.  Law,  sec.  117;  Mass.  Hev.  Laws.  c.  73, 
nee.   104. 

•  Section  70;  Crawford's  Nep.  Inst.  Law,  sec.  I.TO;  Mass.  Hev.  Uiws,  c.  73, 
see.  87. 


.".OG  l-KKSMNI'MKNT    l"OK    I'AVMKNT.  [ART.    VII. 

posed  involving  llio  same  question.  A  note  maturing  on  Saturday 
may  be  lield  by  a  hank  for  colKHliou  for  a  rorri'spoiuleiit.  In  accord- 
anee  with  the  (ustom  whidi  has  l)ccn  prcvaU'iit  the  collecting  bank 
would  make  no  presentment  until  iMontlay.  U  may  be  supposed  that 
on  Saturday  the  note  would  have  been  paid  had  presentment  been 
made,  but  that  owing  to  sui)ervening  bankruptcy,  or  other  cause,  the 
note  is  dishonored  when  ])n'sented  on  Monday.  If  the  note  was  legally 
due  on  Saturday  the  collecting  baid<  has  been  guilty  of  negligence  and 
is  liable  to  its  correspondeid.  The  same  (piestion  may  be  raised  in 
deternnning  when  a  right  to  interest  accrues  upon  a  note  which 
matures  on  Saturday,  and  which  does  not  bear  interest  according  to  its 
terms. 

The  case  of  the  railroad  notes  alluded  to  above  was  submitted  to  the 
counsel  both  of  the  railroad  and  the  trust  company.    The  lawyers  con- 
sulted agreed  in  the  opinion  that  the  trust  company  was  not  entitled  to 
interest  after  the  Saturday  on  wdiich  the  notes  matured.     In  supfwrt 
of  this  conclusion  it  was  pointed  out  that  by  the  terms  of  the  Nego- 
tiable Instruments  Law^  ^"  presentment  for  payment  is  not  necessary  to 
charge  the  maker,  and  that  the  provisions  in  regard  to  presentment 
seem  to  relate  to  the  steps  necessary  for  charging  indorsers  and  other 
persons  secondarily  lialde.     Furthermore,  if  it  had  been   the  intent 
of  the  statute  to  make  a  note  maturing  on  Saturday  for  all  purposes 
like  a  note  maturing  on  Monday,  the  second  sentence  of  section  85 
would  jirobably  have  been  framed  so  as  to  read  "  when  the  day  of 
maturity  falls  upon  Saturday  or  Sunday,  or  a  holiday,  the  instrument 
is  payable  on  the  next  succeeding  business  day."     The  contrast  be- 
tween the  words  "when  the  day  of  matiirity  falls  upon  Sunday  or 
a  holiday"  as  used  in  the  second  sentence  of  the  section  with  the 
words  in  the  third  sentence,  "  Instruments  jaUinr]  due  on  Saturday," 
is  a  strong  indication  that  the  words  "falling  due"  mean  something 
other  than  having  the  day  of  maturity   fall    upon    Saturday.     That 
is,  the  words  do  not  mean  as  the  words  in  the  |)receding  sentence  do, 
falling   due   according   to   the   literal    tenor   of   the    instrument,    but 
according  to  its  legal  effect.     A  slight  additional  argument  also  may^ 
be  built  upon  the  failure  to  mention  Saturday  in  a  subsequent  section 
of  the  Act  which  provides  that  "  Where  the  day,  or  the  last  day,  for 
doing  any  act   herein   required   or  permitted   to  be   done   falls  on   a 
Sunday  or  on  a  holiday,  the  act  may  be  done  on  the  next  succeeding 
secular  or  business  day."  ' 

On  the  other  hand   it  was  urged  on  behalf  of  the  trust  company 
that  the  uniform  custom  of  banks,  since  the  enactment  of  the  Nego- 


mSpption  70;    Crawford's  Ncjj.  Inst.  Law,  soc.  130;    Mass.  Rev.  Laws,  c.  73, 

Bee.  87. 

1  Spction  194;    Crawford's  Neg.  Inst.  Law,  .sec.  5;    Mass.  Rev.  Laws,  c.  73, 

sec.  210. 


II.    2.]  AT    WHAT   TIME.  507 

liable  Instruments  Law,  liad  been  to  treat  instruments  maturing  on 
Saturday  as  if  thoy  were  payable  on  ]\ron(]ay.  Tho  anomaly  was  also 
strongly  urged  of  regarding  a  note  as  dislionored  by  tlie  maker  so  far 
as  his  own  liability  was  concerned  on  Saturday,  when,  so  far  as  the 
liabilities  of  parties  secondarily  liable  were  concerned,  the  maker  had 
not  dishonored  the  note,  and  could  not  dishonor  it  until  Monday.  An 
action  brought  against  the  maker  on  ^londay  morning  would  tlien  not 
be  premature,  thougli  so  far  as  the  indorsers  were  concerned  the  maker 
had  not  yet  dishonored  the  note.  The  law  merchant  prior  to  the 
Negotiable  Instruments  Law  certainly  contained  no  precedent  war- 
ranting such  a  result.  The  practical  inconvenience  which  would  follow 
from  the  construction  given  by  counsel  to  the  statute  was  also  noticed. 
If  that  construction  is  sound  every  instrument  falling  due  on  Satur- 
day and  bearing  indorsements  must  be  presented  on  Monday  in  order  to 
charge  the  indorsers,  but  in  order  to  start  interest  running,  and  in  or- 
der to  make  sure  that  no  chance  of  securing  payment  is  lost,  present- 
ment must  also  be  made  on  Saturday,  if  the  instrument  is  by  its  terms 
payable  at  a  particular  place. 

Though  the  question  is  not  fr^^'c  from  doubt,  since  clear  language 
must  bo  required  to  justify  a  result  which  is  certainly  an  anoiunly 
in  the  law  of  negotiable  paper,  yet  on  the  whole  the  construction 
given  by  the  eminent  counsel  consulted  in  the  matter  seems  sound. 
The  opinion  of  Mr.  Crawford  is  in  conformity  with  this  view,  altliough 
he  does  not  seem  to  Imvc  perceived  the  anoiii;ilous  n^snlt  of  not  only 
authorizing  but  rcfpiiring  pres<mtment  for  payment  in  order  to  charge 
indorsers  on  a  day  other  than  that  on  which  the  instrument  was 
legally  due.' 

The  legal  situation  in  regard  to  the  matter  caused  such  uneasiness 
to  certain  bankers  in  I^oston  tlint  llie  question  was  presented  by  (he 
Clearing  House  Commillee  to  their  eoiinse],  who  gave  the  following 
opinion  : 

"The  language  of  the  statute  is  not  clear,  and  until  it  has  been 
construed  by  the;  Supreme  Court  of  this  Coininonwealtli  we  think 
that  the  only  safe  course  for  a  bank  to  pursue,  which  hoMs  a  note 
falling  due  on  Saturday,  is  to  present  it  for  payinent  on  Saturday, 
80  as  to  protect  itself  from  any  claim  for  negligence  by  the  holder, 
if  the  bank  at  which  it  is  payable  Bhould  have  funds  appli<  able  to  its 
paynient  on  that  day.  If  payment  is  refused  on  Saturday,  the  col- 
lecting bank  shoidd  [)rcserit  it  airain  for  payment  on  Mondav  so  ns  to 
charge  the  indorsers,  wlio  are  entitled  to  a  presentment  on  that  day.'' 

In  consequence  f)f  this  opinion  the  Clearing  House  Cf>mmitteo 
instructed  their  counsel  to  prepare  an  amendment  to  the  law  with 
a  view  to  make  it  both  free  from  ambiguity  and  in  conformity  with 
banking  custom.      Aceordinirlv   in   the   jtresent    session   of  the   Massa- 


'  Crawford's  Neg.  Iii>l.  Law,  .'id.  ci!.,  |i.   1  Id,  t-vc.  II,').  note   (a). 


508  PRESENTMKNT    FOU    PAYMENT.  [ART.    VII. 

rluifiettfi  LepiBliituro  the  section  undor  discussion  lias  been  amended 
60  tluit  tlic  portion  ivlntinu'  to  instruments  I'nllinir  due  on  Saturday 
reads  as  follows : 

"When  the  day  of  niatiirily  falls  ujion  Saturday,  Sunday,  or  a 
holiday,  the  instrument  is  payable  on  the  next  succeeding  business 
day  whirh  is  not  a  Saturday.  Instruments  payable  on  demand  may 
at  the  option  of  the  holder  be  presented  for  payment  before  12  o'clock- 
noon  on  Saturday  wiien  that  entire  day  is  not  a  holiday;  provided, 
liowever.  that  no  person  receivinij  any  check,  draft,  bill  of  exchange, 
or  promissory  note  payalilc  on  demand  shall  be  deemed  guilty  of  any 
neglect  or  omission  of  duty  or  incur  any  liability  for  not  presenting 
for  payment  or  acceptance  or  collection  such  check,  draft,  bill  of 
exchange  or  promissory  note  on  a  Saturday;  provided,  also,  that  the 
same  sliall  be  duly  presented  for  payment  or  acceptance  or  collection 
on  the  next  succeeding  business  day."  ^ 


3.  At  the  Proper  Place. 


§  133  BROOKS  V.  HIGBY. 

11  Hun  (N.  Y.  Sup.  Ct.)  235.— 1877. 

Action  by  holder  against  indorsers.  The  bill  vras  drawn  on  N.  F. 
Mills,  114  South  Main  street,  St.  Louis,  and  by  him  accepted.  The 
notary's  certificate  stated  that  the  bill  was  presented  "at  the  place  of 
business  of  N.  F.  Mills,  St.  Louis."  It  appeared  in  evidence  that  Mills 
had  two  places  of  business  in  St.  Louis.  Defendant  moved  for  a  non- 
suit, which  was  denied.     Judgment  for  plaintiff. 

Smith,  J.  —  As  the  draft  was  addressed  to  the  drawee  at  a  par- 
ticular place  in  the  city  where  he  resided,  and  was  thus  accepted  by 
him,  the  particular  place  thus  designated  was  the  place  of  payment, 
and  a  due  presentment  and  demand  of  payment  at  that  place  was 
necessary  in  order  to  charge  the  indorsers.  (Story  on  Prom.  Notes, 
§  227  and  note  3,  and  cases  there  cited.)  The  certificate  of  the 
notary  stated  merely  that  the  draft  was  presented  and  payment  de- 
manded "at  the  place  of  business"  of  the  acceptor,  without  specify- 
ing the  place.  As  it  appeared  that  the  acceptor  had  two  places  of 
business  in  St.  Louis,  the  certificate  furnished  no  evidence  whatever 
that  the  presentment  and  demand  were  at  the  place  where  the  draft 
was  payable.  The  proof  was  fatally  defective,  and  the  motion  for  a 
nonsuit  should  have  been  granted. 

The  respondent's  counsel  proposed  to  supply  the  defect  on  the  ar- 
gument at  banc  by  the  production  of  a  fresh  certificate  of  the  notary 
showing  that  the  draft  was  presented  at  No.  114  South  Main  street. 

■  Chapter  417. 


II     3.]  AT   WHAT   PLACE.  509 

The  rule  allowing  evidence  of  a  fact  imperfectly  proved  at  the  trial 
to  be  exliibited  at  bar,  in  opposition  to  a  motion  for  a  new  trial,  is,  in 
general,  confined  to  records  or  documentary  evidence  which  proves  it- 
self, and  on  which  no  question  can  arise  in  the  cause,  except  such  as 
is  apparent  on  its  face.  {BanJc  of  Cliarlcsloii  v.  Einerich,  2  Sandf. 
718;  Dresser  v.  Bronls.  3  Barh.  429;  Burt  v.  Place,  4  Wend.  591; 
Armstrong  v.  Pcrcij,  ')  Id.  5"");  Ritchie  v.  Putnam,  13  Id.  524;  Hugh 
V.  Wilson,  2  Johns.  46).  Under  the  statute  of  1833,  a  notarial  cer- 
tificate is  but  presumptive  evidence,  &nd  may  be  explained  or  con- 
tradicted by  the  party  against  whom  it  is  produced.  The  new  cer- 
tificate offered  in  this  case  cannot  be  received  at  bar  to  conclude  the 
defendants;  if  it  is  to  be  used  against  them  they  are  entitled  to  an  op- 
portunity to  meet  it  at  the  trial. 

We  are  also  of  opinion  that  the  evidence  required  the  submission 
of  the  question  of  usury  to  the  jury. 

Judgment  and  order  should  be  reversed  and  new  trial  ordered, 
costs  to  abide  event. 

Present  —  Mullen,  P.  J.,  Talcott  and  Smith,  JJ. 

Judgment  and  order  reversed  and  new  trial  ordered,  costs  to  abide 
event.* 

*  A  bill  is  flrawn,  accepted,  and  indorsed  in  Kentucky,  wlicre  all  tlie  parties 
reside,  bnt  is  addressed  "To  C,  New  York,  N.  Y."  The  holder  knows  these 
facts.  The  bill  is  in  New  ^'ork  on  the  day  of  maturity.  Ildrl :  Presentment 
was  sufficient.  If  the  instrument  is  payable  in  A.,  and  the  residence  of  the 
maker  is  in  B.,  presentment  should  tn-  in  A.  Cox  v.  yational  Hank,  100  U.  S. 
704.  — H. 

[In  Iron  find  Mfg.  Co.  v.  fiackin.  120  App.  Div.  (N.  Y.)  5!^5.  a  note  was 
made  payable  at  the  "  Jenkins  Triist  Comfinny,  Bntli  Beach  Branch.  Brooklyn." 
The  trust  company  maintained  principal  offices  in  the  business  section  of 
Brooklyn,  N.  Y.,  and  plaiiitifT  claimed  that  presentment  at  the  princijial  offices 
of  the  company  on  the  rlate  of  maturity  was  sufficient.  TIooktr,  J.,  said: 
"Section  1.3.3  of  the  Nefjofiable  Instruments  Law  .  .  .  provides:  'Present- 
ment for  payment  is  made  at  the  proper  place:  (1)  Where  a  place  of  pay- 
ment is  specified  in  the  instrument  and  it  is  there  presented.'  It  must  be 
observed  in  reference  to  this  statute  that  it  mentions  a  '  [)lace  of  payment," 
and  a  f)lace  does  not  mean  an  inrliviflual,  a  corporation  or  institution.  The 
Bath  lieach  Branch  of  the  .lenkins  Trust  Company,  as  those  words  were  tised 
in  the  instrument,  referred  tf)  the  place  of  payment,  and  not  the  corporation, 
and  the  place  was  the  spot  where  the  Bath  B<'ach  branch  of  the  trust  company 
was  accustomefl   to  transact   its  business.  The  place   where   the   l?ath 

Beach    branch  did    bu«iness    was    not    the    place    where   the    principal 

offices  of  the  trust  company,  at  which  the  note  was  presented  on  the  due  date, 
were  maintained.  It,  ther<'fore,  was  not  presented  at  the  place  ilesif,'nated 
for  its  payment,  and  there  was  no  Hufficjcnt  preseritnient  to  charge  \r\- 
dorsers."  —  C] 


510  PRESENTMENT    FOK    PAYMI:NT.  [  AUT.    VII. 

5  133  CTLPTN  V.  SAVAGE. 

60  Miscellaneous  (N.  Y.  Sup.  Ct.,  Erie  Co.  Trial  T.)  G05.  —  1908. 

Wheeler,  J.  —  This  action  is  brought  against  tlio  indorser  of  a 
promissory  note  made  by  his  son,  Walter  Savage,  and  by  its  terms 
made  payable  at  the  residence  of  the  maker,  No.  507  Prosj)ect  avenue, 
in  the  city  of  Bull'alo,  N.  Y.  The  note  is  held  by  the  indorsee  of  tlie 
original  payee  and  was  forwarded  by  him  for  collection  to  the  Co- 
lumbia National  Bank  of  Buffalo. 

On  the  day  of  the  maturity  of  the  note  a  clerk  in  the  employ  of 
the  bank  called  up  the  maker  on  the  telcplione.  The  maker  responded 
to  the  call  at  his  house.  The  clerk  then  stated  to  the  maker  that  the 
bank  held  the  note  for  collection,  described  it,  and  asked  the  maker 
what  he  proposed  doing  with  it.  The  maker  replied,  in  substance, 
that  he  could  not  pay  it;  that  he  had  an  understanding  or  agreement 
that  the  note  should  be  renewed,  and  if  the  bank  would  return  the 
note  it  would  be  taken  care  of  at  the  other  end  of  the  line.  The  clerk 
replied  that  they  knew  nothing  about  such  an  arrangement,  and  then 
called  to  the  telephone  the  assistant  cashier  of  the  bank,  who  in  turn 
talked  with  the  maker.  The  maker  repeated  in  substance  what  had 
been  said  to  the  clerk  and  was  informed  by  the  cashier  that  the  bank 
would,  under  the  circumstances,  have  to  protest  the  note.  No  other 
presentation  at  No.  507  Prospect  avenue  was  made,  but  the  note 
was  protested,  and  notice  of  the  protest  mailed  to  the  indorser,  this 
defendant. 

The  defendant  contends  that  the  necessary  steps  were  not  taken  to 
charge  him  as  indorser,  and  that  the  failure  to  present  the  note  at 
its  place  of  payment  discharged  him  from  liability. 

The  question  is,  therefore,  fairly  presented  for  determination 
whether  the  demand  over  the  telephone  was  a  sufficient  presentation, 
and  whether  the  bank  w^as_^ relieved  of  the  obligation,  under  the  facts, 
of  actually  going  to  the  maker's  house  and  making  a  further  presen- 
tation and  demand  there.  The  researches  of  counsel  and  court  are 
unable  to  discover  any  decided  case  directly  in  point.  The  case  is  novel 
in  its  features,  and  its  decision  of  importance  both  to  the  parties  and 
to  the  banking  community. 

As  suggested,  two  lines  of  inquiry  present  themselves:  First,  was 
there  a  presentation  at  No.  507  Prospect  avenue,  and,  if  not,  was  its 
presentntion  excused  so  as  to  still  charge  the  indorser?  (After  quot- 
ing sections  132,  133,  134,  142,  and  144  of  the  New  York  Negotiable 
Instruments  Law,  the  court  continues :] 

It  was  the  evident  purpose  and  intent  of  the  framers  of  the  statute 
to  incorporate  into  the  statute  the  provisions  of  the  common  law,  al- 
though there  follows  the  usual  embarrassment  which  all  codifiers  en- 
counter in  framing  a  statute  to  meet  all  possible  cases. 


11-    3.]  AT    WHAT    PLACE.  511 

Was  the  note  in  this  case  presented  at  No.  507  Prospect  avenue,  the 
place  of  payment  named  in  the  note,  within  the  reasonable  meaning 
of  the  statute?  We  think  it  was.  At  tlie  time  of  the  conversation 
between  the  maker  and  the  bank  officials  over  the  telephone,  the  maker 
was  actually  at  the  place  of  payment.  The  talk  was  immediately  be- 
tween him  and  the  holder  of  the  note.  For  every  purpose  of  demand 
and  refusal,  it  was  just  as  effective  as  though  the  conversation  had 
taken  place  between  the  parties  when  all  were  within  the  walls  of  the 
house  itself.  The  maker  knew  perfectly  well  that  a  demand  was  then 
and  there  made  upon  him  for  the  payment  of  the  note  in  question, 
and  he  was  then  and  there  called  upon  to  act.  He  did  act,  and  treated 
it  as  a  demand  for  payment,  and  declined  to  pay.  He  did  not  ques- 
tion the  mode  or  manner  of  presentment,  but  declared  his  inability 
to  meet  the  note,  and  made  claim  to  some  arrangement  for  its  re- 
newal. Of  course,  the  maker  had  the  right  to  have  insisted  on  the 
exhibition  of  the  note  to  him  as  evidence  of  the  bank's  authority  to 
collect.  That  right  was  a  right,  however,  personal  to  the  maker, 
and,  by  not  demanding  its  production,  he  w-aived  it.  H,  on  demand 
of  payment,  e.xhiljition  of  commercial  paper  is  not  asked,  and  a  party 
to  whom  demand  is  made  declines  to  pay  on  other  grounds,  a  mere 
formal  presentation  by  actual  exhibition  of  the  paper  will  be  con- 
sidered waived.  Daniel  Neg.  Inst.  ^  fi54;  Loci-wood  v.  Crawford,  18 
Conn.  361;  King  v.  CrowcII,  fil  Me.  211;  Porter  v.  Thorn,  10  App. 
Div.  34;  affirmed,  167  N.  Y.  584. 

It  seems  to  the  court  that  all  the  essentials  of  a  good  presentation 
wore  met.  Tt  was  made  on  the  day  of  the  maturity  of  the  note. 
The  note  was  described  to  the  maker,  in  a  conversation  with  the  maker 
at  tlie  place  of  [)ayment,  payment  was  asked  and  declined.  So  far  as 
the  maker  was  concerned  all  that  he  required  was  done.  The  indorser 
could  not  well  demand  more  for  his  own  actual  protection.  All  that 
remains  to  the  indorser  is  tlie  purely  tecbnical  ground  of  a  failure  to 
produce  tlie  note  itself  at  tlie  house,  -"iO?  Prospect  avenue,  wliicli  would 
have  resultcfl  in  the  same  refusal  of  payment  mnde  over  the  telephone. 

'I'lie  use  of  tlie  modern  invention  of  I  lie  Icleplione  is  recognized 
by  tlie  courts.  Commercial  transactions  and  conversations  had  over 
the  teleplione  have  been  recognized  as  of  the  same  binding  force  aa 
where  the  parties  talked  face  to  face,  fllohr  I'rinliiiff  Co.  v.  SfahJ, 
23  Mo.  Ajip.  ir.l,  I.^.S;  Wnlfr  V.  Mo.  I'nnf,r  I!.  /,'.  Co.,  \)1  Mo.  173; 
Rock  Islnvd  P.  /.'.  Co.  V.  Pollrr,  :U\  111.  .\|.i).  ."illO  ;  C/»r.v/  v.  /lainnhnl 
&  St.  J.  n.  li.  Co..  77  Mo.  App.  ^oH;  Thompson  tf-  11'.  Co.  v.  AppJehy, 
5  Kans.  Ap|).  fiHO ;  Murphy  v.  Jnrk,  1  12  N.  Y.  215;  Draring  v.  Shuin- 
pik,  67  Minn.  .TIM. 

The  telephone  is  simply  an  instrument  by  wliicli  two  persons  may 
talk  directly  to  each  other.  Suppose  the  bolder  of  a  note  should  call 
to  the  maker  from  across  a  street  as  the  maker  stood  in  his  doorway 
and  notify  him  that  he  had  his  note  and  ask  payment.  Would  not  such 


^\2  PRESENTMENT    FOU    PAYMKNT,  ( AUT.    Vlli 

a  (leniand  bo  deoinod  in  huv  a  proper  presentment,  although  the  street 
separated  the  person  holding  the  note  and  the  actual  place  of  pay- 
ment ?  Can  it  make  any  substantial  difference  because  the  person 
holding  tiie  note  happens  to  be  some  blocks  away,  provided  he  is  able 
to  reach  the  maker  over  the  telephone  and  talk  directly  to  him  in  that 
way?  The  law  simply  requires  substantial  compliance  in  reference 
to  proper  presentment,  and  will  not  strain  to  fine  grounds  for  releas- 
ing an  indorser,  where  there  has  been  such  a  substantial  compliance, 
and  any  omission  to  observe  the  more  technical  rules  does  not  work 
to  the  prejudice  of  the  indorser. 

Actual  and  formal  presentation  of  notes  has  been  held  unnecessary 
to  charge  the  indorser  under  many  varying  circumstances;  as  where 
the  maker  dies  before  the  maturity  of  the  note,  and  no  representative 
of  his  estate  has  been  appointed  (Daniel,  Com.  Inst.  §  1111),  or  where 
the  maker  has  absconded  (Id.,  §  1125),  or  where  the  maker  has  re- 
moved from  the  state  and  taken  up  his  domicile  in  another  state  or 
country.  Id.,  §  1145;  Foster  v.  Julien,  24  N.  Y.  28;  Eaton  v.  Mc- 
Mahon,  42  Wise.  487;  Whitney  v.  Allen,  56  Iowa,  224;  McGruder  v. 
Bank  of  Washington,  9  Wheat.  598. 

It  has  been  held  a  sufficient  demand  and  refusal  to  constitute  a 
dishonor  of  a  note  if  the  maker,  on  the  day  it  is  due,  calls  on  the  holder 
where  the  note  is,  and  declares  his  inability  to  pay,  and  desires  the 
holder  to  give  notice  to  the  indorser.  Gilbert  v.  Dennis,  3  Mete. 
(Mass.)  495. 

So,  too,  in  an  action  against  an  indorser,  it  appeared  the  holder  met 
the  maker  of  a  note  on  the  street  and  was  refused  payment,  making  no 
objection  to  the  place  of  demand,  and  the  court  said :  "  If  demand 
be  made  upon  the  maker  elsewhere  than  the  place  appointed,  and  no 
objection  be  made  at  the  time,  it  will  be  deemed  a  waiver  of  any  future 
demand."    King  v.  Crowell,  61  Me.  244.    *    *    * 

The  weight  of  authority,  therefore,  seems  to  be  that  the  law  is  not 
over  exacting  as  to  the  mode  or  method  of  presentation,  so  long  as  an 
opportunity  is  given  the  maker  to  pay  the  note  or  refuse  its  payment. 

For  these  reasons  we  think  the  presentation  made  in  this  case, 
although  over  the  telephone,  met  the  substantial  requirements  of  the 
law.    *    *    * 

Judgment  fo/  plaintiff. 


§133  BARNES  v.  VAUGHAN. 

6  Rhode  Island,  259.  —  1859. 

Action  by  holder  against  indorser.  At  the  trial  before  the  court, 
to  whom  the  case  was  submitted  in  fact  and  law,  under  the  general 
issue,  it  appeared  that  the  notes,  which  were  not  made  payable  at  any 
particular  place,  had  been  left  by  the  plaintiff  at  the  Mount  Vernon 


II.    3.]  AT    WHAT    PLACE.  513 

Bank,  in  Foster,  for  collection;  and  that  the  only  demand  of  payment 
made  upon  Northup,  the  maker,  was  by  the  usual  printed  bank  notice,, 
mailed  to  him  by  the  cashier  of  the  bank,  and  directed  to  him  at. 
Providence,  where  he  lived,  in  the  early  part  of  the  months  in  whichi 
they  respectively  fell  due,  although  at  what  time  precisely,  the  cashier 
of  the  bank  could  not  recollect.  Due  notice  of  non-payment  by  the 
maker  was  proved  to  have  been  given  to  the  defendant. 

BoswoRTTi,  J.  —  The  defense  to  this  suit  is,  that  no  legal  and 
proper  demand  was  made  on  the  maker  of  the  note ;  and  that  therefore 
the  indorser,  who  is  here  sued,  is  discharged.  The  rule  of  the  common 
law  is,  that  in  order  to  charge  the  indorser,  demand  must  be  made  on 
the  maker  for  payment  on  the  very  day  on  which  the  note  becomes  due. 
In  case  the  note  on  its  face  is  made  payable  at  a  particular  place,  as 
at  a  bank  named,  it  is  necessary,  and  only  necessary,  to  make  demand 
at  such  place ;  but  if  no  place  of  payment  is  named  in  the  note  at 
which  the  note  is  payable,  it  is  necessary  to  present  the  note  to  the 
maker  personally,  or  at  his  place  of  abode  or  business,  before  the  in- 
dorser can  be  made  chargeable.  In  this  case,  no  place  of  payment  was 
mentioned  in  the  notes.  The  notes  were  left  at  the  Blount  Vernon 
Bank  for  collection ;  and  it  is  agreed,  that  the  maker  had  notice  before 
the  day  of  payment  that  they  were  there  for  that  purpose.  This 
notice  could  not  avail  to  make  the  notes  payable  at  said  bank.  The 
maker  had  not  by  the  terms  of  his  contract  agreed  to  pay  the  notes  at 
that  bank,  and  a  demand  there  was  no  demand  ujion  him.  Tt  was 
necessary  that  demand  should  be  made  upon  him  personally,  or  at 
his  dwelling,  or  place  of  business,  on  the  last  day  of  grace.  No  such 
demand  was  made,  and  the  indorser,  therefore,  was  never  charged. " 

Judgment  must,  therefore,  be  rendered  for  the  defendant,  for  his 
costs.  • 


§  133  BANK  OF  ORLEANS  r.  WTTITTEMORE. 

12  r.RAY  (Mass.)  409.  — IHSn. 

Action  by  holder  against  indorser.  Note  made  and  dated  in  Bos- 
ton, but  maker's  residence  and  i)la('e  of  business  tlicii  and  ever  since 
in  North  Carolina.  This  was  known  to  holder's  agent  at  maturity. 
No  demand  on  maker  in  North  Carolina. 

n  Accord:     Bnylrun  v.  Hnrri/t.   124  Mo.   App.  234.  —  C. 

"The  nnomiil'iiiM  niHtom  pr«'vnil.s  in  MnsHnchiispJta  nni]  Miiino  of  ninkintr  «iich 
a  fif-mand  Hiillicicnt.  MrrhanicH'  Itnnk  v.  Mrrrhnntfi'  Hank,  (5  Mr-t.  24;  \Vnrrrn 
Hank  v.  Parker,  «  (Jray.  221  ;  (laWi(ihir  v.  Robrrts,  11  Mo.  4H!);  .\fainr  Hank  v 
f<milh.  18  Mf.  00.  So  in  New  Knplfind  thoro  soonis  to  he  n  lornl  oii-fom  of 
flrawinir  noten  "  pnyahip  at  any  bank  "  in  a  pivfn  rity.  nn<I  in  sucli  rasp  it  la 
Hufficipnt  that  thf  instnimcnt  in  at  any  hank  in  the  plact"  named  on  the  day  of 
maturity.  Maiden  Hank  v.  Haldwin,  l.T  fSray,  l.')4;  l.nui/lri/  v.  Palinrr.  .10  Me. 
407;  Jarknon  v  Pnrkrr.  H  Tnnn.  .142.  —  H.  tOn  this  point  see  note  in  13; 
L.  N.  R.  at  p.  305. —  C.l 

RBOUT.   INBTHUMRNT8  —  83 


514  l»UKSK\rMKN'l"    Foi;    I'AVMKNT.  [aUT.    VII. 

Mktoai.f,  J.  [AfttT  sliUiiijx  the  fiuts.]  —On  these  facts  the  ques- 
tion is,  whether  the  ilei'enchints  are  liable  as  indorsers.  If  they  are, 
it  is  not  because  seasonable  demand  was  made  on  the  promisor  and 
seasonable  notice  of  non-payment  given  to  them.  The  note  fell  due 
on  Saturday,  May  iUl  —  the  last  day  of  grace  being  Sunday  —  and 
no  demand  was  made  on  tlie  jtromisor  until  nine  days  afterwards. 
This  delay  discharged  the  defendants  from  their  liability  to  the  plain- 
tiffs unless  the  fact  that  the  promisor  always  resided  in  North  Caro- 
lina excused  the  holders  from  making  personal  demand  on  him,  or 
from  using  due  etforts  to  make  such  demand.  The  plaintiffs  rely 
on  this  fact  to  sustain  their  action,  and  cite  the  decision  in  Smith  v. 
Fhilbrick  (10  Gray,  252),  as  conclusive  in  their  favor.  That  was  an 
action  by  an  indorser  against  a  prior  indorser  of  a  note  made  in  Bos- 
ton by  one  whose  only  residence  and  place  of  business  were  in  Texas, 
and  on  whom  no  demand  was  made;  and  it  was  decided  that  no  de- 
mand on  him  was  necessary  to  charge  the  defendant.  The  court  said 
there  was  no  evidence  to  show  whether  the  plaintiff,  or  any  of  the  subse- 
quent liolders  of  the  note,  knew  where  the  promisor's  residence  was; 
that  if  bis  residence  had  l)een  known  to  the  holder,  at  the  maturity  of 
the  note,  it  might  perhaps  have  been  incumbent  on  him  to  forward 
it  to  Texas  for  presentment,  as  was  held  in  Taylor  v.  Hnyder  (3  Denio, 
145). 

In  the  case  before  us,  the  plaintiff's  agent,  whom  they  employed  to 
purfhasp  and  also  to  collect  the  note,  knew  where  Moore's  residence 
was,  and  the  legal  effect  of  his  knowledge  of  that  fact  is  the  same  as 
would  have  been  the  effect  of  their  knowledge  of  it.  Notice  to  an 
agent,  whilst  he  is  concerned  for  the  principal,  is  notice  to  the  prin- 
cipal himself.  And  we  are  of  opinion,  as  intimated  in  Smith  v.  Phil- 
hrich,  that  by  reason  of  the  plaintiff's  knowledge  (tlirough  their  agent) 
of  the  place  of  Moore's  residence,  a  demand  on  him  there,  and  sea  • 
sonable  notice  of  his  default,  were  prerequisites  to  the  defendants' 
liability  as  indorsers.  We  think  this  case  is  within  the  general  and 
familiar  rule  which  applies  to  the  holders  of  indorsed  notes,  and  not 
an  exception  to  that  rule. 

When  a  resident  in  the  state,  after  giving  a  note,  removes  from  the 
state  and  takes  up  a  residence  out  of  the  state,  it  has  been  repeatedly 
decided  that  it  is  not  necessary,  in  order  to  charge  an  indorser  of  the 
note,  to  demand  payment  of  the  promisor  at  his  new  residence.''  This 
exception  to  the  general  rule  which  requires  demand  on  the  promisor, 
and  notice  to  the  indorser,  seems  to  be  established.  But  we  see  no 
sufficient  reason  for  taking  the  present  case  out  of  that  rule.  And 
we  hold,  that  where  the  maker  of  a  note,  when  it  is  made  and  indorsed, 
has  a  known  residence  out  of  the  state,  which  residence  remains  un- 
changed at  the  maturity  of  the  note,  demand  must  be  made  on  him, 

1  M'Oruder  v.  Bank,  9  Wheat.  (U.  S.)  598.  — H. 


II.    3.]  AT   WHAT    PLACE.  515 

or  due  diligence  used  for  that  purpose,  and  notice  of  non-payment 
given  to  tlie  indorser  before  the  indorser  can  be  charged.  So -it  waa 
decided  by  the  C'ourt  of  Appeals  in  New  York,  in  Taylor  v.  Snyder, 
before  referred  to,  and  in  Spies  v.  Gilmore  (1  Comst.  321).  In  this 
last  case,  Bronson,  J.,  said : — 

"  The  only  excuse  which  has  been  offered  for  not  making  demand  is, 
that  it  would  have  been  inconvenient  to  go  or  send  to  Matanioras  for 
the  purpose.  It  is  often  inconvenient  to  present  the  note  for  payment, 
when  the  maker  and  holder  both  reside  in  the  same  state;  and  yet, 
when  the  maker  has  a  known  place  of  residence,  and  there  has  been 
no  change  of  circumstances  after  the  giving  of  the  note,  mere  trouble 
or  inconvenience  to  the  holder  has  never  been  held  a  good  excuse  for 
omitting  demand.  And  this  is  so,  however  wide  asunder  the  maker 
and  holder  may  live.  If  the  plairitiff  wished  to  avoid  the  inconvenience 
of  sending  to  Matamoras,  he  should  have  made  the  note  payable  in 
New  York,  or  got  an  indorsement  with  a  waiver  of  demand.  He  has 
no  right  to  change  the  contract  which  the  indorser  made,  for  the  pur- 
pose of  promoting  his  own  convenience." 

Judgment  for  the  defendants." 


§  133  PARKER  v.  KELLOGG. 

158  Massachusetts,  90.  —  1893. 

Action  by  holder  against  indorser.  Defense,  want  of  demand  on 
maker.  The  notes  s])ccified  no  place  of  payment.  Presentment  was 
made  to  the  maker  pcrsoiinlly  at  the  office  of  the  indorser. 

Field,  C  ,i.  *  *  *  Whether  the  defendant's  office  was  Hart's 
place  of  business  or  not,  if  the  plainfiff  made  a  demand  u|)on  Hart 
personally  at  this  office  during  business  hours  of  the  last  day  of  grace, 
and  produced  the  notes,  and  Hart  said  that  he  was  unable  to  pay  them, 
and  made  no  objociioti  fo  the  plaice  of  the  denuind,  this  would  be  a 
sufficient  dcnumd.  and  fo  this  effect  were  the  instructions  given  by 
the  court.  (h'iin/  v.  Croircll,  (II  Miiiiic,  '31!;  1  I>aiil.  Neg.  Insts., 
§  G3H,  (1th  F.d.l). 

l']\('('|)f  ions  overruled. " 


fi  Taylor  v.  Hnydcr,  .3  Donio  <  N.  Y.)  145  —  1846.  Note  dntod  Troy.  N.  Y. 
Maker  then  nnd  aftcr\v!ii<N  n-Hiilcrl  in  Floriilii.  Ici  flic  kiiowlcfl^'c  of  the  first 
holder  nnd  of  the  xiihHeciiir'nt  indnri<ee  ( filainfilf) .  rresentnicnt  (nof  por.sonal 
or  at  maker's  odlrc  or  rewidcnce)  is  made  in  Troy.  Hi  hi.  Present  nient  not 
sufficient.  "  Wlif-re  no  elinnffe  has  taken  plaee  in  the  residence  of  ihi-  maker, 
between  the  making  of  the  note  and  tlie  time  of  ifs  payminf,  ttie  intervention 
of  n  state  line  does  not  dispense  with  the  nepf-ssify  of  making;  due  demand  of 
payment."  —  11. 

0  See  Sussex  Hank  v.  Haldicin,  17  M.  J.  1-..  487,  ante,  p.  480.  —  II. 


;")16  PRESKN'TMKNT    K()U    I'AVMKNT.  [ART.    VII. 

4.    To    'I'llK     rUOPKK     I*KI!SON. 

§  132  STINSON  V.  LEE. 

68  Mississippi,  113.  —  1890. 

Action  by  holdor  a^niiist  iiidorsor.  Demurrer  to  declaration  sub- 
tained.     PlaintilVs  appeal. 

Cooper,  J.,  delivered  the  opinion  of  the  court. 

The  demurrers  to  the  orij^inal  and  amended  declarations  were  prop- 
erly sustained.  Lee  was  the  payee  in  a  promissory  note,  subscribed  by 
the  maker  thereof,  "  A.  G.  Cunnino^ham,  A,^'t,  "  notliin<:^  appearinf^  on 
the  face  of  the  note  indicating  for  whom  he  professed  to  act  as  agent. 
After  the  maturity  of  the  note  he  indorsed  the  same  to  the  plaintiffs, 
who  some  time  thereafter  presented  the  note  to  S.  A.  Cunningham, 
wife  of  A.  G.  Cunningham,  and  who,  the  declaration  avers,  was  liis 
principal,  "  and  demanded  payment  thereof,  and  sued  out  an  attach- 
ment for  rent  against  her,  in  order  to  collect  said  note,  of  all  of  which 
said  Lee  had  immediate  notice." 

The  present  suit  is  against  S.  A.  Cunningham  as  maker  and 
against  Lee  as  indorser  of  the  note. 

The  liability  of  Lee  rested  wholly  upon  his  indorsement,  and  that 
liability  was  to  pay  the  note,  if  seasonable  presentment  to  the  maker 
should  be  made  and  payment  refused,  and  Lee  notified  thereof. 

A.  G.  Cunningham,  and  not  S.  A.  Cunningham,  was  the  maker  of 
the  note,  the  word  "agent"  following  his  signature  being  —  in  the 
absence  of  the  name  of  the  principal  —  merely  descriptio  personce. 
(1  Danl.  on  Neg.  Tnst.  §§  303-305.)  We  are  not  called  upon  to 
decide  whether,  in  a  proper  action,  Mrs.  S.  A.  Cunnnigham  might 
be  made  liable  on  the  consideration  for  which  the  note  was  given; 
nor  whether,  as  between  the  original  parties,  A.  G.  Cunningham  was 
liable  on  the  note.  The  sole  question  is  whether  Lee,  who  indorsed 
the  note  signed  by  "  A.  G.  Cunningham,  Ag't,  "  can  be  held  on  his 
indorsement  by  virtue  of  a  presentment  to  one  whose  name  nowhere 
appears  on  the  note,  and  we  think  that  lie  cannot,  because  such  per- 
son was  not  the  maker  of  the  note,  for  whose  default  only  was  he 
bound  by  his  indorsement. 

Judgment  afiSrmed. 


§  136  TOBY  V.  MAURIAN. 

7  Loni.siANA,  493. —  1834. 

Action    against    indorser.      Defense,    want    of    due    presentment. 
Judgment  for  plaintiff  on  the  authority  of  Hale  v.  Burr  (12  Mass.  86.) 
Martin,  J.,  delivered  the  opinion  of  the  court. 


II.   4.]  TO   WHOM   MADE.  617 

The  defendant  is  sued  as  indorser  of  a  promissory  note,  for  one 
tliousand  dollars,  executed  by  Peyehaud.  Judgment  was  rendered 
against  him  for  the  amount  claimed.  He  now  claims  a  reversal  of  the 
judgment,  on  the  ground  that  he  was  condemned  as  indorser  to  pay 
the  sum  demanded,  when  payment  was  never  demanded  from  the 
maker,  nor  from  any  person  representing  him,  or  succeeding  to  his 
rights  and  obligations. 

The  record  shows  that  the  maker  died  on  the  last  day  of  grace,  or 
during  the  night  preceding  it.  That  when  tlie  notary's  clerk  called 
at  the  house  and  late  domicil  of  the  drawer  of  the  note  sued  on  to  de- 
mand payment,  he  found  no  person  present  except  a  mulatto  woman, 
who  informed  him  of  the  death  of  Peyehaud,  and  pointed  him  to  the 
corpse  in  the  coffin.  The  note  was  then  protested,  without  any  inquiry 
or  demand  being  made  of  any  heir  or  representative  of  the  deceased. 

It  is  clear  that  no  recourse  can  be  had  against  the  indorser  of  a  note 
until  a  demand  has  been  made  on  the  maker,  if  living,  or  on  his  heir 
or  legal  representative  after  his  death,  unless  the  impossibility  of  mak- 
ing such  a  demand  is  made  apparent.  This  has  not  been  shown  in  the 
present  case.  The  authorities  on  this  point,  and  which  support  the 
position  here  laid  down,  are  numerous,  of  the  highest  character  and 
authority,  and  conclusive  on  this  subject.  (Chitty  on  Bills,  317  ed. 
1828;  Bayley,  do.  128;  2  Practical  Abr.  of  Am.  Cases,  2SS,  202;  3 
Peters,  89;  7  Id.  287;  7  Martin,  364;  I  Pardessus,  392;  Pothier,  Con- 
trat  de  Chance,  No.  146.)  ' 

It  is  therefore  ordered,  adjudged,  and  decreed,  that  the  judgment 
of  the  Distrift  Court  be  annulled,  avoided  and  reversed;  and  that 
judgment  be  entered  for  the  defendant,  with  costs  in  both  courts.  ^ 


§  137  CAYUCA  COUNTY  BANK  v.  HUNT. 

{Reported  licrrin  iit  p.  (i!)}.] 


§138  p.LAKE  r.  McMillan. 

3.T   Iowa.   I.''.0.        1871. 

Action  against  indorser  of  a  note  made  by  W.  C.  Harding  and 
Daniel  Van  Patter.  Presf-ntmcnt  and  demantl  on  Harding  alone. 
Judgment  for  plaintiff. 


1  Sof.   f(rr(l  V.   Hprar.   107    Aj)p.   Div.    (N.  Y.)    144. —  C. 

2  .Mtliougli  thf  iruloFHrr  1k>  flic  ndniiiiiHtrntor  or  pxiuMitor  of  tlu'  dfccfised 
makpr,  firmiinfl  must  ho  nmdo  upon  him  ns  rxpciitor  and  noficf  pivcn  to  liim  as 
indor«fr.  Mmirudfr  V.  Vviou  IUn\k.  H  Curtis  2n!»,  .1  I'ftcrs,  S7  ;  <irnth  V. 
Qyger,  31  Pa.  271.  — H. 


518  PRESENTMKN'l'    FOU    PAYMKNT.  [aU'I'.    VII. 

Mii.LKR,  J.—  On  a  former  apical  in  this  case,  it  was  held  that  a 
prt'sontniont  to  one  only  of  the  two  joint  makers  was  not  sufficient  to 
charge  the  indorser,  unless  some  letjjal  exi-nse  i)e  shown  for  the  failure 
to  make  presentment  to  the  other.  {Blake  v.  McMiJlen,  22  Iowa 
358.)  The  agreed  facts  show  that  David  Van  Patter  died  before  the 
maturity  of  the  note ;  that  Eliza  Van  Patter  was  his  legal  representa- 
tive when  the  note  hecame  due  and  no  excuse  is  shown  for  a  failure 
to  make  jiresentnient  to  her.  Following  the  ruling  on  the  former 
appeal  the  judgment  is 

Reversed.^ 


5.  By  Exhibiting  the  Instrument.* 

§  134  WARING  V.  BETTS. 

[Reported  herein  at  p.  524.] b 


§  134  GILPIN  V.  SAVAGE. 

[Reported  herein  at  p.  510.] 


Ill,  When  delay  in  presentment  excused. 

§  141  PIER  V.  ITEINRICnSIIOFFEN. 

G7  MissoiKi,  103.  —  1877. 

Hough,  J. —  This  was  an  action  brought  by  the  plaintiffs,  as 
liolders  of  a  negotiable  promissory  note,  against  the  defendants,  as 
indorsers  thereof.  The  questions  presented  for  determination  are, 
whether  the  plaintiffs  used  due  diligence  in  making  demand  of  pay- 

3. Accord:  Arnold  v.  Dresser,  8  Allpn  (Mass.)  435;  Ffhutts  v.  Fiyujar,  100 
N.  Y.  539;  lietiedict  v.  tichmieg,  13  Wash.  470. —  H. 

•  Sep  Citi::ens'  Bank  v.  First  7^'at.  Bank,  135  Iowa,  005,  reported  in  l.'> 
L.  N.  S.  303,  with  note  entitled  "  Necessity  of  actual  presentation  of  coin- 
niercial  paper  to  effect  its  dishonor."  —  C. 

5  "  No  valid  presentment  and  demand  can  be  made  by  any  person  without 
having  the  note  in  his  possession  at  the  time,  so  that  the  maker  may  receive  it 
in  case  he  pays  the  amount  due,  unless  special  circumstances,  such  as  the  loss 
of  the  note  or  its  destruction,  are  shown  to  excuse  its  absence."  Arnold  v. 
DrcssPT.  8  Allen  (Mass.)  435:  Mnsson  v.  hake,  4  How.  (U.  S.)  202.  But  if  the 
one  making  demand  has  the  instrument  but  does  not  exhibit  it,  the  present- 
ment is  good  where  the  maker  does  not  ask  to  see  the  instrument,  but  refuses 
payment  on  other  grounds.  Legg  v.  Vinal,  105  Mass.  555.  —  H.  [See  also 
Bank  of  Vergentus  v.  Cameron.  7  Barb.  (N.  Y.)  143,  and  Farmers'  Bank  v. 
Duvall,  7  Gill  &  .1.   (Md.)   78. —  C] 


III.]  WIIEX    DELAY    EXCUSED.  519 

ment,  and  gave  the  requisite  notice  of  non-pa\Tnont  to  the  defendants. 
The  facts  are  as  follows:  The  note  in  question  matured  on  the  4th 
day  of  July,  ISGl,  and  was  payable  at  the  banking  house  of  F.  and 
G.  Willins,  in  the  city  of  St.  Paul,  Minnesota.  Some  time  in  April, 
18G1,  the  plaintiffs  delivered  the  same  to  the  bank  of  Cooperstown, 
at  Cooperstown,  New  York,  for  collection.  At  that  time  a  letter,  in 
due  course  of  mail,  would  reach  St.  Paul  from  Cooperstown  in  about 
six  days.  The  cashier  of  the  bank  of  Cooperstown  sent  the  note  by 
mail  to  its  regular  correspondent,  the  Bank  of  St.  Paul,  in  the  city 
of  St.  Paul,  for  collection,  in  ample  time,  as  the  cashier  stated,  for 
it  to  reach  its  destination  by  ordinary  course  of  mail,  before  the 
maturity  of  the  note.  When  the  letter  readied  St.  Paul,  the  Rank 
of  St.  Paul  had  made  an  assignment,  and  the  envelope  having  printed 
on  it  the  words  "  From  the  Bank  of  Cooperstown,"  the  postmaster 
at  once  returned  it  to  the  Bank  of  Cooperstown,  with  the  indorse- 
ment ''  bank  failed."  The  letter  was  received  by  the  Cooperstown 
Bank  in  the  original  envelope,  unopened,  on  the  9th  day  of  July, 
1861,  and  on  the  same  day  the  note  was  returned  by  mail  to  St.  Paul 
in  a  letter  directed  to  F.  &  G.  Willins,  who  caused  it  to  be  presented 
and  protested  on  the  ir)th  day  of  July,  18(51,  the  day  on  which  it 
was  received. 

The  defendants  contend  that  there  was  a  want  of  diligence  in  not 
sending  the  note  in  time  to  guard  against  such  contingencies  as  the 
evidence  discloses,  and  that  the  action  of  the  postmaster  in  the 
premises  is  no  sufficient  excuse  for  the  failure  to  present  for  pay- 
ment on  the  day  of  the  maturity  of  the  note.  Professor  Parsons,  in 
his  treatise  on  Notes  and  Bills,  says:  "Ordinarily  any  failure  to 
present  a  note  at  the  proper  time,  by  reason  of  the  negligence  of  an 
agent,  would  discharge  an  indorser,  but  where  the  holder  makes  use 
of  the  public  mail  for  the  purpose  of  transinitling  the  note  to  the 
proper  place  in  .season  to  have  a  legal  demand  made,  and  without 
any  negligence  on  his  part,  we  should  say  that  he  would  not  lose  his 
remedy  on  an  indorser,  if  through  any  accident  or  disorder,  or  the 
negligence  or  mistake  of  the  j)ostoffiee  clerks,  the  note  docs  not  reach 
the  destined  place  in  season  to  make  demand  on  the  very  day  of 
maturitv."  (\'<>1-  ',  !>•  l*^'!-)  I"  ^iipjxtrt  of  his  text  he  cites  the 
case  of  il'i/i^///'/ /////«/(/•  v.  .Vor/o»  (■*'.'  Conn.  IM:5).     *     *     * 

We  have  been  refern-d  by  defendants'  counsel  to  the  case  of  SrhafieJd 
V.  liaiffinl  (:'.  Wend.  -188),  as  being  in  direct  conflict  with  the  case 
just  cited  from  Connect ioit  ;  but  a  careful  examination  of  the  facts 
in  Schofield  v.  linijnrd  will  show  that  there  is  no  conflict  whatever 
between  the  two  rases.  ♦  *  *  K  will  he  seen  that  the  court  places 
its  judtrment  expresslv  upon  the  ground  that  tlie  h(tlder  was  guilty 
of  negligence  in  sending  the  bill  to  Tjverpool,  and  this  fa\ilt  of  hifl 
produced  the  iniftossibility  by  virtue  of  which  he  claimed  to  he  dis- 
charged.    In  the  present  case  the  letter  containing  the  note  was  not 


520  rRESRNTMEXT    KOK    I'AYMKNT.  [aUT.    VII. 

misdirected;  it  was  properly  directed;  it  actually  reached  St.  Paul 
in  time,  and  but  for  its  unauthorized  return  by  the  postmaster,  the 
probabilities  are  that  some  agent  or  representative  of  the  suspended 
bank  would  have  received  it  in  time  to  make  due  presentment,  as  the 
testimony  tends  to  show  that  the  representatives  of  the  bank  oon- 
tinucd  to  receive  letters  addressed  to  it,  after  its  suspension.  The 
holders  therefore  exercised  due  ililigcnce  in  sending  the  note  when 
they  did;  its  arrival  in  time  demonstrates  that  fact;  and  they  were 
not  required  to  make  provision  in  advance  for  a  po.ssible,  but  un- 
anticipated suspension  of  the  Bank  of  St.  Paul  before  arrival  of  their 
letter,  or  for  an  unwarrantable  interference  with  the  same  by  the 
public  ofticer  in  charge  of  tlie  mails,  after  its  arrival.  We  are  of  the 
opinion,  therefore,  that  under  the  circumstances  of  this  case,  the  de- 
mand was  seasonably  made. 

[The  court  then  decides  that  a  notarial  certificate  stating  that  the 
notices  were  "  put  into  the  postofTice  at  St.  Paul  directed  as  follows," 
is  sufficient  without  a  statement  that  the  postage  was  prepaid.]  " 

Reversed.^ 


rv.  When  presentment  dispensed  with. 

1.  When  no  Right  to  Require  or  Expect  It. 
§139  BEAUREGARD  v.  KNOWLTON. 

156  MASSACHU.SETTS,  395.  —  1892. 

Judgment  for  plaintiff.    Defendant  excepts. 

Barker,  J.  The  action  is  upon  checks  which  have  never  been  pre- 
sented to  the  bank  upon  which  they  were  drawn.  The  only  question 
argued  is  as  to  the  correctness  of  the  ruling  that,  if  the  facts  were  as 
testified  to  by  the  president  of  the  bank,  the  plaintiff  was  excused 
from  presenting  them.  The  checks  were  dated  on  December  16,  1889, 
—  one  for  the  sum  of  $250,  bearing  a  pencil  memorandum,  "  Draw 
Dec.  19th;"  one  for  $125,  bearing  a  similar  memorandum,  "Draw 
Dec.  26th;"  and  one  for  $125,  with  a  memorandum,  "Draw  Dec. 
28th."  They  were  signed  by  the  defendant  with  the  name  of  J.  G. 
Knowlton  &  Co.,  which  was  the  style  under  which  he  did  business. 
The  president  of  the  bank  testified  that  on  December  16,  1889,  and 
during  the  remainder  of  that  month  and  the  following  January,  J.  G. 
Knowlton  &  Co.  had  no  funds  in  the  bank,  but  that  one  M.  E. 
Knowlton  had  an  account  at  the  bank,  and  the  bank  had  written 
authority  from  him  to  pay  checks  signed  by  J.  G.  Knowlton  &  Co., 

•  See  Neg.  Inst.  L.,  §  176. —  H. 

7  See  also  Schofield  v.  Bayard,  3  Wend.  (N.  Y.)  488,  post,  p.  "04;  1  Daniel, 
§  478.  —  H. 


IV.]  WHEN   DISPENSED    WITH.  521 

charging  the  same  to  the  account  of  M.  E.  Knowiton,  and  that  acting 
upon  this  authority  the  bank  had  been  in  the  liabit  of  so  doing,  and 
tliat  on  December  l(j,  1889,  the  deposit  of  M.  E.  Knowiton  was  $51.15; 
on  December  VJih,  $117.28;  on  December  26th,  $G1.13;  and  on  De- 
cember 28th,  $8.18. 

We  assume  that  under  ordinary  circumstances  the  drawer  of  a 
check  is  not  hable  to  a  suit  upon  it  without  presentment  to  the  bank, 
and  dishonor.  KcUcy  v.  Brown,  5  Gray,  lOS ;  Tassell  v.  Lewis,  1  Ld. 
Raym.  743;  Crugcr  v.  Armstrong,  3  Johns.  Cas.  5;  Conroy  v.  Warren, 
3  Johns.  Cas.  259;  Murray  v.  JndaJi,  6  Cow.  484,  100;  Little  v.  Bank, 
2  Hill,  (X.  Y.)  425;  Case  v.  Morris,  31  Pa.  St.  100,  104;  PiirceU  v. 
AUemong,  22  Orat.  730;  Woodruif  v.  Plant,  41  Conn.  3U,  3t7;  Foster 
V.  PauJl-,  41  Me.  425.  But  tlie  cases  cited,  and  many  otlmrs,  hold  t!int 
a  check  is  in  the  nature  of  a  bill  of  exchange,  payable  on  demand,  and 
that  many  of  the  same  rules  apply  to  both.  Barnet  v.  Smith,  30  N.  H. 
256,  264:  Birl-erdihe  v.  Bnllman,  1  Term  T?.  405;  Boehm  v.  Sterling, 
7  Term  R.  423,  426.  The  drawer  of  a  hill  of  exchange  is  liable  without 
presentment,  if  he  has  no  effects  in  the  hands  of  the  drawee,  unless 
the  drawee  has  something  equivalent  to  effects,  or  has  agreed  to  accept 
and  pay,  or  the  drawer  has  some  ground  for  a  reasonable  expectation 
that  the  bill  will  be  accepted  and  paid.  Kinsley  v.  Robinson,  21  I'iik. 
327,  328,  and  cases  cited;  Bank  v.  Hughes,  17  Wend.  94,  97.  The 
same  general  principles  are  a})plied  to  checks,  and  presentment  is 
excused  where  the  making  of  the  check  was  a  fraud  upon  the  part  of 
the  drawer;  he  having  no  funds  in  the  bank,  and  no  ground  for  a 
reasonable  expectation  that  it  would  be  paid.  Byles,  Bills,  (11th 
Ed.)  216;  Chit.  Bills,  (Amer.  Ed.  1836,)  423;  Franhlin  v.  Vander- 
pool,  1  Hall,  78;  Ifarkcr  v.  Anderson,  21  AVend.  372,  375;  Ca.se  v. 
Morris,  31  Pa.  St.  100,  104;  Sterrett  v.  Posenrranz,  3  Phila.  54;  Hoyt 
V.  Seeley.  18  Conn.  352,  360;  Trvc  v.  Thomas.  16  Me.  36;  Foster  v. 
PauH-,  11  Mo.  125,  428;  Terey  v.  Parker.  6  .Adol.  cV  E.  502;  Wirth  v. 
Austin,  Tj  ]?.  10  C.  P.  Ct^9.  In  this  case  the  drawer  had  no  funds  in 
the  bank,  and  no  antbority  from  the  hank  to  draw  upon  it.  One 
M.  E.  Knowiton  had  a  deposit  ncronnt  with  the  bank,  and  had  "ivon 
it  autlioritv  to  pay  and  rhnrgo  to  his  account  checks  siirnod  by  .1.  fj. 
Knowiton  &  Co.,  and  tlie  hank  had  been  in  tlie  hal)it  of  so  doing. 
But  the  deposit  of  .M.  I'].  Knowiton  was  never  sufhcient  to  pay  any 
one  of  the  cheeks  in  suit,  and  the  bank  had  no  antbority  to  allow  the 
account  of  M.  E.  Knowiton  to  be  overdrawn  l)y  such  cheeks,  and  there 
was  no  evidence  tliat  it  bad  ever  piir.'^ucd  sncli  a  course.  So  Ibat  the 
defendant  could  have  had  no  groun<l  for  a  reasonable  <'xpectation  that 
the  checks  would  be  honored  by  the  Itank.  When  the  defendant  made 
them,  he  knew  they  would  not  be  paid  if  presented,  as  well  as  thotigh 
there  bad  been  no  arrangement  as  to  his  checKs  belwcvn  tlie  bank  and 
M.  E.  Knowiton.  N'otice  of  non-paynicnt  woiilil  have  given  him  no 
new  knowledge.     The  presentment  of  either  of  the  checks  would  not 


522  PKESKNIMKNl"    H)li    I'AVMKNT.  |a1:T.    VU. 

liave  ontilUHl  tlio  phiintiH'  lo  (Iciiiaiul  Iroiii  the  bank  (lie  actual  hahince 
to  the  credit  ol"  M.  \l.  Know  luui.  IhiiKi  \.  //(////,■.  i;>  Alli'ii,  I  IT).  So 
that  the  faits  testitk'il  to  sln)\v  allirmalivrlv  that  iiu  K)ss  happened  to 
tiie  del'eudaiit  by  the  omission  of  j)reseiitnu'nt. 

Exteptionii  overruled.^ 


§139  CATTIELL  r.  GOODWIN. 

[licportcd  herein  at  p.   57(1.  l'-* 


8  "  It  is  next  argued  that  the  court  slioulcl  have  directed  a  verdict  for  the 
plaintilT,  and  that  in  refusing  to  do  so  there  was  reversible  error.  Tliis  con- 
tention is  prounded.  first,  upon  the  proposition  that  no  presentment  of  tlie 
cheetc  or  draft  to  Gilnian.  Son  &  Co.  for  payment  lias  been  sliown;  and,  if  such 
presentment  is  an  indispensable  condition  of  tlie  drawer's  liability  to  the 
payee,  the  point  is  well  taken,  for  such  proof  is  evidently  lacking.  By  section 
30f)0a70  [N.  Y.,  §  13n]  of  the  (ode  Supplement  of  1002  it  is  provided  that 
presentment  for  payment  i^  iint  recpured  to  charge  the  drawer,  where  he  has 
no  right  to  expect  or  require  the  drawee  to  pay  the  instriiment.  The  appellee 
invokes  the  benelit  of  this  provision.  It  is  alleged,  as  we  have  seen,  that 
appellant  knew  Gilnian,  Son  &  Co.  to  be  in  a  failing  condition  when  it  sold 
the  draft  to  appellee.  Tn  support  of  this  claini  there  was  evidence  of  adniis 
sions  by  the  cashier  to  the  effect  tlint  he  had  for  some  time  been  doubtful  of 
the  financial  soundness  of  said  finii :  ttiat  the  bank  had  suspected  the  stability 
of  said  firm,  but  had  continued  to  use  it  as  correspondent  because  of  the 
habit  or  custom  arising  from  a  long  business  accpiaintance;  and  that  the  bank 
guarded  itself  against  great  risk  by  keeping  a  small  balance  only  in  the  hands 
of  its  correspondent.  These  admissions,  some  of  which  were  shown  to  have 
been  made  prior  to  the  date  of  this  transaction,  were  testified  to  witliout 
objection  by  three  or  more  different  witnesses.  It  was  shown,  also,  that,  taking 
into  account  drafts  in  transit,  the  appellant's  balance  with  its  correspondent 
was  frequently  overdrawn,  or  reduced  to  a  eoinparatively  trifling  sum.  and 
that  on  OetolK-r  13.  1902,  the  day  on  which  appellant  claims  the  demand  for 
payment  should  have  been  made,  its  actual  balance  with  said  correspondent 
was  insufficient  to  pay  the  draft  in  eniitiovci  sy.  U'hih'  this  slinwing  vva-.  not 
a  strnn'r  one.  yet  we  think  it  suflleient  to  caiiy  the  case  in  tlic  jury  upon  the 
question  whether,  in  view  of  all  the  facts,  the  manatrinj,'  (ifliccrs  of  the  bank 
in  the  i.-suance  of  .said  draft  had  any  right  as  reasonable  men  to  rely  upon  or 
expect  Oilman,  Son  &  Co.  to  honor  .said  draft  by  payment,  if  juesented  within 
a  reasonable  time  for  that  purpose."  Wkavku.  C.  T.,  in  }\'rs(  I'.vnnrU  State 
Bank  v.  Haines,  1.35  Iowa,  313.  —  C. 

9  See  also  S   IS.t.   l.'^ti:   C'aslnnfDi  v.   flarri.son.  00  Calif.  '207. 

Mere  want  of  fumls  in  drawee's  hands  not  enough  to  excuse  presentment. 
Knirkrrhorkrr  Life  /n.<r.  Co.  v.  Pnullcton,  112  1'.  S.  (HKi,  708;  Welch  v.  Mfy. 
Co..  82  III.  570. 

If  drawer  or  indorser  has  received  funds  or  assets  from  the  acceptor  or 
maker  under  an  agreement  to  pay  the  bill  or  note,  he  has  no  right  to  expect  or 
require  rlemand  and  notice.  Wrifjht  v.  .Andrcir.fi,  70  ^le.  SO.  C^uery,  When  he 
has  received  security  but  with  no  agreement  to  piy.  2  Daniel  on  Neg.  Inst., 
5§  1129-1143;  4  Am.  &  Eng.  Enc.  Law   {2d  ed.),  447-448.  —  H. 


iv.j  when  dispensed  with.  523 

2.  Accommodation  Indorsers. 

§  140       MORRIS  r.  BIRMINGHAM  NATIONAL  BANK. 
93   Alabama,  511.  — 1800. 

Action  on  a  promissory  note.  Judgment  for  plaintifl  and  de- 
fendant ajjpeals. 

Clopton,  J.  —  The  note  sued  upon  was  made  by  Jolni  W.  Read, 
payable  to  B.  C.  Scott,  dffondant's  intestate,  at  the  Birmingham  Na- 
tional Bank,  and  by  him  indorsed  to  tlie  hank.  It  being  admitted 
that  payment  of  the  note  was  not  demanded  of  the  maker,  and  that 
due  and  legal  notice  of  its  dishonor  was  not  given,  so  as  to  charge 
the  indorser,  it  devolved  on  plaintiff  to  show  a  sufficient  excuse  for 
failure  to  give  the  notice.  For  this  purpose  the  depositions  of  Read, 
the  maker,  were  introduced  to  prove  that  the  note  was  made  for  the 
accommodation  of  Scott,  the  indorser.     *     *     * 

The  material  question  is,  wJR'thcr  the  indorser  of  a  note,  made  for 
his  accommodation,  is  discharged  from  liability  on  his  indorsement 
by  the  failure  of  the  holder  to  demand  payment  of  the  maker,  and 
to  give  the  indorser  notice  of  the  non-payment  of  the  note.  To  this 
question  a  negative  answer  must  be  given,  on  principle  and  authority. 
To  the  general  rule,  re(|uiring  such  notice,  there  are  well  recognized 
exceptions.  In  its  application  to  bills  of  exchange,  the  failure  to  give 
notice  will  be  excused  as  to  the  drawer,  where  he  has  no  funds  in  the 
hands  of  the  drawee,  and  no  reasonable  ground  to  ex))ect  that  his  bill 
will  be  honored.  The  reason  on  which  this  exception  rests,  exists 
where  a  note  is  made  for  the  accommoihition  of  the  indorser,  for  the 
purpose  of  raising  money  for  his  benefit,  by  iliMoimJ  or  otherwise,  he 
being  the  real  debtor,  and  primarily  boiiiid  fov  its  iiltitnafe  paynuMit. 
In  such  case,  notice  can  amount  to  nothing,  there  being  no  party 
against  v.-honi  he  can  have  rerour.-e  ii})on  paying  the  note,  and  no 
possibility  that  be  can  !•<•  injured  by  the  failure  to  give  noli«e.  [|p, 
like  the  drawer  of  a  hill  in  such  case,  is  without  funds,  and  has  no 
right  to  expect  the  maker  to  pay  the  note.  Frrvrli  v.  /{fin/,-  of  Cnhini- 
hia,  1  Cr.  1  11  :  AV»/.s-  v.  ]\'inlcr.  T)  I  Me.  3f»!» :  2  Pan.  on  Neg.  Inst., 
§  108');  Tied,  on  Coin.  i'a|«er.  i^  M")."'.  It  being  shown  by  the  testi- 
mony of  Read,  without  contradiction,  that  the  note  sued  on  was  made 
for  the  accommodation  of  Scott,  noliic  of  its  dishonor  was  not  re- 
quisite to  charg<'  the  indorser.      *      *      * 

.ludgment   affirmed.' 


1  FU-p  ,il«n  MrVriqh  v.  nnvk  nf  Olfl  Dnmivinn.  2fi  r.rntt.  (Vn.)  785;  Tiirnrr 
y.  Hnwpsnn.  2  Q.  15.  Div.  2.T ;  Mithrrmr  V.  Slntihark.  IfiK  N.  Y.  041);  Aw.  Xat. 
Bank  v.  Juvk   Hros.,  04  Tnnn.  0'2).  post.  y.  fiTfl.  —  C. 


52-i  PBE8ENTMKNT    KOK    I'AYMENT.  [ABT.    Vlli 

3.    WHKN    TMI'OSSrilLR. 

§142  MOOh'K  V.  COFFllOLI). 

1   Devebki'x   Law    (N.   Cak.  )     247.  — 1827. 

Action  ajjainst  indnrsor.     .Fudsj^nionf   for  dofcnflant. 

Hall.  ,1.  *  *  *  It  wns  proved  tlml  Best,  the  maker  of  the 
obliirntion,  was  a  seafaring  man,  and  at  or  about  the  time  the  oblie;a- 
tion  became  payable,  sailed  from  Washington,  as  master  of  a  vessel 
bound  to  New  York  :  and  it  did  not  appear  that  he  had  a  domieil, 
or  any  establishment  within  the  state,  at  wliicdi  payment  could  Ik; 
demanded.  The  maker  being  at  sea,  in  liis  usual  employment,  and 
the  indorsee  not  being  bound  to  follow  him  beyond  the  state,  it  fol- 
lows, that  if  he  had  no  such  domieil  or  establishment,  a  demand 
should   be  dispensed   with. 

In  this  view  of  the  case,  the  defendant  was  liable  upon  his  indorse- 
ment, without  any  express  promise  to  pay,  and  tlie  jury  should  have 
been  so  instructed  —  and  consequently,  for  the  judge's  omission  to 
give  such  instruction,  there  must  be  a  new  trial. 

Per  Curl\m.  —  Judgment  reversed  and  a  new  trial  awarded.^ 


§  142  WARING  V.  BETTS. 

90  Virginia,  46.  —  1893. 

AcTTOx  against  indorsers  of  a  note  payable  at  the  Business  Men's 
Bank,  T?ichmond.  At  maturity  the  bank  was  defunct.  Demand 
(without  presentment)  was  first  made  on  W.,  a  former  officer  of  that 
bank  (and  also  one  of  the  indorsers),  who  replied  that  the  funds  had 
been  distributed  and  there  were  no  assets.  Later  in  the  day,  at  5  :.'^0 
P.  M.,  the  notary  with  the  note  in  his  possession  went  again  to  the 
office  of  W.,  but  it  was  closed  ;  he  then  went  to  the  residence  of  \V., 
but  he  was  not  there.  He  then  protested  the  note  and  gave  due 
notice  to  the  indorsers.  "^I'he  maker  lived  at  Danville,  Va.,  at  which 
place  the  note  was  dated. 

Lacy,  J.  (after  stating  the  case),  delivered  the  opinion  of  the 
court. 

The  first  question  arising  here  is  that  raised  by  the  demurrer. 
The  declaration  states  a  good  case,  and  sets  fortli  that  on  its  due 
day  it  was  duly  presented  for  payment  of  the  sum  of  money  tlierein 
specified,  required,  payment  refused,  and  that  it  was  duly  protested, 
etc. 

2  But  if  the  makpr  have  a  residence,  presentment  must  be  made  there. 
Dennie   v.    Walker,  7    N.   H.    199. 

I>mand  is  not  e.vcused  brcause  the  maker  is  an  infant.  Wyman  v,  Adams, 
12  ru?h.   (Mfiss.)   210.  —  H. 


TV.]  WHEN   DISPENSED   WITH.  525 

And  the  defendants'  demurrer  to  the  plaintiff's  declaration  was 
properly  overruled. 

The  claim  of  the  defendants  is  that  there  was  no  presentment  of 
the  note,  because  when  pajTuent  was  demanded  of  the  indorser,  W.  L. 
Waring,  Jr.,  manager  of  the  late  Business  Men's  Bank,  Mr.  Glenn 
did  not  have  the  note  in  his  possession,  and  could  not  have  presented 
it,  but  as  has  been  seen  from  the  facts  found  by  the  jury,  payment 
was  refused  by  Waring,  and  the  note  not  asked  for,  but  payment 
refused,  and  the  statement  made  that  he  was  not  authorized  to  repre- 
sent the  bank,  which  had  ceased  to  do  business  and  had  distributed 
its  assets. 

Presentment  of  tiie  bill  or  note  and  demand  of  payment  should  be 
made  by  an  actual  exliibition  of  the  instrument  itself;^  or  at  least 
the  demand  of  payment  should  be  accompanied  by  some  clear  indica- 
tion that  the  instrument  is  at  hand  ready  to  be  delivered,  and  such 
must  really  be  the  case.  This  is  requisite  in  order  that  the  drawer 
or  acceptor  may  be  able  lo  judge  (1)  of  the  genuineness  of  the  in- 
strument; (2)  of  the  right  of  the  holder  to  receive  payment;  and  (3) 
that  he  may  immediately  roolaim  possession  of,  upon  paying  the 
amount.  Tf,  on  demand  of  payment  the  exhibition  of  the  instrument 
is  not  asked  for,  and  the  party  of  whom  demand  is  made  decline  on 
other  grounds,  a  formal  presentment  by  actual  exhibition  of  the  pnyiev: 
is  considered  as  waived.  (Daniel  on  "NTeg.  Tnst.,  p.  1S5,  §  G54,  citing 
Lockwood  V.  Craicfnrd,  18  Conn.  3fil,  and  FnJl  River  Union  Bank  v. 
Willnrd,  5  Afetcalf,  21  fi.) 

All  the  parties  subsecjuent  to  the  principal  payer  are  bound  only 
as  his  guarantors,  and  promise  to  pay  only  on  condition  that  a  proper 
demand  of  pavment  bo  made,  and  due  notice  be  given  to  them  in 
case  the  note  or  bill  is  dishonorrd.  .And  we  repeat  this  as  o?i»'  of 
the  fundaiufTital  j)rin<iples  of  the  law  of  negotiable  paper;  and  the 
infrequency  and  the  character  of  the  circumstances  which  will  excuse 
the  holder  from  making  this  demand,  and  still  preserve  to  him  all 
his  rights  as  effectually  as  if  it  were  made,  will  illustrate  the  strin- 
gency of  the  rule  itself.  (Parsons  on  Notes  and  Hills,  vol.  I,  11?) 
The  question  of  excuse,  then,  will  depend  u]ion  whether  due  diligence 
has  been  used,  and  presents  the  ordinary  inquiry  as  to  negligence. 
The  principal  excuses  resolve  themselves  into  \\\i>  classes  — 

First.    The  impossibility  of  demand. 

Seconfl.  The  acts,  words,  or  position  of  a  jiarly,  proving  thai  ho 
had  not  right,  or  waived  all  right  to  the  deniand  of  the  waiver  of 
which   he   would   avail    hiinscdf. 

That  impossibility  shouhl  excuse  non-demand  is  obvious,  for  the 
law  compels  no  one  to  do  what  be  cannot  perform.  But  it  nmst  be 
actual  and  not  merely  hypothetical  ;  and  though  it  need  not  be  abso- 
lute, no  slight  difficulty  will  have  this  effect.      (Id.) 

sSec  §   134.  — TI. 


r)v()  ruKsKNi'Mi'.N  r  Koi;  I'.WMicN'r.  Iakt.  vii. 

The  cirfuinstaiu'i's  wliirli  will  cxcusi'  a  (k'liiaiid  are  such  generally 
as  apply  (o  a  failure  lo  picsmt  and  (Icinaiid  payment  within  tlie  re- 
tpiired  time,  not  ahsDiutely.      (  rarsons.    Ml,    11.-).) 

In  this  ease  the  present mcid  id'  (lie  note  was  not  made  at  hank 
within  the  usual  hank  lioui-s,  willi  the  nutc  in  possession,  hut  as  we 
have  seen,  this  was  excused  in  this  case  (  1  )  hy  the  fact  that  there  was 
no  hank  to  present  it  at.  and  ('')  hccaiise  payment  was  refused  upon 
the  trround  that  the  hank  had  ci'ased  to  do  husiness,  and  its  assets  dis- 
triliuted,  aiul  the  noti'  was  not  asked  for,  nor  required,  payment  heing 
refused  on  other  ^i-onnds;  the  ri^lil  to  have  it  pi'oduced  must  he  con- 
sidered as  waived. 

The  note,  however,  was  carricij,  during  the  day,  to  the  place  of 
husiness  of  the  late  manager  of  the  hank,  and  the  indorser  sought  to 
be  charged,  and  this  heing  closed,  it  was  carried  to  his  residence,  and 
that  being  also  closed,  it  could  not  he  presented  to  him,  and  although 
it  was  not  in  banking  hours,  it  was  during  the  daytime  and  before  the 
hours  of  rest. 

Wlien  the  note  is  payable  at  a  bank,  it  is  to  ])e  presented  during 
banking  hours;  and  the  payer  is  allowed  until  the  expiration  of  bank- 
ing liours  for  payment.  But  when  not  to  be  made  at  bank,  but  to  an 
individual,  presentment  may  be  made  at  any  reasonable  time  during 
the  day  during  what  are  termed  business  liours,  which,  it  is  lield, 
range  through  the  whole  day  to  the  liours  of  rest  in  the  evening. 
(Parsons,  447,  citing  Cayuga  ('oiniti/  Banl-  v.  TTnnt,  2  Hill,  635;  Nel- 
snti  V.  Fotterall,  7  Leigli,  194.) 

And  in  the  case  of  Farnsimrih  v.  AUen  (4  Gray,  453),  a  present- 
ment made  at  9  p.  m.  at  the  maker's  residence,  ten  miles  from  Boston, 
when  he  and  his  family  had  retired,  was  held  sufficient. 

And  in  Bardaij  v.  Bailey  (2  Campb.  527)  Lord  Ellenborough  sus- 
tained a  presentment  made  as  late  as  S  p.  m.  at  the  house  of  a  trader. 

It  is  only  whore  presentment  is  at  the  residence  that  the  time  is 
extended  into  the  hours  of  rest.  Tf  it  is  at  the  place  of  business,  it 
must  be  during  such  hours  when  such  places  are  customarily  open, 
or,  at  least,  while  some  one  is  there  competent  to  give  an  answer. 
(Parsons,  448.) 

In  this  case  there  was  no  presentment  to  the  maker,  wlio  could  not 
be  found,  which,  however,  was  unnecessary  under  section  2SI2  of  the 
Code  of  Virginia.  The  protest  was  in  due  form,  and  duly  protested, 
which  was  authorized  by  section  2849  of  the  Code,  although  the  said 
note  was  payable  at  a  bank  in  this  state.  And  under  section  2850  is 
prima  facie  proof  of  the  facts  stated  therein,  and  is  substantially  in 
accordance  with  the  finding  of  the  jury.  Tt  tlierefore  appears  that 
such  presentment  as  was  requisite  was  made  to  flic  Indorser  and  late 
manager  of  the  bank,  and  that  it  was  impossible  to  present  the  same 
at  the  bank  named  therein,  as  it  had  ceased  to  exist.     We  must,  there- 


IV.]  WHEN    DISPENSED    WITH.  527 

fore,  conclude  that  there  has  been  sufficient  diligence  on  the  part  o^ 
the  plaintifT,  and  that  tlie  judgment  of  the  court  below  in  his  favor 
was  right,  and  should  be  affirmed. 

Judgment  affirmed. 


4.  By  Waiver. 


§  142  J.  W.  O'BANNON  v.  CURRAN. 

129  Appellate  Divlsion    (X.   Y.)    90. —  1908. 

Action  by  the  J.  W.  O'Bannon  Co.  against  James  M.  Curran.  A 
demurrer  to  parts  of  the  complaint  was  overruled,  and  defendant  ap- 
peals. 

McLaughlin,  J.  —  This  appeal  is  from  an  interlocutory  judgment 
overruling  a  demurrer  to  the  second  and  third  causes  of  action  set 
forth  in  the  complaint.  In  each  case  the  demurrer  was  upon  tb.e 
ground  that  the  facts  stated  did  not  constitute  a  cause  of  action.  The 
second  cause  of  action  alleged  is  to  recover  upon  a  promissory  note 
made  by  the  James  Freeman  Brown  Company,  a  domestic  corporation, 
dated  October  12,  100,3,  and  payable  three  months  after  date  to  the 
plaintifT  at  73  Franklin  street,  New  York.  It  is  alleged  in  substance, 
with  reference  to  this  cause  of  action,  that  the  defendant  indorsed  the 
note,  and  it  was  then  delivered,  before  maturity,  to  the  plaintiff,  which 
gave  full  value  therefor,  relying  on  the  credit  of  said  indorsement; 
that  before  the  note  became  due,  and  on  the  7th  of  December,  1!M).3, 
an  involuntary  petition  in  bankruptcy  was  filed  against  the  James 
Freeman  Brown  Company,  and  a  receiver  appointed;  that  on  the  same 
day  the  defendant,  as  president  of  the  company,  pursuant  to  a  vote 
of  the  board  of  directors,  filed  a  written  admission  of  its  inability  to 
pay  debts  and  a  willingness  that  it  be  adjudged  bankrupt;  that  it  was 
60  adjudged  on  the  20tli  of  February,  1901;  that  at  the  maturity  of 
the  note  the  maker  was  insolvent,  its  business  suspended,  its  place  of 
business  closed,  its  property  still  in  the  possession  of  the  receiver,  and 
that  the  nf)te  was  not  paid,  of  all  which  facts  the  defendant  then  had 
actnal  knowledge;  that  no  [)art  of  the  note  has  been  paid,  except  a 
flividend  declared  in  tlie  t);uikniptcy  proceedings,  and  that  the  balance 
is  now  due  and  owing  tc)  the  plaintifT  from  the  defendant,  for  which 
sum  judgment  is  asked.  The  third  cause  of  action  alleged  is  on  an- 
other note,  and  the  allegations  respecting  it  are  substantially  the  same. 

The  appellant  contends  that  no  cause  of  action  is  stated  against  him 
as  indorser  upon  the  notes,  because  it  does  not  appear  that  they  were 
presented  for  payment  and  notice  of  nonpayment  given  to  him.  T'rior 
to  the  enactment  of  the  Negotiable  Instrnnients  Law  (Laws  lfin7,  p. 
719,  c.  612),  it  was  held  that  an  inilf)rser  of  a  note  or  the  drawer  of  a 
draft  was  not  discharged  by  an  omission  to  demand  payment  and  to 


628  PKESENTMKNT    FOU    PAYMENT.  [arT.    VII. 

give  notice  of  nonpayment,  whore  such  omission  could  not  possibly 
oporato  to  his  injiirv,  tui(  such  injury  was  pn'sumcd,  until  it  was  made 
to  appear  that  no  chimagc  could  have  resulted  ;  that  mere  proof  of  insol- 
vency of  the  maker  and  drawer  was  not  sullicient,  and  would  not  ex- 
cuse the  neglect.  Smith  v.  Miller.  53  N.  Y.  545;  Clift  v.  Rodger,  25 
Hun,  30;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  ')1; 
Mechanics'  Bank  of  N.  Y.  v.  Uriswold,  7  Wend,  165.  Tf  this  were  to 
be  here  applied,  then  it  is  quite  evident,  under  the  facts  allegerl,  the 
plaintilf  would  be  entitled  to  recover,  because  the  defendant  was  in 
no  way  prejudiced  by  the  failure  to  present  the  notes  for  payment, 
or  to  give  him  notice  of  nonpayment.  The  Negotiable  Instruments 
Law,  however,  provides  that  due  presentment  and  notice  of  dishonor 
are  necessary  to  charge  an  indorser  (§§  130-160)  ;  but  either 
presentment  for  payment  or  notice  of  nonpayment  may  be  dispensed 
with  by  waiver,  which  may  be  express  or  implied  (§  142,  subd. 
3;  §  ISO)  ;  so  that  the  real  question  here  presented  is  whether  the  facts 
show  such  waiver. 

I  think  they  do.  Prior  to  the  maturity  of  tlie  notes  the  maker  had 
been  adjudicated  a  bankrupt,  and  the  adjudication  was  Dased  at  least 
in  part  upon  the  written  admission  of  the  defendant  of  its  inability 
to  pay  debts,  coupled  with  a  willingness  that  it  be  adjudged  a  bankrupt. 
It  is  true  the  defendant  signed  this  admission  in  his  official  capacity 
as  president  of  the  corporation,  while  he  is  only  liable  as  indorser  as 
an  individual ;  but  as  an  individual  he  knew  when  the  notes  fell  due 
that  the  corj)oration  could  not  pay  them,  because  it  liad  then  been  ad- 
judicated a  bankrupt  and  all  of  its  property  was  in  the  hands  of  a 
receiver  in  the  bankruptcy  proceedings,  in  which  he  participated.  Un- 
der such  circumstances  the  defendant  must  be  deemed  to  have  waived, 
at  least  impliedly,  within  the  meaning  of  the  sections  of  the  Negotiable 
Instruments  Law  above  referred  to.  presentment  of  the  notes  and  notice 
of  dishonor.  By  his  consent  and  with  his  co-operation  it  had  been 
rendered  impossible  for  the  maker  to  pay — all  of  its  properly  being 
then  in  cuslodia  legis.  This  view  is  also  sustained  by  what  this  court 
decided  in  Moore  v.  Alexander,  63  App.  Div.  100.  There  Mr.  Justice 
Ingraham,  in  considering  the  liability  of  an  indorser  where  no  pre- 
sentation had  been  made,  said  : 

"  *  *  *  It  is  only  when,  because  of  some  act  of  the  indorser, 
the  nonpayment  by  the  maker  and  a  failure  of  notice  to  the  indorser 
cannot  possibly  operate  to  the  injury  of  the  latter,  that  the  omission  is 
excused.  The  mere  fact  of  insolvency  of  the  maker  is  not  enough. 
*  *  *  The  fact  which  would  e.ccnse  this  presentation  must,  as  I 
understand  it,  be  some  act  in  which  the  indorser  participated,  by  rea- 
son of  which  the  knowledge  of  the  fact  that  the  maker  would  not  pay 
the  bill  could  be  of  no  benefit  to  him." 

When  the  notes  in  question  fell  due  the  maker  could  not  pay.  The 
indorser  knew  it,  because  he  had  participated  in  the  act  which  made  it 


IV.]  WHEN    DISPENSED    WITH.  529 

impossible  for  il  to  pay;  and  for  tliat  reason  a  failure  to  present  the 
notes  for  payment  and  give  liini  notice  of  nonpayment  could  not  by 
any  possibility  have  injured  him. 

The  judgment  appealed  from,  therefore,  is  alhrnied,  with  costs,  with 
leave  to  the  defendant  to  withdraw  demurrer  and  answer,  on  payment 
of  costs  in  this  court  and  in  the  court  below.    All  concur.* 


V.  Payment  in  due  course. 

Sec  Article  IX.  —  Discharge  of  Instruments. 

*  See   al.s<)   Jn    re   tsicift,    lOG    Fed.    65;    Baumeistcr   v.    Kuniz,   5.*}    Flu.    340; 
Torbcit  V.  ilontayue,  87   Fac.    (Colo.)    1145;   Gove  v.   ]  ininy,  7  Mete.    (Mass.) 
212,  post.  \).  nsn.     XejT.  Inst.   Law,  §§   180-182.  — C. 
NEOOT.  INBTKUMENTS  —  34 


ARTICLK  VTII. 
Duties  of  Holder:  Notice  of  Disiionoe. 
I.  Notice  necessary  to  charge  drawer  or  indorser. 
§  160  LONG  V.  STEVENSON. 

[Reported   herein   at   p.   442.]  i 


§  160  MARSHALL  v.  SONNEMAN. 

216  Pennsylvania  State,  65.  —  1906. 

Judgment  for  plaintiff,  and  defendant  appeals. 

Mestrezat,  J.  —  This  is  an  action  by  an  indorsee  a<];ainst  an  in- 
dorser to  recover  the  balance  due  on  a  promissory  note.  One  of  the 
defenses  interposed  at  the  trial  was  an  alleged  failure  to  give  the  de- 
fendant notice  of  the  dishonor  of  the  note.  The  plaintiff  proved  the 
execution  of  the  note  by  the  maker,  and  introduced  testimony  to  show 
that  the  defendant  had  indorsed  it.  A  notary  j)ublic  was  then  called 
and  he  testified  that  he  had  protested  the  note  at  maturity  for  non- 
payment, and  that  on  the  same  day  he  had  delivered  notices  of  pro- 
test personally  to  both  the  plaintiff  and  the  defendant,  who  were  the 
indorsers.     *     *     * 

The  defendant  denied  that  he  had  received  notice  of  the  dishonor  of 
the  note.  He  testified  that  the  notary  delivered  to  him  an  envelope 
addressed  to  L.  A.  Marshall,  the  plaintiff,  which  contained  the  follow- 

»  Notice  of  non-acceptance,  whetlier  preeentnient  for  acceptance  be  p.ecef?;\ry 
or  not  (§  240)  must  be  given  in  ca.se  presentment  for  acceptance  is  in  fact 
made,  (§  247).  Blesard  v.  Hirst,  5  P.urr.  2070;  Thompson  v.  Cumminy,  2 
Leigh  (Va.)  321;  Watson  v.  Tarpley,  18  How.  (IJ.  S. )  517.  The  neglect  is  not 
cvired  by  a  .subsequent  presentment  for  payment  followed  l)y  notice  of  dishonor. 
Hmith  V.  Roach,  7  B.  Mon.  (Ky.)  17.  But  if  the  bill  pa.ss  into  tlie  hands  of  a 
holder  in  due  cour.se  after  a  disiionor  by  non-acceptance  he  may  charge  a 
drawer  or  indorser  by  a  subsequent  notice  of  dishonor  for  non-acceptance  or 
non-payment.  Dunn  v.  O'Keeffe,  5  M.  &  S.  282.  See  §  188.  If  after  a 
note  is  overdue  it  is  indorsed  and  transferred,  the  indorser  is  entitled  to  notice 
the  same  as  the  indorser  of  a  note  payable  on  demand.  lieer  v.  Clifton,  98 
Cal.  .32.3.     See  Leavitt  v.  Putnam,  3  N.  Y.  494,  ante,  p.  272. 

Tlie  indorser  of  a  non-negotiable  note  is  not  absolutely  entitled  to  notice  of 
dishonor,  as  his  contract  is  that  of  guarantor.  Cromvell  v.  ffnritt,  40  N.  Y. 
491;  (cf.  A'ewwan  v.  Frost,  52  N.  Y.  422);  unless  in  jurisdictions  where  a 
guarantor  is  absolutely  entitUd  to  notice.  Hutton  v.  Owen,  05  N.  (Jar.  123. 
Fee  ante,  pp.  203-205.  —  H. 

[5301 


I,J  NECESSITY   OF.  531 

ing  notice :  "  Notice  of  Protest.  York,  Pa.,  March  1,  1904.  L.  A. 
Marshall :  Please  take  notice  that  the  note  of  M.  Fink  for  four  thou- 
sand dollars  in  favor  of  A.  Sonaman,  dated  York,  Pa.,  Nov.  2,  1903, 
payable  March  1,  at  L.  A.  Marshall  &  Co.,  Bankers,  York,  Penna., 
and  by  you  endorsed  (being  due  this  day,  payment  having  been  de- 
manded and  refused),  is  protested  for  nonpayment,  and  that  the  hold- 
ers look  to  you  for  the  payment  thereof.  Eespectfully  yours,  Henry 
K.  Kraber,  Notary  Public."  The  defendant  further  testified  that  the 
notary  gave  him  no  other  notice,  paper  or  envelope.    *    *    * 

If  the  holder  of  negotiable  paper  desires  to  charge  antecedent  parties 
with  its  pa}Tnent,  it  is  incumbent  on  him  to  give  tliem  notice  of  its 
dishonor.  He  may  notify  either  or  all  of  the  prior  indorsers,  but  he 
can  compel  payment  only  from  those  who  have  received  notice  of  the 
maker's  default.     *    *    * 

Notice  of  nonpayment,  however,  is  not  sufficient ;  nor  is  mere  knowl- 
edge of  protest  all  that  is  required  to  charge  the  indorser.  Says  the 
author  [Byles  on  Bills]  above  quoted  (page  276)  :  "  Notice  does  not 
mean  mere  knowledge,  but  an  actual  notification.  For  a  man  who  can 
be  clearly  shown  to  have  known  beforehand  that  the  bill  would  be 
dishonored  is,  nevertheless,  entitled  to  notice."  In  Tindal  v.  Brown, 
1  Term  Rep.  107,  Ashhurst,  J.,  says:  "  Notice  means  something  more 
than  knowledge,  because  it  is  competent  to  the  holder  to  give  credit  to 
the  maker.  It  is  not  enough  to  say  that  the  maker  does  not  intend 
to  pay,  but  that  the  holder  does  not  intend  to  give  credit  to  such 
maker.  The  party  ought  to  know  whether  the  holder  intends  to  give 
credit  to  the  maker  or  to  resort  to  him." 

We  are  of  opinion  that  the  written  notice  which  the  defendant  al- 
leges was  delivered  to  him  was  not  sufficient  to  charge  him  with  the 
dishonor  of  the  note.  It  was  in  proper  form,  signed  by  a  notary,  and 
wj>6  dohvorcd  in  duo  time.  But  on  its  face  it  flcarly  discloses  the  fact 
that  it  was  not  intended  for  the  defendant.  It  was  directed  to  L.  A. 
Marshall,  the  plaintiff,  and  the  envelope  containing  it  bore  the  same 
addre.ss.  Marshall,  like  the  defendant,  was  also  an  indorser  of  the 
note,  and,  if  the  holder  intended  to  impose  liability  on  him,  it  was 
necessary  that  he  should  have;  notice  of  (lislioiu)r.  It  is  tlierefon;  ap- 
fiarent  tliat  this  notice  was  intended  for  Marshall,  nrul  was,  of  course, 
for  tiie  purpose  of  apprising  liim  of  the  dishonor  of  the  note,  and  was 
prepared  by  the  notary  with  that  intention.  The  notary  does  not 
(estify  that  at  the  time  he  delivered  the  envelope  containing  the  notice 
he  told  the  defendant  what  it  contained,  or  said  anything  to  him  con- 
cerning its  contents,  lie  did  not  apprise  the  defen.lant  that  the  note 
had  been  dishonored  or  that  the  notice  was  intended  for  him.  He  gave 
the  defendant  no  verbal  notice  whatever,  and  hence  all  the  informa- 
tion the  latter  had  of  the  dishonor  of  the  note  and  the  intention  of  the 
holder  to  guard  his  rights  and  to  avoid  responsibility  hy  fixing  liability 
on  antecedent  parties  was  wli;il  uns  contained  in  the  envelope  addressed 


632  NOTICE   OF    DIBIIONOB.  [auT.    VIII. 

to  Marshall.  Tliis,  as  we  have  observed,  was  a  notice  to  Marshall  that 
the  note  "  by  you  indorsed  "  was  protested  for  nonpayment,  "  and  that 
the  holders  look  to  you  for  the  payment  thereof."  Why  should  the 
defendant  aecept  this  as  a  notice  of  dishonor  to  him  and  take  care  of 
the  note?  There  is  no  intimation  in  the  paper  that  the  holder 
intended  to  look  to  him  for  payment.  On  the  contrary,  the  notice  is 
that  the  holder  will  look  to  Marshall,  his  immediate  piior  indorser, 
for  payment.  This  he  had  a  legal  right  to  do,  and  was  not  compelled 
to  notify  the  defendant  or  any  other  indorser  or  to  demand  payment 
of  him.  If  Marshall  desired  to  hold  the  defendant  responsible  as  a 
prior  indorser  it  was  incumbent  upon  him  to  give  the  latter  notice  of 
dishonor.  The  defendant  was  justified  in  treating  the  paper  delivered 
to  him  by  the  notary  as  a  notice  to  Marshall,  as  the  address  on  the  en- 
velope and  notice  disclosed,  and  that  the  purpose  was  to  notify  Mar- 
shall of  dishonor  for  the  purpose  of  charging  him  with  payment  of 
the  note.  If  either  the  envelope  or  the  notice  had  been  addressed  to 
the  defendant,  or  if  neither  had  been  addressed  to  him,  the  plaintiff's 
contention  that  the  notice  was  for  the  defendant  would  have  some 
ground  for  its  support.  If,  when  he  delivered  the  paper,  the  notary 
had  notified  the  defendant  verbally  that  the  note  had  been  dishonored 
or  that  the  written  notice  was  for  him,  there  would  be  sufficient  to 
charge  the  defendant  with  notice  of  dishonor.  But  none  of  these 
facts  can  be  found  in  the  case.  Assuming  that  the  defendant  opened 
the  envelope  and  read  its  contents,  he  simply  obtained  the  knowledge 
that  the  note  was  dishonored  and  that  the  holder  would  look  to  Mar- 
shall, the  last  indorser,  for  payment.  This,  as  we  have  seen,  is  not 
sufficient  under  the  cases  to  fix  the  defendant,  as  an  indorser,  for  the 
payment  of  the  note. 

Judgment  reversed,  with  a  venire  facias  de  novo.^. 

2  But  see  Wilson  v.  Peck,  G6  Misc.  (N.  Y.)  179,  where  it  was  held  that 
notice  of  dishonor  erroneously  addressed  on  its  face  to  the  maker  but  sent  by 
mail  to  and  received  by  the  indorser  is  sufficient  in  the  absence  of  proof  that 
the  indorser  was  misled  thereby.     Whitney.  J.,  said : 

"  The  first  objection  is  that  the  notice  was  addressed  on  its  face,  by  mis 
take,  to  the  maker  instead  of  the  indorser.  Tt  described  tlie  note  correctly. 
The  envelope  was  correctly  addressed  and  was  personally  received  and  opened 
by  appellant.  By  section  166  of  the  Nef^otiable  Instruments  Law  a  mis- 
description of  the  instrument  does  not  vitiate  the  notice,  unless  the  party 
'  is  in  fact  misled  thereby.'  This  but  states  the  law  as  previously  settled. 
Mills  V.  Bank  of  the  United  Ftfutes,  11  Wheat.  431;  Gates  v.  Beecher,  60  N.  Y. 
518.  By  analopy,  we  think  that  the  same  rule  should  be  applied  where  the 
instrument  is  misdirected  instead  of  being  misdescribed.  Carter  v.  Bradley, 
19  Maine  62.  Whether  Marshall  v.  .Sfonnrman,  216  Fenn.  St.  65,  where  the 
misdirection  was  on  the  envelope  as  well  as  on  the  face  of  the  notice,  would 
be  followed  in  this  state,  it  is  unnecessary  to  discuss.  Appellant  was  a  lawyer. 
He  knew  that  he  had  indorsed  a  note  for  that  maker  for  that  amount,  which 
was  outstanding.  He  knew  the  notary  and  knew  that  the  notary  was  the 
indorsee's  attorney.  He  made  no  claim  on  the  witness  stand  of  having  been 
mialed."  —  C. 


II.    l.j  BY    WHOM    UIVEJJ.  533 

n.  What  constitutes  sufficient  notice. 

1.  By  Whom  Notice  Must  be  Given. 

§  161  CHANOINE  v.  FOWLER. 

3  Wendell  (N.  Y.)   173.  — 1829. 

Action  against  drawer  of  a  bill.    Judgment  for  plaintiffs. 

By  the  Court,  Makcy,  J.  —  [After  deciding  that  there  was  no  suf- 
ficient proof  that  the  protest  in  France,  which  did  not  conform  to  the 
rules  of  the  law  merchant,  did  coiiform  to  the  rules  of  the  French  Com- 
mercial Code.] 

To  determine  whether  the  defendant  had  legal  notice  of  the  non- 
acceptance  of  the  bill,  it  will  be  necessary  to  see  when  it  was  given, 
and  from  whom  it  came.  Messrs.  Sewalls  had  transmitted  the  bill 
to  France,  and  received  information  of  its  non-acceptance  on  the 
fourth  or  fifth  of  April.  II.  D.  Sewall  says  he  did  not  himself  give 
notice  thereof  to  the  defendant,  nor  does  he  know  that  notice  was 
given  by  his  house;  although  it  was  their  custom  to  give  notice  in 
such  cases,  and  he  has  no  doubt  the  defendant  received  it.  He  learned, 
from  a  conversation  with  the  defendant  between  the  time  of  re- 
ceiving notice  and  on  the  14th  of  April,  that  he  had  knowledge  that 
the  bill  was  dishonored.  The  judge,  at  the  trial,  ruled  that  if  the 
defendant  had  notice  in  due  time  of  the  non-acceptance  of  the  bill, 
it  was  no  matter  whence  it  came,  it  was  available  to  the  plaintiffs. 
The  rule  of  law  in  relation  to  the  notice  was,  I  apprehend,  laid  down 
in  a  manner  too  broad  and  unqualified.  The  rule  has  heretofore  fluc- 
tuated ;  but  it  never  has  been  authoritatively  stated,  as  I  can  find,  to 
be  as  the  judge  laid  it  down  on  the  trial,  except  in  the  case  of  Shaw  v. 
Coates,  at  the  sittings  before  Lord  Kenyon,  mentioned  in  Selwyn's 
N.  P.  320,  n.  25.  Jtepcated  decisions  since,  both  in  term  and  at  nisi 
prius,  have  qualified  and  restricted  the  broad  proposition  of  the  judge 
in  this  case,  and  of  Lord  Kenyon  in  the  case  of  Shaw  v.  Coates.  Tn 
some  instance.^,  it  has  been  decided  that  the  holders  or  tiicir  agents 
are  the  only  persons  to  give  notice  of  the  dishonor  of  bills;  but  it 
seems  to  be  now  settled  that  it  is  not  absolntcly  necessary  that  the 
notice  should  come  from  the  holder  of  a  bill,  but  may  be  given  by  any 
person  who  is  a  party  to  it,  and  who  wouM,  on  the  same  being  returned 
to  him,  have  a  right  of  action  on  it.  (Cliitly  f>n  Bills,  229  \  2  Campb. 
.373;  1  Stark.  K.  29;  Bayley  on  Mills,  IHI.)  A  notice  from  a  mere 
stranger  is  not  sufficient;  and  the  charge  of  the  judge  was  broad 
enough  to  sanction  such  a  notice.  For  the  insufiiciency  of  the  proof 
of  the  French  Commercial  Code  and  of  the  protest  of  the  bill,  and 
the  misdirection  of  the  judge  as  to  the  notice,  a  new  trial  ought  to  be 
granted.  New  trial  granted.* 

sN(i<icf  liv  Hip  niiikor  i"  not  siifTioir'nt.  Jnriprr  v.  Notional  flrrmnn  Am. 
Bank,  52  Minn.  386.  Nor  by  the  drawee.  Htanton  v.  nionnnm,  14  MaHH.  116. 
Nor  by  the  acceptor.      Harrison  v.   RuHcor,    l.l    M.   «t   W.   231.     The  contrary 


534  NOTicK  01-'  DisuoNou.  [aut.  VllI, 

§  161  LYSAUIIT  V.  BRYANT. 

a  Common  Ukncu   (C.  1'.)  41).  —  1850. 

Action  by  holder  against  diawcr.  Defendant  drew  the  bill  to  his 
own  order  and  indorsed  it  to  Tj.  X'  S.,  wlio  indorsed  it  to  plaintifT,  but 
L.  eontinued  to  hold  it  as  plainlilT's  auiMit.  The  hill  was  presented 
by  L.  and  dishonored,  whereupon  L.  I'v  S.  iz;ave  del'endant  notiee  in 
their  iirni  name.  \'erdiet  for  jjlaiiitilT.  Defendant  moves  for  a  rule 
nisi  io  enter  the  venlicl   for  the  defendant. 

M.AULE,  J.  —  1  am  of  opinion  that  the  notice  of  dishonor  that  was 
given  in  this  case,  was  suiTieieTit.  Tvysaijlit,  the  younger,  appears  to 
have  acted  as  the  agent  of  his  fatlier,  the  ]ilaintilf.  In  that  ciiaraeter, 
he  received  the  bill  from  Lysaght  &  Smithett,  hy  whom  it  was  sworn 
to  have  been  indorsed  before  it  became  due;  and  Lysaght  the  younger 
proved  that  it  had  ever  since  been  kept  hy  him  amongst  the  docu- 
ments which  were  held  by  him  for  his  father.  It  was  undoul)tedly 
his  duty  to  see  that  his  father  should  have  all  proper  remedies  upon 
the  bill.  The  bill,  it  seems,  was  presented  on  the  day  it  became  due, 
and  was  dishonored;  and  due  notiee  of  dishonor  was  given  hy  Lysaght 
&  Smithett  to  the  defendant,  as  drawer.  Lysaght,  the  younger,  having 
due  notice  of  the  dishonor,  which  operated  as  a  notice  to  Lysaght  & 
Smithett,  it  was  clearly  competent  to  the  latter,  according  to  the  de- 
cided cases,  to  give  notice  to  all  prior  parties  to  the  hill,  and  a  notice 
so  given  would  enure  as  a  notice  by  the  party  who  had  given  notice 
to  them.  T  therefore  think  the  defendant  has  had  a  sufficient  notice 
of  dishonor.     *    *    * 

Cresswell,  J.  *  *  *  Tt  seems,  from  the  cases,  that  the  holder 
of  a  bill  may  avail  himself  of  a  notice  of  dishonor  given  in  due  time 
by  a  prior  indorsee,  provided  he  himself  is  in  a  condition  to  sue  the 
partv  by  whom  the  notice  was  given.  TIere,  Lysaght  the  younger, 
holding  the  bill  as  his  father's  agent,  duly  presented  it,  and  had  it 
returned  to  him  dishonored.  Notice  of  that  fact  to  him,  therefore, 
operating  as  a  notice  to  the  firm,  the  present  plaintiff  was  entitled  to 
sue  them,  and,  consequently,  is  in  a  condition  to  avail  himself  of  the 
notice  of  dishonor  given  hy  them  to  the  defendant. 

doctrine  has  no  foundation  in  principle,  and  may  now  be  regarded  as  ended 
by  the  Nep.  Inst.  Law,  wherever  that  is  in  force.  See,  however,  2  Daiiicd  on 
Neg.  Inst.,  §  990. —  H. 

["  So  far  as  I  am  able  to  discover,  the  doctrine  of  this  case  [Chanoinc  v. 
Fmoler]  has  never  been  questioned,  but  has  been  distinctly  approved.  (Roe 
Walmsley  v.  Arton,  44  Barb.  312;  Lairrencr  v.  Miller.  16  N.  Y.  235)." 
Miller,  J.,   in   First   Nat.   Bk.  v.   Gridley,    112   App.    Div.    ( N.   Y.)    398,  405. 

"  Tt  is  not  enough  that  the  indorser  knew  that  the  note  had  not  been  paid. 
The  notice,  to  be  effectual,  must  come  from  the  lec'al  source."  Dewey,  J.,  in 
Cabot  Bank  v.   Warner,   10  Allen    (Mass.)    522,  525.  —  C] 


II.    1.]  BY   WHOM   GIVEN.  536 

I  find  the  rule  thus  laid  down  in  Byles  on  Bills  (5th  ed.,  p.  214)  : 
"  The  object  of  notice  is  twofold ;  first,  to  apprise  tiie  party  to  whom 
it  is  addressed,  of  the  dishonor;  and,  secondly,  to  inform  him  that 
the  holder,  or  party  giving  the  notice,  looks  to  him  for  payment. 
(Tindal  v.  Broini,  1  T.  11.  1G7.)  Hence,  it  follows  that  notice  can 
only  be  given  by  soimc  })arty  to  the  instrument,  though  he  need  i-ot 
be  the  actual  holder  of  t'le  hill  nt  the  time  {Chapman  v.  Keane,  3  Ad. 
&  E.  193;  4  X.  &  M.  fiOT  ;  Harrison  v.  Ruscoc,  15  M.  &  W.  231  ;  M urs 
V.  Brown,  11  M.  &  W.  37"?)  ;  hut  that  n  stranger  is  incompetent  to 
give  it.  (Steirart  v.  Konneii,  2  Camph.  177.  Vide  iamen  Abel  v. 
Poits,  3  Esp.  N.  P.  C.  213.)  And  it  has  been  hold  by  Lord  Eldon, 
that  notice  by  the  first  indorsee,  who  had  not  Inmself  received  notice 
from  the  second  indorsee,  and  who  was  not,  therefore,  obliged  to  take 
back  the  bill,  was  insullicient  as  between  tlie  second  indorsee  and  the 
drawer.  (Ex  parte  Barclay,  7  Ves.  597:  but  qncvre,  since  the  case  of 
Chapman  v.  Keane,  supra.)  And  it  seems  clear,  that  even  a  partv  to 
the  bill,  who  has  been  already  discharged  by  laches,  or  who  could  not 
in  any  event  sue,  is  incompetent  to  give  notice.  {Harrison  v.  Iiiisme, 
15  M.  &  W.  231 ;  Miers  v.  P,ron-n,  11  M.  &  W.  372.)  But  a  prior  in- 
dorsee, who  has  himself  received  due  notice,  may  transmit  it.  {Jame- 
son V.  Swinion,  2  Campb.  373,  2  Taunt.  224;  Wilson  v.  Swahey,  1 
Stark.  N.  P.  C.  34.)  And  notice  by  the  holder,  or  by  a  party  who  is 
liable  to  be  sued,  and  may  be  entitled  to  sue,  will  enure  to  the  benefit 
of  all  antecedent  or  subsequent  parties.  So  that  a  notice  by  tlic^  last 
indorsee  to  the  drawer,  will  operate  as  a  notice  from  each  iudor.see  to 
the  drawer;  and,  if  the  j^ayee,  or  first  indorsee,  has  duly  received 
notice,  a  notice  by  hiiu  to  the  drawer  will  be  cfiuivalcnt  to  a  notice 
from  each  indorscr,  and  from  the  holder  to  the  drawer.  (Baylev  on 
Bills,  209.)  And  a  notice  from  an  inlei-inedjnle  |i;irty  may,  in  plead- 
ing, be  described  as  a  notiee  from  llie  plaint  ill".  (Srirrn  v.  (lill,  S  V. 
&  P.  307.)  " 

IJule  refused.* 


M  161-104.  Tn  riinpmnn  v.  Krone  (3  Ad.  &  E.  in3  —  IS.IS) .  A  indnrsod 
tlto  l)ill  to  n.  who  left  it  will)  A's  clerk.  'Ilic  clerk  |ircscnt<(l  i(.  ami  on  dis- 
honor notified  llie  drawer  in  (lie  niinie  of  .\.  A  aflcrwiird-  Uml  up  the  liill 
from  B,  and  l)rr)n'_'lit  acdon  a^'ainst  the  drawer.  It  was  olijected  that  the 
notice  nhoiild  liave  been  in  the  name  of  R  tlie  bolder.  Ilrht :  Tltat  the  notice 
waH  HiifTicient.  The  conrt  einploytd  the  swee|iin>.'  lan^Mia/.'e,  which  has  since 
piven  rise  to  Hotiie  Mii>a|i|irehension,  that  "  It  is  universally  considi'red  that  the 
party  entitled  as  hf)lder  to  sue  upon  the  Idll  may  avail  himself  of  notice  ^'iven 
in  dne  time  by  any  party  to  it."  'I'hi-  is  projierly  (jualilied  in  the  \e^'.  Inst. 
L..  8   l»!l. 

In  Harrisfm  v.  h'usror.  (  l.'i  M.  A-  \V.  '2.TI  —  \H4(\).  .\  in.lnr-cl  tli<'  bill  to  H 
who  left  it  with  ('.  ('  pave  notice  of  dishonor  to  the  drawer,  iiut  by  mistake 
and  withont  aufliority.  in  the  name  of  A.  Action  by  I'.  af,'ainst  drawer,  llrld: 
Notice  bv  A  wfinid  be  nixM  under  doctrine  of  ('Impnuin  v.  h'''nnr,  (not.  how- 
ever, if  A  had  been  di«charj;ed   by  ln<  Ikk  u\    had  no  right  of  action  on  the  bill 


5;>()  NoTii'i':  01'  i)isia)S()i;.  [aut.  viH. 

§  162  'rh'ADKK'S'  NATIONAL  BANK  v.  JONES. 

Kit   Ai'iM.i.i.\Ti.:  Division    (\.  Y.)   -1 ."?:?.  — H)05. 

Ai'l'KAi.  1)V  ihc  (liffiKhiiit  Iroiii  ji  jiiil<4in('iil  in  favor  of  tlie  plaiiitilT, 
aiiil  fioiii  an  oidii-  ilciivinL;'  the  (li'lcmhinrs  iiiolioii  lor  a  new  trial 
inado  upon  llu'  ininulrs. 

LaI'cii  I.IN,  .1.  'I'lic  a(li(in  is  In  iiiii;'!il  to  iiHovcr  of  (he  clcrciulnnt. 
as  iiuloiser.  liic  ani<iuiil  ol'  tuo  |M'(iniissoiv  notes  and  protest  I'ei  s. 
The  (piesliitn  pnsiiii.ii  li.i'  di  tci  inination  is  whether  tlie  evi  In  .  .■• 
shows  as  matli'i-  of  law  I'u'  ui\iiiu'  of  (hie  iiotici'  of  protest  to  the  dc 
fenihint.  Both  notes  uiic  made  at  Siianlon,  Pa.,  I)y  tlie  eo-par(:'i  i 
ship  (inn  of  ('.  V.  l^>e(k\vitli  \'  ("o.  of  that  city.  They  were  payiMe 
to  the  order  of  t!ir  (K'fenchmt,  indorsed  hy  him,  and  then  indorsed  hy 
the  nialcerp  and  didivered  to  the  plaiidilT  hcfoi-c  maturity  at  wlioc 
bank  they  were  payaldc     ""     *     * 

The  notary  ^^ave  dne  and  tiniidy  notice  of  protest  to  the  defenchmt's 
firm,  who  were  hoth  niakcis,  and  in  form  at  least,  subsequent  indors 
ers.  If  the  ]daintitf  had  allcifiul  that  tlic  defendant  was  a  member  of 
the  firm  I  am  of  opinion  that  he  would  be  ehara:eable  with  notiee  of 
tiie  dishonor  and  with  the  notice  a^iven  to  his  firm  as  indorsers  ((invan 
V.  Jackson,  20  Johns.  ^7(^\  llallhlnii  v.  MrDougall,  2)1  Wend.  2CA,  272; 
see,  also,  Xeg.  Inst.  Law,  ifvj  K()-l.sr)-l,SO )  ;  but  this  was  not  pleaded, 
and,  since  it  was  not  an  issue,  tiiere  is  no  justice  or  pro])riety  in  seizinj^ 
upon  this  item  of  evidence,  although  admitted  without  objection  that 
it  was  not  pleaded,  for  the  purpo.se  of  holdins:  the  defendant.  The 
verdict  should  stand  or  fall  upon  the  issues  as  tried.  The  notice  to 
the  film,  however,  was  ic'cci\(Ml  either  on  the  day  the  note  fell  due  or 
on  the  mornin<]:  of  tlie  day  followini^.  With  it  eame  under  separate 
cover,  aihlressed  to  the  defeiulant,  care  of  the  firm,  a  formal  notice  of 
protest  hy  the  notary  in  behalf  of  the  plaintiff  directed  to  the  defend- 
ant, and  the  firm  were  requested  to  forward  the  same  to  him.  Mr. 
Beckwitli  testified  that  innnediately  upon  reeeiviuii  this  notice  he  in- 
closed it  in  an  envelope  and  addre-^sed  it  to  l!ie  defendant  at  his  i'e<,'- 
ular  place  for  receivin,;]j  mail  in  the  city  of  Xew  York,  which  was 
in  the  care  of  his  counscd  on  this  ajipeal.     *     *     * 


If  hf  had  tat-'f-n   il    uji)  :    nnticc  hy  ('   in    A's   mino  is   frood   since,   ttiouirli    un- 
authorized,   tin-   drawer    i^    imt    ininred. 

In  JenninCiH  v.  Ifobcits,  (A  li..  &.  I!.  (ilS —  IS;")")),  .\  indorsed  the  hill  to  de- 
fendant and  defpndnnt  to  p'aintifT.  I'laintiff  I  new  the  neeepfor  l;nd  stonped 
payment,  and  froli;thh-  "nrhl  "ot  pnv.  On  the  d:iv  after  rent''' ;*'•  ..  tM.n.'t 
knowinp  whetlipr  the  bill  (which  was  payable  at  a  distance)  h:id  Mctuall> 
been  dishonored.  plnintifF  told  defendant  it  had  l.<'eii  dislionmcl.  ;iiiii  In  slionld 
look  to  defendant,  l/rlil:  Xotier'  snfTieient.  "  Ff  :»  hill  is  dishoiiei' ■,!  i.i  fact, 
and  a  partv  to  the  hill  >nief|nivoeally  assert-,  that  fnet  in  v  vk  ♦:'..  nf  di-- 
honor.  I  think  von  cannot  inrjuire  into  the  state  of  the  party's  iiiiiid,  or  hi.s 
means  of  knowledge."  —  H. 


II.    1.]  BY   WHOM   GIVEN.  537 

Although  it  presumptively  appears  from  the  face  of  the  notes  and 
the  indorsements  that  the  defendant  was  an  accommodation  indorser 
for  the  makers  (Smith  v.  Weston,  159  N.  Y.  104;  Nat.  Park  Bank  v. 
German  American  M.  W.  &  S.  Co.,  116  N.  Y.  281),  and,  therefore, 
would  not  be  liable  to  them  and  consequently  they  could  not  in  their 
own  behalf  give  him  a  valid  notice  of  protest  (Neg.  Inst.  Law,  §  161; 
Cahot  Hank  v.  Warner.  10  Allen  (Mass.)  522;  Harrison  v.  Rusroe,  15 
M.  &  W.  231  ;  Stanton  v.  Blossom,  17  Mass.  116,  130;  Story,  Prom. 
Notes,  7th  Ed.,  §  303),  yet  they  could  on  behalf  of  the  bank  and  as 
its  agents  give  the  notice  by  forwarding  it  immediately  as  was  done. 
(Neg.  Inst.  Law,  §§  162-163;  Sewall  v.  Russell,  3  Wend.  276;  Cha- 
noine  v.  Fowler,  3  Wend.  173;  Lawrence  v.  Miller,  16  N.  Y.  235; 
Smith  v.  Poillon,  87  N.  Y.  590 ;  Eagle  Bank  v.  Halhaiuay,  5  Mete. 
(Mass.)  212;  Rowe  v.  Tipper,  13  C.  B.  249;  Chapman  v.  Kcane,  3 
Ad.  &  El.  103;  Lysaght  v.  Bryant,  19  L.  J.  C.  P.  160). 

It  follows,  therefore,  that  the  judgment  and  order  should  be  af- 
firmed, with  costs. 

Ingraiiam  and  McLaughlin,  J  J.,  concurred;  Patterson,  J.,  con- 
curred in  result;  Van  Brunt,  P.  J.,  dissented. 

Judgment  and  order  affirmed,  with  costs. 


§  163  STAFFORD  v.  YATES. 

18   .Johnson    (N.   Y.)    .327.— 1820. 

Action  by  second  indorser  against  first  indorser.  Defense,  want 
of  notice.    Judgment  for  plaintiff. 

The  note  was  indorsed  for  the  accommodation  of  the  maker.  It 
was  di.scounted  at  bank,  and'  on  dishonor  at  niatiirily  due  notice  was 
given  hy  the  agent  of  IIk;  bank  to  both  indorsers.  No  notice  was  giv<>n 
by  plaintiff  to  defendant.     Plaintiff  took  np  the  note. 

Per  Curiam.  —  We  see  no  ground  to  doubt  the  correctness  of  the 
decision  at  the  (•ir<'nit.  T'^pftn  authority,  as  well  as  sound  renson,  it  is 
sutTicient  that  the  first  indorser  had  notice  from  any  subseriuent  holder 
of  the  note,  of  the  default  of  the  mnker,  and  thnt  he  would  he  looked 
to  for  payment;  provided  such  notice  were  given  imrnedintely  after 
such  default.  The  only  object  in  re'|uiriii;r  notice  is,  that  such  in- 
dorser mav  have  recourse  to  the  mnker,  to  indemnify  hiniself.  And 
whether,  after  such  notice,  the  first  indorser  be  sued  by  the  secoiul, 
or  third  indorser,  is  immnterial :  ond  notice  of  nonpayment,  etc., 
from  either  of  them,  enures  to  the  benefit  of  all  who  stand  behind  him 

on  the  note. 

Judgment  for  the  |»lMintiff. 


538  NOTICE   OF    DlSllONOK.  [auT.    YIH. 

§  165  OHIO  LIFE  INSURANCE  AND  TRUST  CO.  v.  M'CAGUB. 

KS    Ohio,    54.—  1849. 

Action  against  drawor  of  a  Itill  payable  to  his  own  order  and  in- 
dorsed by  liini  to  plaintiil'  and  by  |)hiintilF  to  its  agent  in  New  York. 
Jndgnient  for  plaintiil'. 

Si'.VLUiNC,  J.  —  There  are  really  but  two  questions  presented  in  this 
case  for  our  consideration:  First.  Was  the  notice  of  protest  for  non- 
payinont  transmitted  with  siillicieni  diligence  and  direetness  to  the 
defendant  ? 

The  bill  matured  and  went  to  protest  on  the  l!)th  day  of  June,  1846. 
It  was  then  in  the  hands  of  an  agent  of  the  plaintiff  in  the  city  of 
New  York.  Admit  that  agent  to  have  been  the  actual  cashier  of  the 
"  Trust  Company."  lie  was  then  attending  to  an  agency  in  the  City 
of  New  York,  and  so  far  as  it  concerned  the  bill  in  question,  which 
was  discounted  at  the  bank  in  Cincinnati  and  sent  to  him  in  New  York 
for  collection,  he  may  as  well  be  called  an  agent  as  any  indifferent 
person.  This  agent,  on  the  very  next  day  after  the  protest  in  New 
York,  sent  the  notice  by  mail  to  his  principal  in  Cincinnati,  where  it 
arrived  on  the  25th  of  June,  and  on  the  same  day  was  again  placed  in 
the  mail,  directed  to  the  defendant  at  Ripley.  The  most  stringent 
rules  of  the  law  merchant  will  require  no  more  than  this.  The  whole 
objection  of  counsel  is  based  u])on  the  fanciful  idea  that  the  Ohio  Life 
Insurance  and  Trust  Company  at  Cincinnati  was  embodied  in  the 
person  of  its  cashier,  Win.  M.  Verniilye,  in  the  City  of  New  York; 
and  that  it  was  sending  the  notice  of  protest  from  itself  in  New  York 
to  itself  in  Cincinnati.  We  are  not  inclined  to  indulge  in  subtleties  of 
this  sort,  and  hold  that  Mr.  Vermilye  in  New  York,  whether  he  be 
called  agent  or  cashier,  was  employed  by  the  holder  of  the  bill  in  Cin- 
cinnati to  present  the  same  for  payment;  and,  on  payment  being  re- 
fused, to  return  it  in  <lnc  time,  with  the  ordinary  notice  of  protest,  to 
his  cmplovcr  in  Cincinnati,  whose  duty  it  would  be  to  communicate 
with  the  other  parties  to  the  bill. 

[Omitting  a  question  of  statutory  construction.] 

Judiriiu'iit  affirmed.* 


5  Accord:  Howard  v.  Ives,  1  Hill  (N.  Y.)  20.3;  Church  v.  Barlow,  fl  Tick. 
(Mass.)    .547;    Rnnshnw  v.   Triplctt,  23   Mo.  213. 

It  has  rocently  been  held  by  the  Engli-sh  Court  of  Appeal  (Collins,  L.  J., 
di'sentinjr).  that  where  a  bill  is  forwarded  by  the  A.  Branch  of  the  X  Bank, 
due  notice  to  the  R.  Branch  of  the  same  bank  is  sufficient  to  satisfy  sec.  49 
subsec.  (12)  and  (13)  of  the  Bills  of  Kxchanjrc  Act,  since  the  X  Bank  is  the 
principal,  and  not  a  particular  branfh  of  that  bank.  Firldinq  d  Co.  v. 
Carry,  flRflS]  1  Q.  B.  268.  These  provisions  are  substantially  the  same  as 
§   165,  and   ^   175  of  the  Nep.  Inst.  Law.  —  H. 


ii.  2.]  form  of  notice.  539 

2.  Form  of  Notice. 
§  166  KING  V.  HURLEY. 

85   Maime,  525.  —  1893. 

Emery,  J.  —  This  wns  an  action  1)y  an  indorsee  against  the  indorser 
of  a  promissory  note.  At  the  maturity  of  the  note,  payment  was  duly 
demanded  of  the  maker,  and  was  refused,  and  notice  tliereof  was  sea- 
sonably sent  to  the  defendant  indorser.  The  defendant  makes  but 
two  objections  to  the  notice.  First,  that  it  did  not  state  who  were 
the  other  indorsers  of  the  note.  Second,  that  it  misstated  the  amount 
of  the  note. 

The  defendant,  however,  docs  not  show  that  he  was  in  the  least  mis- 
led or  confused  by  the  omission,  or  by  the  mistake.  On  the  contrary, 
it  clearly  appears  that  he  understood  the  notice  to  refer  to  the  note 
in  suit.  He  was,  tlierefore,  fully  informed  of  the  dishonor  of  this 
note  and  that  tiie  holder  looked  to  him  for  payment.  This  was  suf- 
ficient to  fix  his  liability.  {Cayuga  Co.  Bank  v.  Warden,  1  N.  Y.  413; 
6  N.  Y.  19.) 

Exceptions  overruled." 


§  167  ]\nLLS  V.  BANK  OF  UNITED  STATES. 

II    Whkaton    (II.   S.)     431.— 1826. 

Action  against  indorser  on  a  note  dated  20  July,  ISIO,  payable 
60  days  after  date  at  the  office  of  di.scount  and  deposit  of  the  Rank  of 
the  United  States,  at  riiilicothc.  The  following  notice  of  dishonor 
was  sent  to  the  indorser: — 

CniLirOTliK,  22n(l  Srplritibrr,  1819. 
Sir,  Yon  will  lifPfliy  take  nntico,  that  a  ik>1(;  drawn  l)y  W'ooti  &  Khcrt,  dated 
20th  day  of  .ScptfinlxT,  181!),  for  3,(JI)0  dcillars,  jtayahlp  to  you,  or  order,  in 
sixty  days,  at  tlie  ofTinc  of  disroiint  and  deposit  of  (lie  Hank  of  the  I'nitefl 
States  at  (liilicot  he.  and  on  wl'iieh  yon  are  indorser,  has  hecii  protested  for 
non-payment,   and   the   holders   thereof   look    to  yon. 

^'onrs    ri'sjieel  fnlly. 

I.KVIN     r.i-iT. 
Peter    Mills,    Esq.  Mayor   of    Chilieolhe. 

Mr.  JtisTiCE  Story  (after  staling  the  fads)  delivered  Ihe  opinion 
of  the  court. 

The  first  point  is,  whether  the  notice  sent  (<>  the  dcfendanf  at 
Chilicothe,  was  sufficient  to  charge  him  as  indor.ser.  The  court  was 
of  opinion,  that  it  was  sufficient,  if  there  was  no  other  nolo  payable 
in  the  office  at  Chilicothe,  drawn  by  Wood  (^  Eberl,  and  iiiibirscd  by 
the  defendant. 

•  See  al.so  Sussex  Oank  V.  lialdicin,  17  N.  J.  L.  487.  ante,  p.  480.  —  H. 


640  NOTICE   OF    DISHONOR.  [ART.    VIII. 

It  is  contended,  that  this  opinion  is  erroneous,  because  the  notice 
was  fatally  dofoi'tivo  hy  reason  of  its  not  stating  who  was  the  holder, 
by  reason  of  its  misdescription  of  the  date  of  the  note,  and  by  reason 
of  its  not  stating  that  a  deniaiul  had  boon  made  at  tiie  hank  when  the 
note  was  due.  The  first  objection  proceeds  upon  a  doctrine  which  is 
not  admitted  to  be  correct ;  and  no  authority  is  produced  to  support 
it.  No  form  of  notice  to  an  indorser  has  been  prescribed  by  law.  The 
whole  object  of  it  is  to  inform  the  party  to  whom  it  is  sent,  that  pay- 
ment has  been  refused  by  the  maker;  tliat  he  is  considered  liable;  and 
that  payment  is  expected  of  him.  It  is  of  no  consequence  to  the  in- 
dorser who  is  the  holder,  as  he  is  equally  bound  by  the  notice,  whom- 
soever he  may  be;  and  it  is  time  enough  for  him  to  ascertain  the  true 
title  of  the  holder,  when  he  is  called  upon  for  payment. 

The  objection  of  misdescription  may  be  disposed  of  in  a  few  words. 
It  cannot  be  for  a  moment  maintained,  that  every  variance,  however 
immaterial,  is  fatal  to  the  notice.  It  must  be  such  a  variance  as  con- 
veys no  sufficient  knowledge  to  the  party  of  the  particular  note  which 
has  been  dishonored.  If  it  does  not  mislead  him,  if  it  conveys  to  him 
the  real  fact  without  any  doubt,  the  variance  cannot  be  material,  eitlier 
to  guard  his  rights  or  avoid  his  responsibility.  In  the  present  case,  the 
misdescription  was  merely  in  the  date.  The  sum,  the  parties,  the 
time  and  place  of  payment,  and  the  indorsement,  were  truly  and  ac- 
curately described.  The  error,  too,  was  apparent  on  the  face  of  the 
notice.  The  party  was  informed  that  on  the  22d  of  September,  a  note 
indorsed  by  him,  payable  in  sixty  days,  was  protested  for  non-payment ; 
and  yet  the  note  itself  was  stated  to  be  dated  on  the  20th  of  the  same 
month,  and,  of  course,  only  two  days  before.  Under  these  circum- 
stances, the  court  laid  down  a  rule  most  favorable  to  the  defendant. 
It  directed  the  jury  to  find  the  notice  good,  if  there  was  no  other  note 
payable  at  the  office  at  Chilicothe,  drawn  by  Wood  &  Ebert,  and  in- 
dorsed by  the  defendant  If  there  was  no  other  note,  how  could  the 
mistake  of  date  possibly  mislead  the  defendant?  If  lie  had  indorsed 
but  one  note  for  Wood  &  Ebert,  how  could  the  notice  fail  to  he  full 
and  unexceptional  in  fact?^ 

The  last  objection  to  the  notice  is,  that  it  docs  not  state  that  pay- 
ment was  demanded  at  the  bank  when  the  note  became  due.  It  is 
certainly  not  necessary  that  the  notice  should  contain  such  a  formal 
allegation.  It  is  sufficient  that  it  states  the  fact  of  nonpayment  of 
the  note,  and  that  the  holder  looks  to  the  indorser  for  indemnity. 
Whether  the  demand  was  duly  and  regularly  made,  is  matter  of  evi- 
dence to  be  established  at  the  trial.  If  it  be  not  legally  made,  no  aver- 
ment, however  accurate,  will  help  the  case;  and  a  statement  of  non- 

7  Followed  in  Derham  v.  Donohue,  15.5  Fed.  :i85,  reported  in  12  A.  &  E. 
Am.  Cas.  372,  with  note  entitled  "  Effect  of  misstatement  in  notice  of  protest 
as  to  time  of  dishonor."  —  C. 


II.    2.]  FORM    OF    NOTICE.  541 

payment  and  notice,  is,  by  necessary  implication,  an  assertion  of  right 
by  the  holder,  founded  upon  his  having  complied  with  the  requisitions 
of  law  against  the  indorser.  In  point  of  fact,  in  commercial  cities, 
the  general,  if  not  universal,  practice  is,  not  to  state  in  the  notice  the 
mode  or  place  of  demand,  but  the  mere  naked  nonpayment. 

Upon  the  point,  then,  of  notice,  we  think  there  is  no  error  in  the 
opinion  of  the  Circuit  Court. 

[The  court  then  decides  that  a  usage  to  demand  payment  on  the 
fourth  day  of  grace,  is  good,  and  some  other  points  immaterial  here.] 

Judgment  affirmed.* 


§  167  SALOMON  v.  PFEISTER  &  A^OGEL  LEATHER  CO. 
31  Atl.\ntic  Reporter  (N.  J.)   602.—  1S95. 

Action  against  indorser.    Judgment  for  plaintiff. 

Van  Syckel,  J.  —  The  only  question  which  it  is  deemed  necessary 
to  discuss  in  this  case  is  whetlier  a  notice  of  protest  must  contain  an 
express  statement  that  the  holder  of  the  protested  note  will  look  to 
the  indorser  for  payment.  This  question  was  before  our  Supreme 
Court  in  Burgess  v.  Vreelaiid  (24  N.  J.  Law,  71),  in  which  case  there 
was  a  failure  to  state  in  the  notice  that  the  holder  looked  to  the 
indorser  for  payment.  The  chief  justice  in  deciding  the  case  said: 
"  The  object  of  the  notice  is  to  apprise  the  indorser  that  the  note  is 
dishonored,  and  that  he  is  looked  to  for  payment.  It  is  not  necessary 
to  state,  in  terms,  that  the  holder  looks  to  the  indorser  for  indemnity. 
It  is  enough  if  that  fact  appears  by  just  and  natural  implication.  The 
modern  cases  agree  that  the  fact  of  giving  iiolice  to  tlie  indorser  that 
the  note  is  dishonored  for  nonpayment  is  in  itself  a  sufficient  notice 
that  the  indorser  is  looked  to  for  payment."  Many  authorities  sup- 
porting this  rule  are  cited  in  the  opinion.  In  the  later  case  of  11  nw- 
land  V.  Adrian  (.SO  N.  J.  Law,  II)  the  rule  recognized  was  that  the 
notice  must  be  sufficient  to  inform  the  partv.  either  in  express  terms 
or  by  necessary  inifdication,  that  the  l»ill  or  note  had  been  dishonored, 
and  that  he  was  looked  to  for  paymetd.  Iri  (he  case  in  hand  the  notice 
mailed  to  the  indorser  stated  that  payment  of  the  note  bad  been  duly 

"  An  nmisiion  or  misdrspriptinn  of  t)io  mnkpr's  nnmp  may  ronflcr  the  notion 
ineffectual.  Ilnmr  /nn.  Co.  v.  Crr.rn.  10  N.  Y.  518;  Mrdrnrfir  v.  Chnptnnn,  ATi 
N.  .7.  I-.  3n.'i.  flut  not,  it  Hfrms.  if  tin*  indorser  is  not  ini'-lcd  tlicrctn'.  niurUind 
f.  Aflrinn.  30  N.  J.  L.  41  ;    fJodpcs  v.  Shulrr.  22  N.  Y.   114. 

Where  the  not  ire  mny  ni>I)ly  to  any  one  of  two  or  more  notes  inrlorsed  t»y 
the  defendant,  the  notice  may  he  inefTeetiial.  Cnnk  v.  Ijitrhfirld.  fl  N.  Y.  270. 
But  not,  it  seems,  if  the  indorser  is  not  misled  th<rchy.  s.  c,  (on  retrial),  2 
Bo8w.    (N.   Y.)    137. 

It  is  unnece.ssary  that  the  Ti')liro  slioiild  ineliide  a  ropy  nf  (hr  protest. 
Donnistoun  v.  Stewart,   17    Mow,    tV.  S.)    606,  pout. —  M. 


542  NoricK  OF  disiionou.  [art.  viii. 

(UmikiikKmI  of  tlu'  lualu'i',  (hat  |>aviiu'iil  was  refused,  and  that  tlie  note 
was  protested  for  noii-|iaviiieiit.  'I'lie  only  inference  wliicli  the 
indoiser  eoiiKI  reasonal)!}'  have  drawn  from  such  a  notice  was  that 
the  liolder  of  the  note  intended  to  look  to  him  for  payment.  The  lia- 
bility of  the  niakei'  to  the  holder  was  fixed  without  prosontmcnt  and 
protest,  and  therefore  the  only  purpose  which  the  holder  could  have 
had  in  sending  such  notice  was  to  charge  the  indorser.  The  notice  in 
this  ease  was,  in  my  opinion,  sufficient,  and  the  judgment  below  should 
be  atlirmed.* 


3.  Mode  of  Notice. 

(a)  Personal  delivery. 

§  167  TIOBBS  V.  STRAINE. 

149  Massachusetts,  212.  — 1889. 

Action  against  indorser.    Verdict  for  plaintiff. 

Morton,  C.  J.  —  Notice  of  the  dishonor  of  a  note  is  6uf!ioient  to 
charge  an  indorser  if  it  is  delivered  to  him  personally,  or  is  left  at 
his  place  of  residence  or  of  business,  or  is  deposited  in  the  mail  ad- 
dressed to  him  at  his  place  of  residence  or  of  business,  the  postage  being 
prepaid.  (Pub.  Sts.,  c.  77,  §  16;  Bank  of  America  v.  Shaw,  142  Mass. 
290;  Importers  &  Traders'  National  Bank  v.  Shaw,  144  Mass.  421.) 
The  underlying  principle  of  all  the  decisions  upon  the  subject  is,  that 
reasonable  diligence  must  be  used  by  the  holder  in  getting  notice  of 
the  dishonor  to  the  indorser. 

In  the  case  at  bar,  the  evidence  tended  to  show  that  the  plaintiffs, 
in  due  time,  took  a  written  notice  of  the  dishonor,  addressed  to  the 
defendant,  to  his  office,  wliich  was  his  place  of  business,  and,  finding 
no  one  in,  left  it  there.  The  precise  place  in  the  office  where  it  was 
left  was  not  fixed  with  certainty,  and  the  court  instructed  the  jury, 
that,  if  they  found  that  it  was  left  in  a  conspicuous  place  in  the  office, 
it  was  a  sufficient  notice.  This  ruling  was  correct.  The  jury  might 
well  find  that  the  notice  was  left  in  good  faith  in  the  defendant's  office, 
in  such  way  that  he  would  be  likely  to  see  it  when  he  came  in.  Such 
a  mode  of  giving  the  notice  would  ordinarily  be  as  effe(;tual  as  if  it 
were  sent  by  mail  through  a  "letter  carrier.  We  think  the  evidence 
shows  a  compliance  with  the  rule  of  law  requiring  the  holder  to  exer- 

»  An  indication  of  dishonor:  "  Has  not  been  paid  and  I  request  (or  demand) 
payment."  Arnold  v.  Kinlnch,  50  Barb.  (N.  Y.)  44;  Page  v.  Gilbert,  fiO  Me. 
48S;  Armstrong  v.  Thurston,  11  Md.  148;  Pinhham  v.  Macy,  9  Met.  (xVlaas.) 
174.  — H. 


II.    3.]  MODE    OF    NOTICE.  643 

r-T?c  ron.-orinl)l('  diligence,  iiml  t!i;it  the  iiotiec  was  suffieieiit  to  eliarge 
1  ••?  til  I'l"  (';i!l  as  iiiuorsei . 

[\i\:  iiii.  .: -tjia't^lio:!  as  to  waivei.J 

K.xeeptions  overruled.' 


{!>)   Mail  delivery. 

\  1G7  SIIKLDOX  V.  BENHAM. 

4   Him.   (N.  V.)    12!t.  —  lS-43. 

Action  against  indnrser.  Note  payable  in  (Jeneva.  TTolder  and 
indorser  reside  in  Penn  Van.  Xote  dishonored  in  (Jeneva  ;  notices  .';ent 
l)y  mail  from  Geneva  to  iioldcr  in  I'enn  Yan  ;  holder  deposits  notice  for 
indor.<5er  in  Penn  Yan  postotHce.  Indorser  asks  nonsuit  on  the  ground 
that  leaving  the  notice  in  the  ywstoffice  at  Penn  Yan,  there  heing  no 
evidence  that  the  defendant  received  it,  was  insufficient.  Motion  for 
nonsuit  denied.     Verdict  for  plaintiff. 

liif  Ihf  Coiiri.  HiioNsoN,  .1.  —  It  seems  to  have  been  assumed  on 
the  trial  that  lialnock  o>vncil  tiie  note,  and  sent  it  to  the  hank,  where 
it  was  made  payable,  for  collection.  Notice  was  sent  to  Babcock,  tlie 
last  indorser,  with  notices  for  the  other  indorsers;  and  if  he  was  not 
mistaken  as  to  the  ])roi)er  mode  of  service,  he  gave  notice  to  the  de- 
fendant Benhani  on  the  same  day  or  the  day  after  he  received  advices 
from  the  bank.  Either  day  was  sufficient,  (l/dirnrd  v.  Ires.  1  II ill, 
'.?';'5;  Hank  v.  Daris,  '^  Id.  I')!.)  But  as  Babcock  and  the  defendant, 
Penhani,  lived  in  the  same  village,  I  think  the  service  should  have 
I'ccn  personal,  or  by  leaving  tlie  iiofiie  at  the  dwelling  house  or 
■hvv  of  business  of  the  irulorser,  and  that  service  through  the  post- 
o"!ce  was  not  sufficient.  The  postctffice  is  not  a  place  of  depo'-it  for 
••otiees  to  indorsers,  except  where  the  notice  is  to  be  transmitted  bv 
mail  to  another  otliee.  {Uausinn  v.  Marl,-,  'i  Hill,  5X7.)  None  of  onr 
cases  have  go?)e  further  than  tlial. 

New  I  rial  :n"''del 


'  Notiro  at  a  plnrp  of  lni«in<'<"'  nipv  ho  I-ft  wMli  .""iv  v^  "•'  i"  o  •••••-'• 
i'nitk  V.  ifudfi'tl.  44  N.  Y.  514:  Mrrz  v.  h'nisrr,  20  T.a.  .\nn.  377.  Se.  mIm>. 
•  •  to  notiri-  at  tin-  rrsi(l<-ncc  of  tin-  iii'Iorfi-r.  f  .  S.  Hmih  v.  U-i-h.  '•  ''  ' 
'I'.  S.)  2.'')0;  liliikrjy  v  Crnnl .  0  >tn«M.  3R«:  lirmtlrv  v,  nmiy.  ?r>  M.  -iri- 
Hn-rr  v.  Hrftfllru.  10  M*-.  .11.  Notice-  liv  tf!c'nlir)nc  to  h.'  rlTrctivi-  r-'wt  I -• 
nhown  to  hav**  artiinlly  rf-arlH-d  tlw  imiorvcr.  rsnally  it  -Aould  Iti-  nrrpssnry 
to  show  tlint  the  [>rrson  n-Mpondin^'  wa-i  the  indorser  hiniself.  Thompson,  rtr., 
Co.  V.  Applrhy.  5  Kan.  Ajip.  (W).  4S  V-.u-.  tlej..  0.13.  S  ■■•  a'-^o  st'-„-t  v.  /■>/-•... 
i  Cainps   (N.  Y.)    121.  post.  p.  .')4(l:   Atlams  v.  Urtv/i/.   14  VVIh.  408.  po,y/.  —  TT. 

2  NoTiCK  iiv  Mail.  In  the  almenee  of  "tatnte  the  mail  eannot  he  iiHed  a<  n 
place  of  depcmit  hut  onlv  hm  a  i-ea'm  of  Iran-mission.  \  on  Vrrlilni  v  I'rxnin, 
13  N.  Y.  549.  This  rule  wn«>  plian'jed  hy  statute  in  New  York  by  T,.  1S.')7. 
p.  410:   ^ut  t!iM  sf.nttit.'  d-'M  net   ahrjct-/"  the  ri\'l't   (if  t h'-   iiKloiscr  to  dcH^nfitr 


'"iM  NOTICE   OF    DISHONOR.  [aHT.    VIll. 

§176  S'lW'I'K  n.WK  r.  SOLOMAN. 

S-J  Si  rn.KMiM    iN.   ^,  Sri".  (  r.,  Ait.  T.)    070.-1003. 

1""kki;i»iM A.\,  1*.  .).  —  'I'liis  ailiDii  \v;i,'^  upon  a  ])i'oiiiiss(irY  note,  anrl 
tiio  oiilv  i!«siii'  liti^aloil  ;il  liu'  liial  wa.--  wlicllicr  nr  luil  iiolni'  dl'  llic 
uit^lioiioi'  ol"  (he  note  was  ijivt'ii  ami  irri'i\i'(l.  I'ldof  that  siicli  iidIkc 
was  iluly  adilresseil  aiui  (K^|lu^ilnl  in  the  jxistoiruf  in  a  |i().-t|)ai(l 
wiappL'i-  was  addufod  hy  Ihr  |)hiintiir.  The  court  chai'^tMl  the  jiiiy  tliat. 
tlie  only  (juestioii  for  them  to  decide  was  whether  the  delenthint  k;- 
eeived  notice  of  the  presentation  and  protest  of  the  note.  "  If  he  did,"' 
said  the  court,  "your  verdict  will  be  in  favor  of  the  plaintill";  other- 
wise it  will  he  in  favor  of  the  defendant.  It  is  the  i\u\\  of  the  j)laintiir 
to  establish  by  the  weii^ht  and  preponderance  of  evidence  that  a  notice 
of  presentation  and  protest  of  this  note  was  served  upon  the  defendant 
in  this  action."  The  plaintiff's  counsel  thereupon  asked  the  court 
to  eharsxe  the  jury  "  tliat  it  is  not  necessary  for  an  indorsei-  to  i-eccive 
a  notiee  of  protest.  The  mere  deposit  of  a  notice  in  a  postpaid  wrap- 
per in  the  postoffice  of  New  York  City  is  sufficient."  To  this  rnpiest 
the  court  responded  :  '*  It  is  not  suflfieient.  It  is  prima  farie  evidence 
of  the  facts  stated  by  the  witnesses."  To  this  rulint?  the  plaint ilf's 
counsel  duly  excepted.  'I'he  jury  rendered  a  verdict  in  favor  of  the 
defendant,  and  the  plaintiff  now  appeals. 

This  ruling  of  the  court  was  in  direct  conffict  with  section  ITH  of 
the  Negotiable  Instruments  Law  (Laws  1S!)7,  p.  711,  c.  612).  That 
section  provides:  "Where  notice  of  dishonor  is  duly  addressed  and 
deposited  in  the  postoffice,  the  sender  is  deemed  to  have  given  due 
notice,  notwithstanding  any  miscarriage  in  the  mails."  'J'he  testi- 
mony of  the  plaintiff's  witnesses  as  to  the  addressing,  mailing,  eli .,  of 
the    notice    was    undisputed.      Tf    llie    jury    believed    t'lal    te;  (iiiiory, 


the  particular  address  to  which  the  notice  shall  be  sent.  Bartktt  v.  Rnliihson, 
3!)  X.  Y.  187  (18(J8).  Indcpcndrnt  of  statute  it  has  been  licid  tliat  where  tlie 
indorsrr  resides  outside  the  corporate  limits  of  tlie  town  wliere  the  instrument 
i«  dishonored  and  is  in  the  linbit  of  receiving  his  mail  tliere.  tlie  post-offiee  may 
he  used  as  a  place  of  deposit  in  order  to  relieve  the  holder  of  tlie  burden  and 
expense  of  .sending  a  niessen<,'cr.  Bank  of  Columbia  v.  Lrnriciice.  1  I'et.  (I'.  S.) 
578  (1828)  ;  linrrrt  v.  Evans,  28  Mo.  331  ;  BcTl  v.  Stair  Itnnk,  7  Blnekf.  (  Iiid.) 
4.')r»:  but  the  contrary  has  also  been  maintnined.  Forhrs  v.  Omahn  \fit.  fU:..  Ht 
Neb.  338  (188n);  Rroirn  v.  Bank  of  Ahi7ipfIon.  85  Va.  05  (188S).  If  s-cli 
notice  is  actually  received  in  due  time  it  is  unquestionably  good.  I'hclps  v. 
Ftockinq,  21  Neb.  443  (1887).  Where  there  is  a  letter  carrier  delivery  !it 
offices  and  re-idenees  the  mail  mny  be  used  though  the  indorser  reside  in  1lie 
place  where  the  instrument  is  dishonored,  for  in  such  case  the  mail  is  ii-cd 
for  transmission  and  not  for  deposit.  Shormnkfr  v.  MpcJianir/i'  Batik.  59  I'a. 
St.  83  (ISOS);  Walters  v.  Brown,  15  Md.  285  (1859);  but  in  such  case  a 
deposit  of  a  notice  not  addres-ed  to  a  street  and  number  has  been  held  not 
within  the  rule.  Brncdict  v.  Srhmirp.  13  Wash.  47fi  (189(i).  By  the  stntute 
above,  notice  by  deposit  is  now  sufficient.     See  §   174,  subsec.  3,  post. — H. 


II.    3.]  MODE   OF    NOTICE.  545 

whetlier  tlie  defendant  received  such  notice  is  not  material.  The  court 
should  have  so  charged.  To  refuse  so  to  charge  constituted  reversible 
error,  for  which  a  new  trial  must  be  granted. 

Judgment  reversed,  and  new  trial  ordered,  with  costs  to  the  appel- 
lant to  abide  the  event.    AH  concur.^ 


§  177  PEARCE  V.  LANGFTT. 

101   Pennsylvania   State.  507.— 18S2. 

Action  against  indorser.  Holder  handed  notice  duly  addressed  and 
stamped  to  a  United  States  mail  carrier,  who  was  then  in  the  bank  to 
deliver  mail.     Judgment  for  plaintiff. 

Mk.  Justice  Green  delivered  the  opinion  of  the  court,  December 
30th,  1882. 

We  think  the  delivery  of  a  letter  to  an  official  letter  carrier  is  the 
full  equivalent  for  depositing  it  in  a  receiving  box  or  at  the  postoffice. 
WHien  left  in  the  former  it  is  for  the  purpose  of  being  taken  therefrom 
by  the  carrier,  and  if  left  at  the  postoffice  it  must  be  taken  from  the 
receptacle  there  provided  for  its  deposit,  either  by  the  postnuister  or 
by  some  one  of  his  agents,  to  be  placed  in  the  mail.  In  cither  case  the 
letter  must  come  into  the  personal  custody  of  some  one  lawfully  au- 
thorized for  tlie  purpose,  whose  function  it  is  to  participate  in  the 
transmission  of  it  from  the  sender  to  the  mail. 

It  certainly  can  make  no  difference  whether  the  letter  is  handed 
directly  to  the  carrier,  or  is  first  deposited  in  a  receiving  box  and  taken 
from  thence  by  the  same  carrier.  In  the  case  of  SHlberl-  v.  Carhett 
(7  Ad.  &  El.  N.  S.,  p.  S4fi),  in  which  the  very  point  was  decided,  Lord 
Denman,  C.  J.,  said:  "  If  a  public  servant  belonging  to  the  postoffice, 
takes  charge  of  the  letter  in  the  exercise  of  his  public  duty,  it  is  the 
same  as  if  it  were  carried  to  the  office."  The  postal  regulations  of  the 
United  States  require  that  carriers  while  on  their  rounds  shall  receive 

3  "  Prior  to  tho  ciiuetiiiont  of  tlie  Negotiable  Instruments  Law.  if  tiotice  of 
protcHt  was  sent  liy  a  letter,  itrciiaid,  properly  addressed,  and  dipDsitcd  in 
the  |M)''t-ofriee,  there  was  a  presuni|>t  ion  that  it  reaehe<!  its  dcsf  inal  ion  l)y 
diM«  eonrse  of  mail,  hnt  <lie  presumption  could  he  rebutted  by  r'viih'nec  show- 
ing that  it  was  not  received,  and  when  such  evirlenee  was  proilueed,  it  wa« 
a  question  of  fact  for  the  jury:  .Jmmn  v.  MrCorhill,  Lll  I'a.  ;J2:{.  Section 
inr)  [N.  v.,  §  ITiij  has  ehan^ed  the  former  hiw  on  lliis  subject  liy  providin."; 
that  'where  notice  of  dislionor  Ih  diily  a<hlr««sed  and  deposited  in  the  post- 
ofFicP.  the  sender  is  deemerl  to  have  given  due  notice,  nof wilhsfandinL'  any 
miscarriage  in  the  mails.'  Umler  this  Hcction  due  n*)ticc  of  dishonor  is 
deemed  to  have  be«'n  given  when  it  is  hIiowu  that  the  notice  is  properly  ad- 
drensed  and  rleposited  in  th'*  post  olTice,  whether  it  has  been  received  or  not. 
In  other  wordH,  the  purpfise  an<l  effect  of  this  section  of  the  act  were  simply 
to  protect  the  sender  of  the  notice  against  miscarriag''  of  the  mails."  Mies- 
TREZAT,  .T..  in  Zollnrr  v.   MofT'tl.  222  J'a.  St.  044,  051.  — C. 

NKOOT.   INSTKL'MKNTS  —  ^5 


.*>i6  NOTICK    OK    DtSlIONOK.  [AUT.    Vlll. 

all  letters  pivpniil  that  may  l)e  liaiulod  to  tlioiii  for  mailing.  It  fol- 
lows that  when  siieh  a  carrii'l-  receives  a  j)rej)aicl  lettel'  from  a  citizen 
for  the  purpose  of  heing  inailini,  he  is  in  the  striet  performance  of  his 
ottieial  duty. 

[Omitting  other  questions.) 

Judgment  affirmed.* 


4.  To  Whom  Notice  May  Be  Given. 
§  169  STEWART  v.  EDEN. 

2  Caines   (N.  Y.)    121.— 1804. 

AcTfoN  against  executor  of  indorser.  Shortly  after  the  note  was 
indorsed  the  indorser  removed  to  his  country  residence  and  there  died. 
His  will  was  not  proved  until  after  the  maturity  of  the  note.  At  its 
maturity  the  holder,  upon  dishonor,  sent  a  messenger  with  a  notice  of 
dishonor,  directed  to  the  indorser,  to  the  town  house  of  the  indorser, 
but,  as  it  was  closed,  the  notice  was  rolled  up  and  put  into  the  keyhole 
of  the  door. 

Livingston',  J.,  delivered  the  opinion  of  the  court.  *  *  * 
Ought  notice  of  the  maker's  default  to  have  heen  sent  to  the  in- 
dorser's  country  house  ?  The  note  hcing  dated  in  New  York,  the  maker 
and  indorser  are  presumed  to  have  resided,  and  contemplated  payment, 
there.  It  is  admitted,  indeed,  that  the  indorser  did  reside  in  the  city 
at  the  time  of  its  date,  for  it  is  stated  that  shortly  thereafter  he  went 
to  his  country  seat,  shutting  up  his  house  in  town.  We  must  take 
care  that,  while  proper  diligence  be  imposed  on  the  holder  of  negotiable 
paper,  we  do  not  e.xact  from  him  every  possible  exertion  that  might 
have  been  made  to  affect  an  indorser  w'ith  knowledge  of  its  being  dis- 
honored.    If  he  has  done  all  that  a  diligent  and  prudent  man  could 


«  "  The  deposit  of  the  notice  in  a  postofTice  box  on  the  street  was  jurst  the 
same,  in  le^aj  effect,  as  if  it  had  been  deposited  in  a  box  at  the  post-ollice. 
(Hkilbrck  v.  Garhett.  7  Q.  B.  84fi:  Pearce  v.  Langfit,  101  Penn.  St.  507)."— 
■Johnson  v.  Broun,  154  Mass.  105  (1891).  Accord:  Casco  A'a<.  Bk.  v.  l^haw, 
70  Me.  37r,:    Wood  v.  Callaqhan,  01    Midi.  402. 

["The  attorney  testifies  that  he  put  it  fthe  notice  of  protest]  in  the  mail 
chnte  on  the  day  of  protest.  .  .  .  The  chnte  was  n  letter  box  under  tbf 
control  of  the  Post  Office  Department,  and  therefore  equivalent  to  the  post- 
office  itself.  Negotiable  Instruments  Law,  §  177."  Wilson  v.  Peck,  06  Misc. 
179.  180. -r.i 

The  notarial  certificate  need  not  state  that  the  address  to  which  the  notice 
is  sent  is  the  correct  residence  or  address.  In  the  absence  of  evidence  to 
the  contrary,  the  jiresuniption  is  that  the  notary,  who  is  a  public  officer, 
has  correctly  stated  the  address.  Legq  v.  Vinal,  105  Mass.  555,  citing  con- 
trary holdings.  As  to  sufficiency  of  notarial  certificate  as  evidence  of  notice, 
see  post,  pp.  589-590.  —  II. 

[See  also  Ailums  v.  \\'ii<jht,  14  Wis.  408,  post,  p.  548.  —  C] 


II.    4.]  to    WHOM   GIVEX.  54:? 

naturally  and  fairly  do  under  like  circumstances;  if  the  law  has  pre- 
scribed no  certain  way  of  sending  a  notice  in  the  given  ease;  if  thd 
indorser's  own  conduct  has  rendered  it  soniewliat  difficult  to  determine 
in  what  way  the  notice  ought  to  be  given ;  and  especially,  if  from  what 
has  been  done,  it  may  reasonably  be  presumed  that  notice  has  reached 
the  parties  concerned,  we  should  be  satisfied,  and  not  ask  for  more. 
Indorsers,  therefore,  cannot  complain,  if  notices  of  this  nature  are  per- 
mitted to  be  left  at  tlieir  houses  in  town  notwithstanding  their  removal 
into  the  country  during  the  hot  montiis.  It  is  more  reasonable  that 
they  leave  a  person  in  town  to  attend  to  their  business,  than  tliat  the 
holders  of  their  paper  be  put  to  the  trouble  of  finding  out  to  what 
part  of  the  country  they  have  removed  and  sending  after  them.  It  is 
also  probable,  especially  when  the  distance  between  the  two  houses  is 
only  four  miles,  as  it  was  here,  that  some  communication  will  be  kept 
u|)  between  them,  and  that  a  letter  left  at  the  dwelling  in  town  will 
not  be  long  in  finding  its  way  to  the  country.  I  speak  now  of  a  tem- 
porary residence  in  the  country ;  for  a  permanent  removal  from  the 
city  might  render  a  different  cour.se  necessary.  Nor  was  it  fatal  to 
direct  the  notice  to  the  indorser  himself;  for  as  it  was  not  known 
whether  he  had  made  a  will,  nor  who  his  executors  were,  until  long 
after,  it  was  full  as  probable  that  it  would  reach  the  parties  interested 
l)y  this  address  as  by  any  other;  some  one  of  the  deceased's  family 
would  either  open  it,  or  see  it  safely  delivered  to  an  executor.  The 
notice,  therefore,  was  well  served,  and  its  address  proper.' 

[Reversed  on  a  point  of  pleading,] 


§  170  DABNEY  r.  STTDGER. 

12  MlSSl.ssii'i'i.  7M».  —  1.S40. 

Action  against  adniini.«trat()r  oC  indorser.  Indorsement  by  Thomas 
k  Dabney,  partners.  Not  ice  to  Thomas,  surviving  partner.  Holder 
knew  of  Dahnoy's  death  and  that  the  j)artnership  was  thereby  dissolved. 
Judgment  for  ])lainti(r. 

Mit.  JusTiCK  TuuNKi!  delivered  the  opinion  of  the  court. 

•''"When  tin-  indor.'tor  is  dvnt]  nnd  tlnT«'  nrc  no  porsonal  r<'|ir<"<r'iitntivr's,  or 
Tifinf  onn  he  (W'^caviTCi]  by  rcii-niiatilf  (lili^oncc,  ttion  notice  of  dishonor  should 
bo  nddrpsscd  to  fhf  indr)rHiT  !it  his  Inst  plan*'  of  nliodc  (NtrirnrI  v.  Hdru,  2  Cai. 
121;  Mrrrhnnta'  ftnnk  v.  fiirrh.  17  .Ifilin".  2.'i :  lAnilrrmnn'n  F.Trrutnrs  v.  (]n1din, 
34  I'a.  St.  .'")4;  V.iUs.  Hills  4  N.  (jni  ;  Dan.  Neg  Inst..  §  1001.)  Hut  when  there 
are  porsonol  reprfsontativcs  ami  they  nrp  known  or  discovrrablp  by  due  dili- 
ponre,  thon  notifc  mn-t  be  /;ivon  to  them.  (Orirnlnl  Hank  v.  KInhr.  22  I'iek. 
20«;  Smnllry  V.  Wrioht.  11  Vroom.  471  :  Story.  Prom.  V..  S  310:  E<l\v.  Hills  A 
N.  631;  Dan.  Nep.  Inst.,  §  1000;  (hit.  Hills.  295] ."  —  DfMlsnu  v.  T<tyU>r.  158 
N.  J.  L.  11,  19.  —  H. 


548  NOTIOK    OF    DISHONOR.  [aHT.    VIII. 

Tlio  only  question  rai><i'(l  in  lliis  case  is  wliotlier  the  executor  or 
administrator  of  a  deceased  pji.rtner  is  entitled  to  notice  of  the  non- 
payment of  a  note  indorsed  liy  I  lie  |iartiiers  as  such. 

The  authorities  are  clear,  and  are  ludieved  to  be  uniform,  that  notice 
to  one  is  notice  to  all.  (Bayley  on  Hills,  "is');  I  l!on.  R.  'M')H;  4  Cow. 
r^G ;  t)  Louisiana,  ()S4 ;  .i  Litt.  251.)"  But  it  must  appear  that  they 
are  partners.  In  this  case  it  so  appears.  Persons  being  joint  payees 
of  a  note,  who  severally  indorse  it,  are  entitled  each  to  notice  of  non- 
payment." They  being  joint,  does  not  necessarily  constitute  them  part- 
ners. The  act  of  assembly  relied  on  by  the  appellant,  found  in  Statute 
Laws  of  Mississippi,  H.  &  H.,  595,  merely  affects  the  remedy  and  not 
the  right,  and  was  passed  to  facilitate  creditors  in  obtaining  judgment 
for  their  just  demands  against  one  or  all  of  several  partners." 


§172   MORELAND'S   ADMINISTRATOR   v.   CITIZENS'    SAV- 
INGS BANK. 

[^Reported  herein  at  p.   696.] 


5.  Time  Within  Which  Notice  Must  Be  Given. 

(a)  Where  parties  reside  in  same  place. 

§  174  ADAMS  V.  WRIGHT. 

14  Wisconsin,  408.  —  1861. 

This  was  an  action  against  Wright  as  indorser  of  a  promissory  note, 
payable  at  the  Bank  of  Oshkosh.  The  note  was  protested  for  nonpay- 
ment, and  the  complaint  alleged  that  due  notice  of  protest  and  non- 
payment was  given  to  the  defendant ;  which  allegation  was  denied  by 
the  answer. 

8  Accord:  Hubbard  v.  Matthews,  54  N.  Y.  43;  Fourth  N.  B.  v.  Eeuschen,  52 
Mo.  207.  —  II. 

[In  Feigan.ipan  v.  McDonnell,  201  ^lass.  341,  it  was  held  tliat  wliere  the 
indorsement  on  a  promissory  note  is  in  the  name  of  a  copartnership,  by  the 
express  provisions  of  R.  L.  c.  73.  §  116  (N.  Y.  Neg.  Inst.  Law.  §  170).  notice 
to  one  of  the  partners  of  the  dishonor  of  the  note  "  is  notice  to  the  firm,  even 
tliough  there  has  Ijeen  a  dissolution." — C.l 

7  Accord:  \Villif!  v.  Green,  5  Ilill  (X.  Y.)  232;  iihcpard  v.  IJaulcy,  1  Conn. 
367.  — H. 

8  If  notice  is  piven  to  a  bankrupt  before  a  trustee  or  assijjnee  is  appointed  it 
must,  of  course,  be  given  to  him  fjersonaliy.  Ex  parte  MoHne,  19  Ves.  21G.  If 
given  after  tlie  appointment  of  the  trustee  it  may  be  given  to  tlic  bankrupt 
or  to  the  trustee.  /»  re  Bellman.  L.  R.  4  Ch.  D.  795;  Callahan  v.  KentMclnj 
Bank,  82  Ky.  231  ;  SMoreland'a  Adminifitrator  v.  Oit.  .SVji;.  Bank.  114  Kv.  .')77, 
post.  —  C] ;    American   N.   B.   v.  Junk   Bros.,   94   Ky.  624,  pout,   p.   .579.  —  H. 


n.    5.]  WITHIN    WHAT   TIME.  549 

endeavoring,  b}-  the  orcal  testimony  of  the  notary,  to  fortify  the  case 
made  by  the  record,  the  plaintiff  should,  as  afterwards  happened  in  this 
action,  call  forth  facts  which  tend  to  disprove  it  and  to  falsify  the 
certificate,  it  would  become  a  question  of  veracity  between  the  notary  as 
a  witness  upon  the  stand,  and  as  a  public  officer  acting  under  the  sanc- 
tity of  an  official  oath,  to  be  settled  by  the  jury.  He  being  a  competent 
witness,  and  the  certificate  being  open  to  explanation  and  contradic- 
tion, it  is,  of  course,  possible  for  him  to  dispute  it,  and  if  he  does,  the 
jury  must  weigh  his  account  on  oath  against  the  official  document 
under  his  seal,  and  determine  between  them.  This  was  so  held  under 
a  similar  statute  of  Pennsylvania,  in  the  case  of  Siewart  v.  Allison,  6 
Serg.  &  Rawle,  324.  That  case,  indeed,  goes  much  further,  and  sanc- 
tions a  doctrine  which  the  facts  of  this  do  not  present.  The  majority 
of  the  court  held  that  the  protest  of  the  notary  under  his  official  seal 
was  competent  evidence  to  go  to  the  jury,  notwithstanding  he  was  pro- 
duced as  a  witness  and  testified  positively  that  he  had  no  knowledge 
whatever  of  the  transaction,  and  that  the  protest  was  written  and 
sealed  by  his  son,  who  acted  as  his  clerk  or  agent,  and  who  said  he 
had  given  the  notice.  The  dissenting  opinion  of  Gibson,  J.,  is  a  pow- 
erful argument  against  its  admissibility  in  such  a  case,  and  the  Su- 
preme Court  of  New  York,  in  Onondaga  County  Bank  v.  Bates,  3  Hill, 
53,  under  a  statute  like  ours,  held  that  the  office  of  notary  was  one  of 
personal  trust  and  confidence,  and  that  its  duties  could  not  be  per- 
formed by  a  clerk  or  third  person.  Tt  seems  obvious  from  the  nature  of 
his  duties  and  the  provisions  of  the  statute,  that  his  official  oath  is 
substituted  for  the  ordinary  judicial  oath  taken  in  the  presence  of  the 
court  and  jury,  and  that  he  cannot  lawfully  and  conscientiously  certify 
or  record  as  matters  of  fact  things  which  he  would  be  incompetent  to 
testify  to  as  a  witness  if  called  to  the  stand  in  the  trial  of  a  cause, 
and  which  would  be  excluded  as  mere  hearsay.  Still,  we  think  the 
reasoning  of  the  majority  of  the  court  in  Steicart  v.  Allison  applicable 
to  a  case  like  this,  where  the  notary  does  not  directly  deny  a  knowl- 
e 'ge  t.f  the  facts  staled  in  his  cerfificate,  but  only  l)y  inferemc  and  by 
testifying  to  circumsfances  which,  fhough  not  absolnfely  iiicoiisislciit 
witli  them,  tend  to  draw  them  into  doubt  and  rrnKivc  llicir  tdVi  i.  1Hicy 
say  that  the  jury  may  ])0SBibly  give  more  credit  to  the  ollicial  cfiiidcale 
than  to  the  oath  of  Ihe  notary;  that  he  may  have  i)een  tampered  with 
after  giving  bis  cerfificaf*' ;  or  the  jury  may  thiid\  that  the  (cilificate 
and  parol  evidence  are  not  inconsistent,  or  that  he  may  hr  iiiislaken 
after  the  lapse  of  many  years,  or  confound  one  fransacfion  wiih  an- 
other. 

The  rocnrd  of  the  nr)tnry  was  properly  admitted.  The  objedion 
taken  to  it  was,  that  the  cortifirafc  which  bad  been  already  introduced, 
showed  no  service  upon  the  deffndant,  personally  or  otberwisf,  of  the 
notice  of  which  it  purported  to  contain  a  copy.  So  far  as  the  objection 
ua-  founded  on  the  supposed  rerjuirement  of  the  statute,  that  notice 


550  NOTICK    OK    IHSllONOU.  [ART.    VIII. 

T  gave  liini  the  notice,  ami  asked  him  to  hand  it  to  his  father;  he  turned 
and  went  towarils  tlie  house;  1  did  not  see  him  go  in,  as  I  could  not 
see  the  door  from  where  I  stood;  this  was  hetween  the  gate  and  the 
front  door." 

The  defendant  re(]uesti'd  the  court  to  instruct  the  jury  as  follows: 
'*  1.  Unless  the  jury  find  from  the  evidence  tluit  tlie  notice  of  protest 
was  personally  served  on  the  defendant,  the  plaintiff  cannot  recover. 
2.  Leaving  notice  at  his  house  was  not  a  personal  service,  unless  it  was 
left  with  some  memher  of  the  family  to  whom  its  contents  were  ex- 
plained. 3.  Giving  the  notice  to  a  boy  in  the  defendant's  front  yard, 
and  requesting  him  to  hand  it  to  the  defendant,  was  not  a  personal 
service.''  These  instructions  were  all  refused;  and  the  court  instructed 
the  jury  that  if  the  notice  of  protest  was  left  at  the  defendant's  hous':!, 
that  was  equivalent  to  a  personal  service,  and  that  it  made  no  differ- 
ence that  the  defendant  did  not  receive  the  notice,  or  that  he  never 
heard  of  it,  or  that  he  never  had  any  knowledge  that  it  had  been  so 
left,  or  whether  he  ever  heard  of  the  protest  of  the  said  note. 

Verdict  and  judgment  for  the  plaintiff. 

By  the  Court,  Dixon,  C.  J.  —  The  motion  for  a  nonsuit  was  prop- 
erly denied.  At  that  time  tlie  plaintiff  had  made  out  a  sufficient  prima 
facie  case  to  charge  the  defendant  as  indorser.  Nor  was  there  any  error 
in  the  previous  proceedings.  The  certificate  of  the  notary  showing 
presentment  and  protest  for  non-payment,  and  service  of  notice  upon 
the  defendant,  togetlier  with  the  time  and  mode  of  giving  it,  was  re- 
ceived without  objection.  There  was  no  impropriety  in  the  question 
put  to  the  notary  as  to  whether  he  gave  notice  to  the  defendant  of  the 
protest  of  the  note.  It  was  obviously  asked  for  the  purpose  of  laying 
the  foundation  for  the  introduction  of  his  official  record  of  protests 
and  notices,  which  was  immediately  produced.  But  if  it  had  been 
put  for  any  other  purpose,  we  cannot  perceive  why  it  should  have  been 
rejected  on  the  grounds  urged,  or  what  other  good  objection  there  was 
to  it.  The  notary's  certificate  is  not  the  only  evidence  by  which  the 
service  of  notice  of  the  dishonor  of  a  note  can  be  established.  It  may 
be  shown  by  other  evidence,  and  the  notary  himself  may  be  called  to 
prove  it.  The  certificate  and  record  are  but  presumptive  evidence  by 
statute  (R.  S.,  chap.  12,  §§  4-6),  and,  being  so,  are  liable  to  be  rebutted 
or  disproved  by  the  testimony  of  witnesses.  And  if  by  other  witnesses, 
then  why  not  by  the  notary?  It  is  hardly  to  be  supposed  that  a  plain- 
tiff who  has  made  a  good  case  by  the  record,  would,  at  the  risk  of  shak- 
ing or  destroying  it,  seek  to  go  further  into  the  facts  by  an  oral  ex- 
amination of  the  notary ;  but  if,  not  being  content  with  the  record, 
he  should  desire  to  strengthen  it  by  the  oral  testimony,  we  can  see  no 
objection  to  it.  Of  the  several  modes  of  establishing  notice,  all  are 
open  to  him,  and  he  may  resort  to  one  or  more  at  his  option.  The 
only  possible  ground  of  objection  there  can  be  is,  tliat  having  made  a 
BuflBcient  prima  facie  case,  furtlier  proof  is  unnecessary.     If  in  thus 


II.    5.]  WITHIN    WHAT    TIME.  551 

On  tlio  trial  the  plaintifT  gave  in  evidence  the  note,  with  tlie  certifi- 
cate of  protest  annexed.  This  certificate,  after  stating  that  the  note 
was  presented  at  the  Bank  of  Oshkosh  on  the  12th  of  Deceniher,  1S59, 
which  was  the  day  it  became  due,  and  that  payment  was  refused,  con- 
tained the  following:  "  And  I,  the  said  notary,  do  hereby  certify  that 
on  the  same  day  and  year  above  mentioned,  notices  of  the  foregoing 
protest  were  put  into  the  postoffice  at  Oshkosh  as  follows:  Notice  for 
James  Freeman,  Oshkosh,  Wis.;  notice  for  W.  Wright  (left  at  his 
house),  Oshkosh,  Wis.  Each  of  the  above  named  ]>l:u'es  being  the  re- 
puted place  of  residence,"  etc.  The  plaintiff  then  called  as  a  witness  the 
notary  by  whom  the  protest  was  made,  and  asked  him  the  following 
question :  "  Did  you  give  notice  to  the  defendant  of  protest  of  the 
note?  "  The  defendant  objected  to  the  question  because  the  certificate 
and  record  of  the  notary,  required  by  statute,  were  the  best  evidence, 
and  because  the  certificate  could  not  be  explained  or  contradicted  by 
])arol  evidence.  The  objection  was  overruled,  and  the  witness  an- 
swered, "  that  he  had  no  particular  recollection  of  this  notice,"  and 
})roduced  his  official  record  of  protests  and  notices.  The  i)lain{iff 
olTered  this  record  in  evidence;  the  defendant  objected  to  it  on  the 
ground  that  tliere  was  no  proof  that  the  notice  of  which  said  record 
purported  to  contain  a  copy  was  ever  served  on  the  defendant  per- 
sonally or  otherwise;  but  the  objection  was  overruled,  and  the  record 
given  in  evidence.  It  contained  a  copy  of  the  note,  and  of  the  certifi- 
cate of  protest,  etc.,  previously  road  in  evidence,  and  also  a  copy  of  a 
notice  of  protest  for  non-payment  of  the  note,  addressed  to  the  defend- 
ant. It  was  admitted  that  the  defendant  resided,  at  the  time  of  the 
protest  of  said  note,  within  two  miles  of  the  residence  and  place  of 
business  of  said  notary;  and  the  plaintiff  rested.  The  defendnnt  moved 
for  a  nonsuit,  upon  th(;  ground  that  there  was  no  |>r(H)f  of  llic  luTsoiinl 
service  of  the  notice  of  ])rotcst  upon  liim  ;  but  the  motion  was  denied. 
Tlie  defendant,  as  a  witness  in  his  own  behalf,  testified  that  no  notice 
of  said  protest  had  lieen  personally  served  upon  liini  ;  Unit  none  had 
been  left  at  his  house  to  his  knowledge;  and  that  hi-  had  made  iii- 
(juiries  upon  the  subject  of  all  the  mendters  of  his  family.  The  idainlilf 
then  recalled  the  notary,  who  tesfifie<l  that  he  was  a(<|iiain1('d  wilh  the 
defendant's  place  of  residence.  Queslinn.  "  Have  you  left  notices  of 
protest  at  his  house?  "  OI)jeete(]  to,  and  objection  overruled.  Answer. 
•*  I  have,  several  times."  QucsHmi.  "Slate  whether  in  all  eases  in 
which  you  have  made  a  record  of  the  manner  of  service  upon  the  de- 
fendant, of  the  notice  of  protest  and  non-jiaymenl  of  notes,  yon  have 
made  the  same  in  the  manner  indicated  by  the  record  of  protest."  Oh- 
jeited  to,  and  objection  overruled.  Anawor  "When  I  considcre(l  it 
personal  service,  T  entered  it  so  in  my  record,  and  did  not  enter  the 
facts  and  eircuinstances  which  constituted  the  service.  *  *  *  In 
one  instance  onlv —  1  cnprmt  tell  whether  this  is  the  one — I  met  a 
boy  in  the  defendant's  front  ynrd  ;    he  said  he  was  the  defendant's  boy; 


5r)'3  NoTic'i:  ov  DisiioNDi;.  [aut.  viii. 

must  bo  actually  ilelivcred  to  the  person  of  the  iudorscr  wliere  lie  re- 
sides within  two  miles  of  the  residence  of  the  notary,  it  has  been  al- 
ready answered  by  this  court,  in  the  case  of  West  fall  v.  Farwell,  13 
Wis.  504.  It  was  there  held  that  the  words  "personally  serve"  were 
designed  to  include  service  by  leaving  the  notice  at  the  indorser's  resi- 
dence or  place  of  business,  as  well  as  by  actual  delivery  to  him,  and 
that  they  were  used  in  contradistinction  to  service  by  mail.  As  to  the 
certificate  being  uncertain  in  not  showing  whether  the  notice  was  sent 
through  the  postotliee  or  left  at  the  defendant's  house,  we  think  that  the 
words  "  left  at  his  house,  Oshkosli,  Wis.,"  placed  immediately  after 
his  name,  indicate  tliat  tlie  latter  was  the  mode  of  service  adopted  as 
to  him.  The  omission  to  say  "  dwelling  house"  did  not  vitiate  the  cer- 
tificate. Notaries  are  only  to  be  held  to  reasonable  certainty  in  tiie 
use  of  language,  and  when  they  say  that  notice  was  left  at  the  house 
of  the  indorser,  all  men  would  understand  it  to  signify  his  dwelling 
house.  Neither  is  the  certificate  defective  in  not  stating  the  hour  of 
the  day  when  the  notice  was  left,  or  with  whom  it  was  deposited, 
whether  a  member  of  the  family  or  other  person,  or  the  particular 
circumstances  attending  the  service,  or  that  the  defendant  was  absent. 
It  is  very  generally  said  in  tlie  books,  and  tlie  doctrine  is  laid  down 
without  any  apparent  limit  or  qualification,  tliat  the  service  by  leaving 
the  notice  at  the  dwelling  house  or  place  of  business,  is  equivalent  to  a 
personal  delivery  to  the  party  to  be  notified.  Judge  Story  says :  "If 
it  be  not  personally  given,  then  it  will  be  sufTRcicnt  if  it  is  given  or  left 
at  or  sent  to  his  domicil  or  place  of  business."  Story  on  Promissory 
Notes,  §  312.  Mr.  Chitty  says:  "With  respect  to  tlie  mode  of  giving 
the  notice,  personal  service  is  not  necessary,  nor  is  it  requisite  to  leave 
a  written  notice  at  the  residence  of  the  party,  but  it  is  sufficient  to  send 
or  to  convey  verbal  notice  at  the  counting  house  or  place  of  abode  of 
the  party,  without  leaving  notice  in  writing;  and  the  giving  such 
verbal  notice  to  a  servant  at  his  home,  the  defendant  having  left  no 
clerk  at  his  counting  house,  as  it  was  his  duty  to  do,  suffices."  Chitty 
on  Rills,  502.  This  is  the  language  of  the  books  generally,  and  no 
case  has  fallen  under  our  observation  wliere  it  has  been  held  that  the 
absence  of  the  party  to  be  notified  was  a  condition  necessary  to  sustain 
service  by  leaving  the  notice  at  his  place  of  abode  or  business ;  though 
it  is  said  in  Ireland  v.  Kip,  11  John.  231,  that  the  notice  must  be  per- 
sonal, or  something  tantamount,  such  as  leaving  it  at  the  dwelling 
house  or  place  of  business  of  the  party,  if  absent.  See  autliorities  cited 
by  Judge  Story,  supra.  Nor  does  any  case  seem  to  have  arisen  requir- 
ing an  accurate  definition  of  the  manner  in  which  service  by  leaving 
notice  at  the  domicil  or  place  of  business,  when  found  open  and  oc- 
cupied, shall  be  performed.  Where  the  particular  mode  of  service  did 
not  appear,  T  suppose  the  cases  have  gone  off  on  the  reasonable  assump- 
tion that  an  officer  engaged  in  a  duty  of  that  kind  would  perform  it 
with  proper  care  and  prudence,  and  use  the  means  most  likely  to  attain 


II.    5.]  WITHIN   WHAT   TIME.  553 

the  object  in  view  —  that  he  would  go  to  the  place  of  service  and  in- 
quire for  the  party  to  be  notified,  and,  if  present,  deliver  it  to  him  in 
person,  or,  if  that  should  be  unsuitable  or  inconvenient,  that  he  would 
hand  it  to  a  servant  or  some  inmate  of  the  place  with  a  request  that  it 
be  so  delivered;  and,  if  absent,  that  he  would  in  like  manner  leave  it 
with  some  person  residing  or  doing  business  therein,  with  a  similar 
request.  Service  at  the  place  of  business  must  be  during  business 
hours,  but  service  at  the  residence  is  not  so  regulated.®  It  will  be  suf- 
ficient if  made  during  any  of  the  liours  when  memliers  of  households 
are  attending  to  their  ordinary  afl'airs.  But  these  particulars  of  service 
need  not  be  stated  in  the  certificate.  It  will  be  sufficient  if  it  shows 
service  at  the  residence  or  place  of  business,  which  constitutes  legal 
diligence,  and  the  special  circumstances  will  be  presumed  until  the 
contrary  is  shown. 

We  are  not  called  upon  to  express  any  opinion  as  to  the  admissibility 
of  the  testimony  of  the  defendant.  He  was  permitted  to  testify  without 
objection,  that  no  notice  in  fact  came  to  his  possession  or  knowledge. 
It  seems  to  be  well  settled  law  that  it  is  no  answer  to  service  properly 
made  at  the  dwelling  house  or  place  of  business,  that  the  party  to  be 
notified  did  not  in  fact  receive  it. 

After  the  defendant  had  given  his  testimony,  the  notary  was  re- 
called by  the  plaintiff,  and  testified,  among  other  things,  that  he  had 
protested  several  notes  against  the  defendant,  and  that  on  one  oc- 
casion, but  wjiether  on  that  of  giving  the  notice  in  question  he  could 
not  say,  he  met  a  boy  in  the  defendant's  front  yard,  who  said  he  was 
the  defendant's  boy,  and  gave  him  the  notice  and  asked  him  to  hand  it 
to  his  father;  that  the  boy  turned  and  went  toward  the  house,  hut  tiiat 
he  did  not  see  him  go  in,  as  the  door  was  not  in  sight  from  where  he 
stood.  The  defendant  thereupon  requested  the  court  to  instruct  the 
jury  that  giving  the  notice  to  the  boy  and  requesting  him  to  hand  il  to 
the  defendant,  was  not  personal  service.  Understanding  the  tcrni 
"personal  service"  according  to  the  definition  given  in  Wrsffnll  v. 
Farvfll,  we  are  of  opinion  tliat  the  defendant  was  entitled  to  the  in- 
struction. The  testimony  of  the  notary  clearly  tended  to  impeach 
liis  certificate,  arul,  within  the  principles  above  stated,  it  was  the  legal 
right  of  the  defenrlaiit  to  have  it  submitted  to  the  jmy  to  fletermine 
whether  the  notice  was  given  as  staterl  in  the  certificate  or  in  the  oral 
testimony,  or,  in  other  words,  whether  the  occasion  of  which  the  n(»tary 
spoke  was  that  of  giving  the  notice  under  consideration.  If  it  was, 
the  rertificnte  must  fall.  Being  the  statement  of  a  matter  which  the 
notary  did  not  know,  and  false  in  fact,  it  could  no  longer  be  relied 
upon  as  evidence  showing  due  service  of  notice.     And  as  to  the  dc- 

•  Rut  if  the  nofirp  is  in  fart  ppfonnl,  it  apoms  that  it  nppd  not  l)o  during 
bneinfs"*  Imiirs.  nifhotipli  f1oIiv«'rf<l  ri(  n  plnrp  nf  fni«in«'«s.  lUmmr  v.  "Srtr  OV' 
leans,  2  Woods  (U.  S.  C.  C.)   135;  3  Fed  Cas.  853.  —  H. 


551  NOTH'K    OF    niSllONOU.  [aUT.    VIII. 

\i\vv\  to  till'  liDV  liciiiij;  i^ood  service,  it  is  not  seriously  contiMulod  tliat 
it  wa.-;  ;i:u;,  ii"  il  wuc,  no  autlioiily  tan  he  foiiiul  .^iistainiii;^-  such  a 
positia::.  ^iiow.ir.g  short  ol'  st-rviix'  uj)oii  tlu'  jktsoii,  oi'  at  tlie  ilwelliug 
houj.L"  c;-  \..].\:  uf  Lusinrss,  when  those  phurs  wiTe  open  ami  accessible, 
has  CO !•  yd  ]:cn  !;eM  a  sunicienl  ser\iee,  unless  it  was  furthermore 
shoTTi  r.iiif  t' v"  r.oiiee  rame  U)  the  actual  kuo\\le(l;j,-e  or  ])ossessioii  of 
the  paity;  nud  i(  is  not  for  us  to  make  innovations  upon  a  doctrim^  the 
usefr.lrcr  ■  of  which  de])eiids  so  much  upon  its  certainty  and  uni- 
fonvi^v.  Ihiv  the  strict  rules  whicli  have  been  lield  upon  this  subject, 
see  rjut'orities  referred  to  above,  and  jiarticularly  Granite  Bank  v. 
Atf'-y.  "!'!  Pick.  r?r)2.  Tf  in  sucli  n  case  as  this  it  should  be  otherwise 
shovT  thnt  the  indorscM-  actually  received  the  notice,  it  would  present 
a  dilfcrent  question.  The  plaintifT's  case  would  not  then  stand  on  the 
ground  of  the  otiicial  act  of  the  notary. 

The  instruction  should  have  been  given  to  the  jury,  and  because  it 
was  not  the  judgment  is  reversed  and  a  new  trial  awarded. 


(h)  Wherr  parfics  rrsirle  in  (lijjcrcni  places. 

§  173  LINDENBERGPJR  v.  REALL. 

0  Wheatox    (U.  S.)    104.— 182 1. 

Action  against  indorser.  Evidence  that  on  the  last  day  of  grace  the 
notice  to  the  indorser  was  put  into  the  postofhce  propeidy  addressed, 
etc.  The  court  held  the  proof  of  notice  insufficient.  Plaintiff  brings 
error. 

The  court  were  unanimously  of  opinion,  that  after  the  demand  of 
the  maker  on  the  third  day  of  grace,  notice  to  tlie  itulorser  on  the 
same  day  was  sufficient,  by  the  general  law  merchant:'"  and  that  evi- 
dence of  the  letter  containing  notice  having  been  put  into  the  post- 
office,  directed  to  t'^e  di^fendant,  at  his  place  of  residence,  was  sufficient 
proof  of  the  notice  to  be  left  to  the  jury,  and  that  it  was  unnecessary 
to  give  notice  to  the  defendant  to  produce  the  letter  before  such  evi- 
dence could  be  admitted. 

Judt^ment  reversed. 


^  175  WTTTTWELL  v.  JOHNSON. 

17  Ma.s.«:aciiu.';etts,  449  —  1821. 

Action  on  promissory  note  payable  to  the  order  of  defendant,  in- 
dorsed by  him  to  one  Oerrish.  and  by  Gerrish  to  the  plaintiffs.  The 
note  was  lodged  by  the  plaintiffs  in  the  Massachusetts  Bank  for  collec- 


1"  Arcorrl:  Ex  parte  Hfolinc,  19  Vps.  210;  2  Daniol  on  Not.'.  Inst,  §  1030.  ~  H. 


"•    5.]  WITHIN    WHAT    TIME.  .  555 

tion.  On  the  14th  of  February,  1820,  the  day  when  the  note  became 
due,  after  making  demand  on  the  maker  for  payment,*  tlie  messenger 
of  the  bank  carried  two  notifications  for  the  indorsers  (directed  to 
them,  but  without  any  directions,  to  Xcwburyport,  the  town  in  which 
they  lived),  to  the  store  of  the  phiintifTs;  and  there  was  evidence  tend- 
ing to  show  that  these  notifications,  after  being  directed  to  Newbury- 
port,  were  put  into  the  Boston  postoffice  the  same  afternoon.  That 
directed  to  the  defendant  w\as  produced,  and  the  postmark  upon  it 
was  the  15th  of  February.  The  post  officer  at  Xewburyport  testified 
that  it  did  not  arrive  at  his  office  until  tlie  morning  of  the  16th;  and 
an  officer  of  the  Boston  postoffice  testified  tliat  if  the  note  had  boon  put 
into  the  office  on  the  14th,  before  eight  o'clock  in  the  evening,  it  would 
have  been  stamped  the  14th,  and  if  received  after  that  hour,  it  would 
have  been  stamped  the  15th,  and  would  have  gone  into  the  morning's 
mail  of  that  day,  which  arrives  at  Newburyport  about  noon. 

The  jury  were  instructed  that,  if  they  were  satisfied  from  a  com- 
parison of  the  evidence,  that  the  notice  to  tlie  defendant  as  indorser 
was  put  into  the  postoffice  on  the  Mtli  of  February,  before  eight  o'clock 
in  the  evening,  the  defendant  was  liable.  A  verdict  was  returned  for 
the  plaintifls,  and  the  defendant  moved  for  a  new  trial,  on  account  of 
the  directions  to  the  jury. 

Pakkri!,  C.  j.  *  *  *  Supposing,  then,  the  demand  [for  pay- 
ment on  the  maker]  to  have  been  sufficient  to  charge  the  indorser,  the 
question  remaining  is,  whether  seasonable  notice  was  given  to  him  of 
nonpayment.  The  note  became  due  on  the  11th,  and,  according  to  the 
finding  of  the  jury,  the  point  is  settled  against  the  defendant. 

But,  on  the  suppo'^ition  that  it  was  necessary  that  the  notice  should 
have  been  put  into  tlie  postoffice  on  the  day  when  the  note  became  duo, 
a  petition  has  boon  presented  for  new  trial,  on  the  ground  that  evi- 
dence since  the  trini  has  boon  rliscovorod  which  Ims  a  bonring  on  thnt 
point. 

As  the  evidence  at  the  trial  was  by  no  means  of  a  conclusive  natnr(\ 
it  would  be  ftropcr  to  hiivc  a  further  in(|uiry  if  (he  point  to  be  ostnh 
Jished  was  e8.sential  to  the  (locision  of  tPie  cause.  .Xflcr  some  doiilils, 
and  looking  into  tin-  aiilhoritios,  wo  arc  satisfied  that  it  was  not  neces- 
sary for  the  j)l;iiii(ilf  to  shf»w  lh;il  uotico  (o  (he  indorser  was  put 
into  tho  mail  on  the  same  day  the  nolo  bocjimo  duo.  What  is 
seasonable  notice  is  a  rpieslion  of  l;nv,  upon  Iho  fads  provo(|.  II  c.ui- 
not  be  rcfjuisite,  and  we  do  not  find  that  it  has  ever  been  rcfjiiinMl,  (o 
give  notice  to  an  indorser,  living  in  another  (own,  by  the  very  next  mail 
after  the  dishonor  of  the  note,  or  f)ti  the  same  dav.  This  would  bo  an 
unmasonablo  hardship  on  holders  of  notes,  especially  as  the  maker 
may,  before  the  day  expires,  take  the  note  up.    Tt  is  not  to  be  expected 


•Tim  part,  of  tlip  case  reiatinj,'  to  llic;  <l<'iiiari(l  uii  tliu  maker  for  paynifnt  in 
omitted.  —  (". 


."jStj  Norici':  OK  dishonor.  |  art.  viii. 

that  moiTlmiits  will  loavi-  oviM-ylliiiit;  rise  to  ailiMid  to  this  one  subject 
on  the  wry  day  the  nolo  is  ilisliuiioird.  'IMic  lu-xl  da}'  is  early  enougii, 
and  if  there  should  be  two  jnails  a  day,  wlietlier  the  notice  goes  by  the 
iirst  or  the  second  of  those  mails,  we  think  is  ininiaterial,  provided  it 
was  put  into  the  postolTKc  early  enough  to  go  by  a  mail  of  that  day. 

We  understand,  from  good  authority,  that  the  Supreme  Court  of 
the  United  States  have  adopted  the  same  rule,  and  it  is  desirable  that 
the  same  law  should  j)i-evail  on  commercial  subjects  in  all  states. 

Judjiment  on  the  verdict.*' 


§  175  SMITH  V.  POILLON. 

87  New  York,  590.  —  1882. 

Action  against  inflorser.  The  holder  iiotified  the  third  indorser 
hv  mail  and  inclosed  notiees  for  the  second  and  first  indorsers.  The 
third  indorser  notified  the  second  indorser  and  inclosed  notice  for  the 
first.  The  second  indorser  received  notice  on  the  6th  and  mailed  notice 
to  the  first  indorsers  on  the  7th,  in  time  for  the  second  mail  of  the 
day  closing  at  1 :30  p.  m.  The  first  mail  of  the  day  closed  at  9  :30  a.  m. 
The  first  indorsers  (defendants)  contend  that  they  were  not  notifuMl 
with  due  diligence.    Judgment  for  plaintiff. 

Earl,  J.  —  [After  deciding  that  tlie  presentment  and  prior  notices 
were  sufficient.] 

Smith  was  an  aged  man,  upward  of  eiglity  years  old.  On  the  morn- 
ing of  March  7  lie  took  the  notices  for  tlie  defendants  and  drove  to 
Thomaston,  for  the  purpose  of  consulting  his  counsel,  and  there,  under 
the  advice  of  his  counsel,  he  wrote  a  letter  addressed  to  the  defendants, 
and  inclosed  it  with  the  notiee  for  the  defendants  in  an  envelope  ad- 
dressed to  them,  and  caused  it  to  be  mailed  at  Thomaston,  in  time  for 
the  mail  which  left  there  for  New  York,  the  residence  of  the  defend- 
ants, at  1  :40  p.  M.  That  mail  passed  through  Warren,  on  its  way  to 
New  York,  at  2  p.  m.  There  were  two  mails  each  dnv  from  Warren,  one 


'1  UsR  OF  Post.  —  Prior  to  the  statute  it  was  held  that  where  there  are  suc- 
cessive indorsers  and  the  holder  sends  notice  to  the  last  indorser  by  mail  in- 
closing tiierewith  notices  to  prior  indorsers,  the  last  indorser  may  use  the  post- 
ofTlce  as  a  place  of  deposit  for  the  notices  to  the  prior  indorsers  who  live  in  the 
same  town  as  he.  (But  see  ffheldnn  v.  fipvhnm.  4  TTill.  120.  ante.  p.  543.) 
Under  this  rule,  it  is  held  that  such  redeposiit  must  be  in  time  to  reach  the  prior 
indorser  in  the  usual  course  on  the  day  followiiit;  the  day  of  receipt.  Thus,  if 
the  last  indorser  receives  the  notices  on  the  lOtli,  they  must  be  redeposited  in 
season  to  reach  the  prior  indorsers  in  the  usual  course  on  the  11th.  If  de- 
posited on  the  11th  too  late  to  reach  the  prior  indorsers  on  that  day,  the  in- 
dorsers are  discharged.  KheAburnf,  Falls  Nat.  Bk.  v.  Tawnslcy,  102  Mass.  177; 
8.  c.  107  Mass.  444.  It  is  this  rule,  established  for  the  exceptional  case  where 
drop  letters  were  permitted  independent  of  statute,  that  is  now  extended  to  the 
use  of  drop  letters  peneraliy  under  the  statute.  —  H. 


ri.    5.]  WITHIN    WHAT   TIME.  557 

closing  at  about  9  :30  a.  m.  and  the  other  at  about  1 :30  p.  m.,  and  that 
letter  went  in  the  same  mail  that  closed  at  Warren  at  1 :30.  The  con- 
tention on  the  part  of  the  defendants  is,  that  the  law  required  that 
that  notice  should  have  been  mailed  by  the  first  convenient,  practical 
mail  on  the  7th,  and  hence  that  it  should  have  been  mailed  bv  the  first 
mail  on  that  day;  and,  to  sustain  their  contention,  our  attention  is 
called  to  various  authorities.  (Swedes  v.  Utica  Bank,  20  Johns.  372; 
Mead  v.  Engs,  5  Cow.  303 ;  SewaJl  v.  Russell,  3  Wend.  276 ;  Howard 
V.  Ives,  1  Hill,  263;  Haskell  v.  Boardman,  8  Allen,  38;  Sussex  Bank 
V.  Baldwin,  2  Harrison  (N.  J.),  487;  Burgess  v.  Vreeland,  24  N.  J.  L. 
71;  Lawson  v.  Farmers'  Bk.,  1  Ohio  St.  206;  Freemans  Bank  v.  Per- 
kins, 18  Me.  292.)  These  autliorities,  while  not  entirely  harmonious, 
undoubtedly  tend  to  sustain  the  rule  that  the  notice  must  be  sent  on 
the  next  day  by  the  first  practical  and  convenient  post. 

The  counsel  for  the  plaintiff,  however,  contends  that  the  rule  is, 
that  notice  of  dishonor  in  such  cases  may  be  sent  to  the  prior  party 
by  any  post  of  the  next  day,  and  he  calls  our  attention  to  several 
authorities  which  tend  to  sustain  his  contention.  (Chick  v.  Pillsbury, 
24  Me.  458;  Whitivell  v.  Johnson,  17  Mass.  449;  2  Daniels  on  Neg. 
Inst.  87;  Story  on  Bills,  §  288;  Story  on  Prom.  Notes,  §  324;  3 
Kent's  Com.  106.) 

From  a  careful  examination  of  all  these  authorities  and  many 
others  it  is  clear  that  the  law  is  not  precisely  settled.  It  appears 
that  at  first  it  was  supposed  to  be  necessary  that  notice  of  dishonor 
should  be  given  by  the  next  post  after  dishonor,  on  the  same  day,  if 
there  was  one.  That  rule  was  found  inconveniently  stringent,  and 
then  it  was  held  that  when  the  parties  lived  in  different  places, 
between  which  there  was  a  mail,  the  notice  could  be  posted  the  next 
day  after  the  dishonor  or  notice  of  dishonor.  Some  of  the  authori- 
ties hold  that  the  party  required  to  give  the  notice  may  have  the 
whole  of  the  next  day.  Some  of  them  hold  that  when  there  are 
several  mails  on  the  next  day,  it  is  sufficient  to  send  the  notice  by 
any  post  of  that  day.  Other  authorities  lay  down  the  rule,  in  gen- 
eral terms,  that  the  notice  must  be  posted  by  tlie  first  practical  and 
convenient  mail  nf  the  next  day;  and  that  rule  seems  to  be  supported 
by  the  most  authority  in  this  state.  What  is  a  convenient  jhuI 
practical  mail  depends  upon  circumstances.  It  may  be  controlled 
by  the  usages  of  business  and  the  customs  of  the  people  at  the  place 
of  mailing,  and  the  condition,  situation  and  business  engagements 
of  the  person  ref(uired  to  give  the  notice.  The  rule  shotild  have  a 
reasonable  application  in  every  case,  and  whether  suffi'ienf  diligence 
has  l)een  used  to  mail  the  notice,  the  facts  being  undisputed,  is  a 
question  of  law. 

In  Mend  v.  EngR  (T^  Cow.  303).  notices  of  dishonor  of  n  bill  reaehed 
the  post-office  at  the  residence  of  the  last  indorser  at  5  p.  M..  and 
actually    came    to    his    hands    the    next    morning.      The    first    mail 


5hS  NOTICK    OK    DISHONOR.  [ART.    VIIl, 

tfioroafliT  for  the  rosidcncr  of  tlio  prior  j>;irty  loft  at  1  P.  M.,  but  the 
notices  for  that  party  were  not  iikuKmI  until  aftrr  that  hour.  Suther- 
land. J.,  said:  " 'i'lie  cashier  was  not  hound  in  the  exercise  of  due 
diligence  to  have  |)ropared  and  forwarded  notices  by  the  one  o'clock 
mail;  it  is  not  reasonable  to  demand  from  him  the  neglect  of  his 
other  otlii'ial  duties  to  prepare  his  letters  and  notices  during  the 
usual  hanking  hours;"  and  further,  that  "the  law  does  not  require 
the  holder  of  a  hill  or  note  to  give  the  earliest  possible  notice  of  its 
dishonor;  it  requires  of  him  only  an  ordinary  and  reasonable  dili- 
gence ;  nor  is  he  bound,  the  moment  he  receives  notice  of  the  dishonor 
of  a  bill,  to  lay  aside  all  other  business  and  dispatch  notice  to  the 
prior  parties  to  the  bill ;  if  reasonable  diligence  is  used  it  is  suflTicient 
In  Darhishire  v.  Parker  (6  East,  3),  Lord  Ellcnborough  observes: 
"  There  must  be  some  reasonable  time  allowed  for  giving  noti(^e, 
and  that,  too,  accommodating  itself  to  other  business  and  affairs  of 
life;  otherwise  it  is  saying  that  a  man  who  has  bill  transactions  pass- 
ing through  his  hands  must  be  nailed  to  the  post-office,  and  can 
attend  to  no  other  business,  however  urgent,  till  this  is  dispatched." 

It  does  not  appear  here  how^  far  Mr.  Smith  lived  from  the  post- 
office  at  Warren ;  he  was  an  aged  man  and  wanted  some  advice  about 
the  matter.  Early  on  the  day  after  he  received  the  notices  he  went 
to  Thomaston  to  see  his  counsel,  and  thus  he  missed  the  mail,  which 
closed  at  9 :  80.  We  think  it  cannot  be  said  that  the  delay  was 
unreasonable,  or  that  tliero  was  the  absence  of  that  proper  diligence 
which  the  law  requires.  There  was,  therefore,  no  error  in  holding 
as  matter  of  law  that  due  diligence  was  used  by  Smith  in  posting  the 
notice  to  the  defendants. 

The  judgment  should  be  aflirmed,  with  costs. 

All  concur.    Judgment  affirmed.' 

1  A  mail  which  closes  at  9:10  a.  m.,  beino;  the  only  mail  of  the  day  after  the 
day  of  dishonor,  is  not  at  an  unreasonable  or  inconvenient  lioiir.  Lotrson  v. 
Farmers'  Bank,  1  Oh.  St.  200  (1S53).  Six  A.  m.  is  an  inconvenient  hour. 
Chick  V.  I'Wshury,  24  Me.  458  (1844).  " 'i'he  next  day  is  early  enoui^'li ;  and  if 
there  should  be  two  mails  a  day.  wliother  flie  notice  fjoes  by  the  first  or  the 
second  of  those  mails,  we  think  is  inimntfriai.  provided  it  was  put  into  tlie 
postoffice  early  enough  to  go  l)y  a  mail  of  that  day." — Whitirell  v.  Johnann, 
17  Mass.  449  (1821).  The  second  day  after  dishonor  is  too  late  unless  the 
mail  of  the  first  day  after  closes  Ix'foro  business  hours.  Brink  v.  Bradley,  1 17  N.C. 
526.  If  the  day  after  dishonor  is  a  holiday  or  Sunday,  it  is  exchided  from  the 
computation.  See  Nep.  Inst.  T...  §  ,5  fdencral  Provisionsl.  It  has  been  held 
that  a  notice  given  on  Sunday  is  inefTcctive.  Rheeni  v.  Carlisle  Deposit  Bank, 
76  Pa.  St.  132.  But  not  one  given  on  a  holiday.  Dehlieux  v.  Bullard.  1  Rob. 
(La.)  66. —  H. 

[See  also  /^cWs.  fluhhnrd  d  Co.  v.  Mnntfiomery  Nupply  Co.,  59  W.  Va.  75, 
reported  in  4  L.  N.  S.  1.12.  with  case  note  entitled  "Bills  and  notes;  time  allowert 
for  mailing  check  or  notice  of  dishonor,  as  affected  by  the  hour  at  which  the 
mail  closes  and  departs." 

In  First  yat.  Bank  v.  Miller.  139  Wis.  126.  128.  Mnrshall.  .T..  said:  "The 
Jaw  relating  to  proceedings  to  fix  the  liability  of  an  indorscr  of  a  promissory 


II.    5.]  WITHIN    WHAT   TIME.  55i> 

§  175  STAIXBACK  v.  BANK  OF  VIRGINIA. 

11  Gkattan   (\'a.  )   260.  —  1S54. 

Action  against  indorser  of  bill  drawn  on  a  drawee  in  London  and 
protested  for  non-acceptance  on  April  5th.-  Notice  was  sent  in  a 
mail  leaving  Liverpool  on  April  19th  by  a  Cunard  steamship,  that 
being  the  first  steamship  leaving  England  for  the  United  States  after 
the  dishonor  of  the  bill.  But  between  the  5th  and  tiie  lOtli  several 
sailing  packets  carrying  mails  left  England  for  the  United  States. 
It  was  the  usage  of  the  London  post-office  to  forward  all  mail  by  the 
Cunard  line  unless  specially  directed  to  be  forwarded  by  other 
vessels.    Judgment  for  plaintiff. 

Samuels,  J.  *  *  *  The  law  requires  notice  of  dishonor  of  com- 
mercial paper  to  be  transmitted  to  the  parties  thereto  for  the  pur- 
pose of  enabling  them  to  do  what  is  needful  to  protect  their  interests; 
to  this  end  it  may  be  important  to  have  early  notice,  and  the  law 
requires  it  to  be  given.  In  the  case  before  us  the  notice  was  sent 
in  a  mode  which  would  bring  it  to  the  hands  of  the  plaintiff  in  error 
at  the  earliest  practicable  day.  Yet  it  is  alleged  that  it  should  have 
been  sent  by  another  mode,  which,  although  it  might  have  com- 
menced the  transmission  at  an  earlier  day,  yet  would  not  have 
delivered  it  so  soon  as  the  mode  adopted.  If  we  could  yield  to  the 
arguments  of  the  plaintiff's  counsel,  wc  should  sacrifice  the  object  of 
the  law.  The  notice  was  transmitted  in  the  mail  by  an  ocean 
steamer  belonging  to  the  Cunard  line,  which  line  carried  tlio  mail 
from  rjreat  Britain  to  the  United  States.  It  was  sent  by  the  first 
steamer  which  started  after  the  l)ill  was  dishonored.  Tins  brings 
the  case  within  the  stringent  rule  of  requiring  that  tiie  notice  be  sent 
by  the  first  mail.  It  appears,  however,  that  there  are  regular  lines 
of  sailing  packets  from  London  (the  place  of  the  drawee's  residence) 

note,  in  caso  of  dislionor  by  tlio  maker,  was  difrorcnt  in  snmo  states  than  in 
otherH.  and  for  liarniony  on  tliat  as  to  tlip  time  and  manner  of  jiivinfj  notice  of 
dislionor  to  the  indorser  it  was  provided  hy  siitxiivision  .'14,  §  IfiTS,  (N.Y.,  § 
l?.")),  of  the  Nepotiat)le  Instrument  Statute,  that,  '  where  the  person  f^ivinp  and 
the  person  to  receive  notice  re.side  in  different  places,  the  notice  must  he  piven 
•  •  •  if  sent  hy  mail  '  by  depositing  it  '  in  the  |)ostotlic<'  in  time  to  po  by  mail 
the  dav  following'  tlie  day  of  dishonor,  or.  if  there  be  nr)  mail  at  a  convenient  hour 
on  that  day,  by  the  next  mail  thereafter.'  Mere  notice  was  not  sent  till  after 
time  for  mail  on  the  first  secular  day  after  dishonor,  thonph  there  was  am|>le 
opportunity  to  do  ho.  The  departure  time  for  the  mail  was  between  H  and  10 
o'clock  of  such  day.  That  was  certainly  a  convenient  time  within  the  meaning 
of  the  statute.  No  excuse  is  found  in  the  evidence  for  not  depositing;  the  notice 
with  postage  fully  pai«l  so  as  to  have  reached  the  respondent  by  such  mail. 
The  deposit  on  the  evening  of  that  day,  after  ordinary  business  hours  and  long 
after  the  closing  of  the  mail  for  such  day.  as  regards  the  route  by  wliicli  it 
must  have  been  known  the  notice  would  reach  renpondent,  if  at  all,  clearly  wai 
too  late."  — r. 

«  Fe*'  Neg.  Inst.  L.,  §  260.  —  H. 


560  NOTICE   OF    DISllONOU.  [ART.    VIII, 

to  the  United  States;  tliat  tliese  packets  carried  letter  bags  made 
up  at  the  London  jiost-office ;  and  that  the  times  for  their  sailing  from 
(treat  Britain  occurred  between  the  day  of  the  dishonor  of  this  bill 
and  the  day  of  the  steamers  leaving.  Tt  further  appears,  that 
although  a  sailing  packet  should  leave  on  the  regular  day  for  her 
departure,  and  thereafter  a  steamer  sliould  leave  on  her  regular  day 
of  depaifure,  the  steamer  would  prnhahly  arrive  first  in  the  United 
States.  It  further  appears,  that  the  line  of  mail  steamers  is  used  by 
a  very  large  majority  of  business  men  for  the  transmission  of  letters 
from  Great  Britain  to  the  United  States.  There  can  be  no  question, 
that  of  these  two  modes  of  transmission,  the  proper  one  was  adopted. 
Tliis  one  has  in  its  favor  the  facts  that  it  carries  the  mail,  that  it  is 
the  ordinary  mode  of  transmission,  and  that  it  may  be  expected  to 
deliver  a  letter  at  an  earlier  day  than  the  other;  that  other  having 
in  its  favor  the  facts  that  it  starts  at  an  earlier  day,  and  carries  a 
letter  bag.  There  is  nothing  to  counterbalance  the  fact  that  the 
other  line  will  deliver  the  letter  at  tlie  earliest  day.  I  think  the 
notice  of  dishonor  was  duly  transmitted. 

I  am  of  opinion  to  affirm  the  judgment.     The  other  judges  con- 
curred. 

Judgment  affirmed.' 


5j  175  JARVIS  V.  ST.  CROIX  MFG.  CO. 

23  Maine,  287.  —  1843. 

Assumpsit  against  the  defendants  as  drawers  of  a  bill  of  exchange, 
dated  Aug.  10,  1839,  on  IST.  Dewey  of  the  city  of  New  York,  payable 
in  60  days  after  sight,  accepted  by  Dewey  on  Aug.  26,  1839,  and 
indorsed  by  the  defendants,  and  by  the  plaintiffs. 

The  plaintiffs  resided  at  St.  John,  New  Brunswick;  the  place  of 
business  of  the  defendants  was  at  Calais  in  this  state;  and  the 
acceptor  resided  in  the  city  of  New  York. 

The  bill  was  protested  in  the  city  of  New  York,  for  non-payment 
by  the  acceptor,  on  Oct.  28,  1839,  and  a  notice,  addressed  to  the 
defendants,  informing  them  of  the  dishonor  and  protest,  was,  at  the 
request  of  the  plaintiffs,  placed  in  the  post-office  at  Eastport  on 
the  eleventh  day  of  November,  1839.  It  was  agreed,  that  the  mail 
was  at  that  time  five  days  in  passing  from  New  York  to  Eastport ;  that 
the  mail  between  St.  Andrews  and  St.  John  passed  three  times  each 
week,  leaving  the  former  place  on  Monday,  Wednesday,  and  Friday, 
and   returning   on    Tuesday,   Thursday,   and    Saturday,   leaving  each 

•  Notice  must  be  sent  by  the  first  usual  mail  ship  whether  it  sail  direct  to  the 
port  of  the  drawer  or  indorser  or  to  some  other  port  of  the  United  States. 
Fleminf)  v.  MrClure.  1  Brevard  (S.  Car.)  428  (1804);  Lenox  v.  Leverett,  10 
Mass.  1  (1813).  — H, 


II.    5.]  WITHIN    WHAT   TIME.  561 

place  early  in  the  morning  and  arriving  late  in  the  evening;  that  the 
mail  between  Eastport  and  Calais  tlien  passed  on  alternate  days,  and 
on  said  eleventh  day  of  November  passed  I'rom  Eastport  to  Calais, 
leaving  before  the  notice  was  put  into  the  office;  that  letters  to  and 
from  the  Province  of  Xew  Brunswick  meet  through  that  mail;  and 
that  letters  from  St.  John  for  Calais  would  not  go  by  the  way  of 
Eastport,  but  directly  from  St.  Andrews  to  Robbinston  and  from 
thence  to  Calais.  The  court,  upon  this  evidence,  were  authorized 
to  draw  any  inferences  which  a  jury  would  be  authorized  to  do,  and 
to  order  a  nonsuit  or  default,  as  justice  might  require. 

The  opinion  of  the  court  was  by 

Whitman,  C.  J.  —  Notice  of  the  non-payment  of  the  draft  in  this 
ease  could  not  have  reached  the  defendants  before  tlie  Kith  or  17th 
day  after  its  dishonor.  Instead  of  sending  it  directly  from  St.  John 
to  Calais,  by  due  course  of  mail,  the  plaintiffs  seem  to  have  pre- 
ferred sending  it  to  Eastport;  and  there  to  liave  mailed  it  for  the 
defendants  at  Calais.  This  was  on  the  16th  day  after  its  dishonor 
in  New  York.  The  mail  was  five  days  in  reaching  Eastport  from 
New  York.  This  accounts  for  five  days  of  the  time.  IIow  it  should 
happen  that  eleven  days  more  were  necessary  to  forward  it  from 
thence  to  St.  John  and  back  to  p]astport  does  not  appear.  It  does 
not  seem,  by  tiie  course  of  the  mails  between  Eastport  and  St.  Jolin, 
that  more  than  four  or  five  days  need  be  occupied  in  the  transmis- 
sion of  a  letter  and  the  return  of  an  answer.  It  is  true  that  the  plain- 
tiffs had  a  right  to  adopt  a  private  conveyance  for  the  roccijit  and 
transmission  of  notice.  But  it  is  clearly  incumbent  on  them  to  show 
that  due  diligence  was  used.  The  evidence  in  the  case  is  entirely 
silent  as  to  how  it  should  have  happened  that  so  much  greater  delay 
took  place  than  we  can  see,  from  the  evidence,  to  have  been  necessary. 
It  was  incumbent  on  the  ))l;iin<iff.s  to  have  removed  anv  rcasonahle 
doubts  upon  tliis  point;  and,  not  having  done  so,  we  think  a  nonsuit 
muBt  be  entered. 


(c)   Successive  notices. 

§  178  LINN  V.  linilTON. 

17  WisroNHi.N.  ir,l.— 1863. 

Action  against  irregular  indorser*  by  payee.  The  note  was  pay- 
able in  Jnnesville,  Wis.  Plaintiffs  were  merchnnts  in  Now  ^'ork. 
Plaintiff?  indorsed  for  collection  to  K..  in  \ew  York.  K.  imlorsed 
for  collection  to  Central  ]?ank  in  Janesville.  'IMie  latter,  on  dis- 
honor    on    Nov.    22,    mailed    notices    to    K.,    who    received    the?ii    on 

«8ee  Neg,  Inst.  L..  §  114.  — II. 

KKGOT.  INHTROMENTH  —  ."W 


562  '  NOTICE    OF    DISHONOR.  [auT.    VIII. 

Nov.  27,  and  delivoivd  tlicm  to  pliuiitiU's  on  that  ilay.  On  the  same 
day  phiintitTs  mailed  iidtirr  U>  dereiidant  at  .lanesville,  but  it  wa8 
never  received  by  hiiii.    .ludi^Muent  for  derenchint. 

By  the  Coiirl,  Hixox,  ('.  J.  -  It  is  an  estahlisht-d  principle  of  mer- 
cantile law,  that  if  the  holder  of  a  hill  or  note  chooses  to  rely  upon 
the  resjionsihilily  of  his  immediate  indorser,  tJiere  is  no  necessity 
for  his  giving  notit-e  to  any  previous  party;  and  if  such  notice  he 
properly  given,  in  due  time,  hy  the  other  parties,  it  will  inure  to 
the  henelit  of  the  holcier,  and  he  may  recover  thereon  against  any 
of  them.  Thus,  if  the  holder  notifies  the  sixtli  indorser,  and  he  the 
fifth,  and  so  on  to  the  first,  the  latter  will  he  liable  to  all  the  parties. 
(1  Parsons  on  Rills  and  Notes,  50;},  501  ;  and  Kdwards  on  Rills  and 
Notes,  473,  474,  and  the  cases  cited.)  And  it  is  no  objection  to  such 
notice  that  it  is  not  in  fact  received  so  soon  by  the  first  or  any  prior 
nidorser,  as  if  it  had  been  transmitted  directly  by  the  holder  or 
notary,  provided  it  has  been  seasonably  sent  by  each  indorser  as  he 
receives  it.  {Colt  v.  Xoble,  5  Mass.  167;  Mead  v.  Engs,  5  Cow.  303; 
Howard  v.  Ives,  1  Hill,  203.)  And  the  same  degree  of  diligence 
must  be  e.xercised  on  the  part  of  the  indorser  in  forwarding  notice  as 
is  required  of  the  holder.  Ordinary  diligence  must  be  used  in 
both  cases.  He  is  not  bound  to  forward  notice  on  the  very  day  upon 
which  he  receives  it,  hut  may  wait  until  the  next.  {Howard  v.  Ives, 
and  the  authorities  cited.) 

For  the  purpose  of  receiving  and  transmitting  notices,  those  who 
hold  at  the  time  of  protest,  and  tliose  who  indorse  as  mere  agents  to 
collect,  are  regarded  as  real  parties  to  the  bill  or  note;  the  former 
as  holders  in  fact,  and  the  latter  as  actual  indorsers  for  value. 
{..lead  V.  Engs;   Howard  v.  Ives,  supra.)  ^ 

It  follows  from  these  principles,  that  the  proper  steps  were  taken 
to  charge  the  defendant  Horton  as  indorser.  Notice  for  him  was 
forwarded  by  mail,  postpaid,  on  the  day  of  the  protest,  to  the  agents 
and  last  indorsers  in  New  York,  and  delivered  l)y  them,  on  the  day 
it  was  received,  to  the  plaintiffs,  their  immediate  indorsers,  who,  on 
the  same  day,  deposited  it,  inclosed  in  an  envelope,  ))ostpaid,  in  the 
post-office  at  New  York,  directed  to  the  defendant  at  Janesville,  Wis- 
consin, his  proper  post-oflfice. 

Under  these  circumstances,  the  only  question  which  can  possibly 
arise  is,  whether  the  defendant  ought  to  be  discharged  by  reason  of 
the  notice  not  having  been  in  fact  received  by  him.  He  testifies 
that  it  was  not.  Professor  Parsons  observes,  that  in  all  the  cases  of 
constructive  notices,  where  notice  given  by  a  subsequent  to  a  prior 
indorser  has  been  held  to  inure  to  the  benefit  of  the  immediate 
indorser,  it  has  appeared  that  the  notice  was  actually  received;   and 


6  See  also  Farmers'  Bank  v.  Vail,  21  N.  Y.  485;  Rosson  v.  Carroll,  90  Tenn. 
90.  —  H. 


II.    5.]  WITHIN    WHAT   TIME.  5G3 

lie  raises  a  question  whether  this  would  be  so  if  the  notice  was  sent 
to  the  wrong  place.  (1  Parsons  on  Bills  and  Notes,  504,  note,  and 
G-^T.)  "  But  heie  tjie  notice  was  sent  to  the  right  place.  Besides,  the 
plaintifTs,  who  seek  to  avail  themselves  of  the  notice,  are  the  indorsers 
who  sent  it  to  the  defendant  as  the  indorser  next  immediately  pre- 
ceding them.  We  have  already  seen  that  the  rule  of  diligence  as  to 
t'lem  is  the  same  as  in  the  case  of  tlie  holder. 

T.ot  the  judgment  be  reversed,  and  the  cause  remanded  with  direc- 
tions to  enter  judgment  in  favor  of  the  plaintiffs  according  to  the 
demand  of  the  complaint." 


§  178  SIMPSOX  r.  TURXEY. 

5  Hi'MPiiREY   (Texx.)   419. —  1844. 

T?Ki:sF,  J.,  delivered  the  (»])inion  of  the  court. 

The  Branch  Bank  of  the  State  of  Tennessee  was  the  holder  of  a 
promissory  note,  payable  at  said  bank,  made  by  James  H.  Jenkins, 
to  .Vnthony  Dibrell,  and  endorsed  in  the  following  order:  A.  Dibrell, 
S.  'I'urney,  and  J  no.  \V.  Simpson.  Turney's  residence  is  within  one 
mile  of  the  bank,  at  Sparta,  so  known  to  be  to  the  bank,  and  to  all 
tie  other  parties  to  the  note.  The  note  was  legally  due  on  the  1st 
day  of  February,  IHIM,  that  being  the  third  day  of  grace.  It  was 
on  that  day  protested.  On  the  second  day  of  Fel)ruary  no  notice  of 
t.'ie  protest  for  the  non-payment  of  the  note  was  either  served  on 
Turney  personally  or  left  at  his  residence.  He  had  notice  from  the 
bank,  the  holder,  on  the  M  day  of  February.  John  \V.  Simpson, 
t!ie  plaiiitid',  fbe  immediate  indorsee  of  Turney,  gave  him  no  notice 
wlintever. 

'I'liesc  facts  being  spcciiilly  found  l)y  the  jury  in  the  ca.se,  the 
Cinnit  Court  gave  judgment  for  Turney,  and  the  ])l;iintin'  has 
afipf-nled  in  error  to  this  court. 

It  is  not  insisted  for  the  jjinintifT  here  that  the  notice  of  the  l)Mnk 
to   Turney,   the   only    notice    he    received,   was   in    time,      lint    it    is 


«  S<'C'  Hralp  V.  I'nrrish.  20  \.  Y.  407.  —  II. 

T  In  -lunirvK  V.  WirhiixDiu.  121  App.  Div.  (  N.  \ .)  ^y'.W ,  r).T2.  (Javiior,  .1..  saitl : 
"Till-  fifiint  i«  jil-(i  Tn!i<l<'  tliat  nolirf  of  ilinlififior  was  imt  yivcn  to  Xhc  n|iji('llant 
in  timp.  '\hc  fvidt'iirc  is  that  tlio  iilaintilT  ciuIorHod  and  dcpositi-d  the  clicck  in 
liiH  liank  fr>r  fidlcrlion  on  .Iidy  2Mtli,  and  Hint  ho  notified  appellant  by  tole- 
prajdi  on  .Inly  .lOtli  of  itn  di'^lionor.  Tlio  evidence  is  tliat  this  was  ilono  im- 
niofiiafr-Iy  after  Hie  [ihrnfifT  bad  received  notiee  of  ^\ir\\  disbnnor  from  tii>^  bank. 
Wy  seetionn  174  and  I7.'i  of  tlie  Net'ofiable  Instninients  haw.  the  plaintilf's  b.ink 
bad  until  tbe  day  followini.'  Hic-  riisbonor  to  (rive  bini  notie*-,  wliirli  would  be 
.Inly  2!nb.  and  bv  H<'rtion  17.S  tbe  plaintiff  bad  until  the  day  following  notice 
to   him   to   ('ivr-   tbe   a'|t'ellanf    notire." 

See  also  Oukhy  v.  Carr,  0(i  Neb.  751.  —  C. 


5(j.i  KOTU'K   OK    DLsllONOK.  [aUT.    VIII, 

urged,  that  if  Simpson  had  given  him  noLicc  on  tlie  day  he  received 
notice  from  tlie  bank,  such  notice  wouhl  have  been  good;  and  tliat 
is  certainly  so;  and  the  phiintill  ruiihcr  insists  that  the  notice  given 
by  tlie  bank  shall  inure  to  his  bcnclll.  If  the  notiie  had  been  in 
time  and  valid,  it  would  by  law  have  inured  to  his  benefit,  he  being 
an  intermediate  party.  But  a  notice  of  no  benefit  to  tlic  bank,  because 
not  fixing  the  liability  of  the  party  notified,  cannot  inure  to  tlie 
benefit  of  another.  So  to  hold  would  be  to  introduce  a  new  principle 
into  the  law  morchant.  Su])po?o  there  were  ton  indorscrs  upon  a 
note;  if  the  Iiolder,  ten  days  aficr  the  ])rntost,  gave  notice  to  the 
first  indorser,  this,  according  to  the  argument,  would  fix  all  the 
indorsers,  for  it  would  be  just  the  time  necessary  to  them  to  have 
given  notice  to  each  other  successively. 

It  is  perhaps  a  universal  principle,  where  substitution  exists  at  all, 
that  the  matter  or  thing  to  be  substituted  to  must  be  valid  and 
effective  in  behalf  of  tlie  principal;  if  it  be  inelTectual  in  his  behalf. 
It  is  difficult  to  see  how  it  can  inure  to  the  benefit  of  others. 

Upon  the  direct  question  raised  in  tliis  case,  Bayley  on  Bills 
expressly  says :  "  Nor  is  it  any  excuse  that  there  are  several  inter- 
vening parties  between  him  who  gives  the  notice  and  the  defendant 
to  whom  it  is  given;  and  if  the  notice  had  been  communicated 
through  those  intervening  parties,  and  each  had  taken  the  time  the 
law  allows,  the  defendant  would  not  have  had  the  notice  the  sooner." 
The  same  principle  is  also  decided  in  the  case  of  Turner  v.  Leech 
(I  Barnwall  &  Aldcrson,  451). 

We  have  been  referred  by  the  plaintiff,  to  what  has  been  said  by 
this  court  in  the  case  of  McNeil  v.  IF.va/^  (3  Humphreys,  128).  The 
bank  at  Lagrange  in  that  case  gave  notice  to  one  Glover  on  the  1  Ith 
to  be  served  on  Wyatt  &  McNeil,  Wyatt  was  served  on  the  1 1th, 
and  McXeil  on  the  15th.  But  Glover  proved  in  the  Circuit  Court 
that  he  was  the  general  agent  of  Wyatt  to  serve  notices  for  him 
when  his  name  was  on  paper.  And  the  Circuit  Court  left  it  to  t'le 
jury  to  say  whether  Glover,  who  served  the  notice,  was  not  Wyatt's 
agent  as  well  as  the  agent  of  the  bank;  and  if  he  was,  then  the 
notice  to  McNeil  on  the  15th,  one  day  after  Wyatt  received  notice, 
was  sufficient. 

This  court  held  that  there  was  not  any  error  in  this  part  of  the 
chargef  and  placing  the  validity  of  the  notice,  as  this  court  did, 
upon  that  special  ground,  is  a  distinct  recognition  of  the  general 
principle  maintained  by  us  in  this  case. 

Upon  the  whole,  we  affirm  the  judgment.* 

"Accord:     Rowe  v.  Tipper,  13  C.  B.  249.  —  11. 


II.    6.]  AT    WHAT   PLACE.  665 

§178  FIRST  NATIONAL  BANK  v.  FARNEMAJ^. 

93  Iowa,  101.  —  1894. 

Action  against  indorser.  Defendant  indorsed  to  plaintiff.  Plain- 
tiff indorsed  for  collection  to  Valley  Bank.  The  latter  indorsed  for 
collection  to  German  Bank,  at  Carroll,  which  place,  unknown  to 
German  Bank,  was  the  residence  of  defendant.  The  German  Bank, 
on  dishonor  on  Xov.  10,  mailed  notices  to  Valley  Bank,  which  for- 
warded them  to  plaintiff,  who  received  them  on  Nov.  12,  and  on  that 
day  gave  personal  notice  to  defendant.  Of  the  indorsements  on  the 
bill  all  except  that  by  the  defendant  are  erased.  Judgment  for 
defendant. 

Granger,  C.  J.  *  *  *  Appellant  relies,  mainly,  in  argument 
on  a.  rule  that  the  holder  need  only  notify  his  immediate  indorser, 
and  this  indorser  the  next,  and  so  on,  and  then  claims  that  the  Ger- 
man Bank  did  notify  the  Valley  Bank.  How  such  a  rule  might  affect 
the  rigiits  of  parties  were  tlie  German  Bank  seeking  to  recover,  it  is 
not  for  us  to  say.  Defendant  is  the  immediate  indorser  of  the 
plaintiff  bank,  and,  because  of  the  erasures,  there  are  no  otlier 
indorsers;  and  the  rule  cited,  if  a  correct  one,  is  without  force.  It 
is  to  be  kept  in  mind  that,  as  to  the  indorsers  other  than  the  defend- 
ant, they  were  such  for  collection  only,  and  the  indorsements  were 
erased.  We  treat  the  case  on  the  theory  of  but  a  single  indorser, 
and  that  one  the  defendant. 

The  judgment  is  affirmed. 


6.  Place  at  Which  Notice  Must  Be  Given. 

§  179  Morris  v.  Husson.  4  Sandford  (N.  Y.  City  Superior  O'rt.), 
93.  _  1850.  Mason,  J.  — "The  addition  by  t!ic  "defendant  of  the 
words,  '  !.'{  Chambers  Street,'  beneath  his  indorsement,  conid  have 
no  other  meaning  than  a  direction  as  to  the  place  where  notice 
Bhould  be  sent  in  case  of  the  dishonor  of  the  note,  and  tlit;  notice 
put  in  the  post-office  addressed  to  him,  as  was  the  nolicc  in  this 
case,  to  .\'o.  1.'}  ('hambers  street,  was  given  strictly  in  compliance  with 
his  directions." 


§  179  Bahtlett  v.  T?oniNsoN,  39  New  York,  187.  —  IBfiH.  Wood- 
ruff, J.  —  "  As  well  when  the  parties  do  not  reside  in  the  same  city 
or  town  as  wlien  (according  to  our  statute)  they  do,  or  in  short 
whenever  notice  is  sent  by  mail  or  deposited  in  the  post-office,  the 
notice  must  be  directed  to  the  indorser.  not  only  at  the  city  or  town, 
but  to  thp  ppecifir  place  designated  bv  the  undorwriting.  •  •  ♦  J 
think     *     *     *     that  the  words  '  directed  to  the  indorser  at  such  city 


566  N0T1CI-:  or  disiionok.  jakt.  viii. 

or  town  '  includes  as  a  part  of  sueh  '  (liroction  '  coiironnity  to  the  pre- 
scription which  the  special  indorsement  ini})orts/"  [Hence,  a  notice 
addressed  to  "  A.  B.,  city  of  New  York,"  is  not  sullicient  where  the 
indorsement  is  "A.  B.,  2U  E.  ISth  st."J. 


§179       BANK  OF  GENEVA  v.   HOWLETT. 

4  Wi-.NDKi.L  (N.  V.)  328.  —1830. 

Action  against  indorser.     Verdict  for  defendant. 

By  ilie  Court,  Sutiiekl.and,  J.  —  The  verdict  is  clearly  against  the 
weight  of  evidence.  Charles  A.  Cook',  the  cashier  and  notary  of  the 
bank,  testified  that  he  regularly  protested  the  note  on  the  day  it 
became  due,  and  sent  notice  thereof  on  the  same  day  to  the  delJL'ud- 
ant,  directed  to  him  at  Ceddesburgh,  and  put  the  notice  in  the  post- 
ofTice  at  Geneva,  lie  did  not  recollect  whether  he  put  the  county 
on  tlie  notice  of  protest,  hut  it  was  his  custom  to  do  so. 

It  was  shown,  on  the  part  of  the  defendant,  that  the  legal  name 
of  the  post-otTicc  near  which  the  defend;:  I  resided  was  Geddes,  not 
Geddesburgh ;  hut  all  tlie  witnesses  concurred  in  stating  that  it  was 
known  as  well  by  the  one  name  as  the  other,  and  that  at  least  half 
the  people  called  it  Geddesburgh ;  and  Mr.  Earle,  the  postmaster  at 
Onondaga  Hill,  within  a  few  miles  of  Geddes,  testified  that  until 
lately  he  supposed  the  name  of  the  post-ofBce  was  Geddesburgh,  and 
if  a  letter  was  put  in  his  office  directed  to  Geddesburgh,  he  should 
forward  it  to  Geddes.  He  further  stated  that  there  was  no  post- 
office,  either  in  this  state  or  in  the  United  States,  of  the  name  of 
Geddesburgh.  John  Wilkinson,  tlie  postmaster  at  Syracuse,  testified 
that  packages  in  the  mails  were  as  frequently  directed  to  Geddesburgh 
as  Geddes,  except  from  the  large  offices.  Upon  this  testimony 
there  can  be  no  question,  if  the  notice  was  directed  to  Geddes- 
burgh without  the  name  of  the  county,  that  it  was  sent  to  Geddes. 
But  the  fair  intendment  from  the  testimony  (if  (he  notary  is,  that 
the  name  of  the  county  was  also  part  of  i\\v.  superscription.  It 
was  his  general  custom  so  to  direct  his  notices,  and  no  cir(;uin- 
stance  is  stated  to  induce  the  belief  that  he  departed  from  it  in  this 
instance.  The  verdict,  therefore,  under  the  charge  should  have  been 
for  the  plaintiff. 

The  judge  decided,  as  a  question  of  law,  that  the  notice  was  good, 
if  it  was  sent  to  the  Geddes  or  Geddesburgh  post-office.  It  was 
properly  assumed  as  a  question  of  law,  and  Hie  f)])ini()n  of  the  judge 
was  correct. 

The  evidence  shows  that  altbougb  the  defendant  resided  a  mile 
and  a  half  or  two  miles  nearer  to  the  posf-officc  nt  Onondaga  Hill 
than  to  Geddos.  still  that  Geddes  was  lii<  nhuc  nf  business,  where 
he  carried   o)i   tfie  manufacturing  of  ^;ilt  and   tlie  slaughtering  and 


II.    6.]  AT    WHAT    PLACE.  567 

packing  of  beef;  tliat  he  received  letters  at  both  offices.  ^Tore 
letters  fur  him  iiidividually  were  received  through  the  office  at 
Onondaga  C.  II.  than  at  Geddes;  but  all  the  company  letters  were 
directed  to  the  latter  ofhce.  The  defendant  or  his  sons  were  in  the. 
habit  of  calling  for  letters  at  the  Geddes  office,  and  he  kept  a  postage 
account  there. 

Under  such  circumstances,  notice  directed  to  either  office  would 
i)e  good.  It  is  not  indispensable  that  the  notice  should  be  sent  to 
the  odice  nearest  to  the  residence  of  the  party,  nor  even  to  the  town 
in  which  he  resides.  It  is  sufficient  if  it  be  sent  to  the  office  to 
which  he  usually  resorts  for  his  letters,  and  where  he  would  probably 
receive  it  as  soon  as  at  the  office  nearer  to  him.  (Rcid  v.  Pai/iie, 
IG  Johns.  R.  218;  1  Peters,  578;  10  Johns.  R.  411;  11  Id.  490.) 
When  a  party  has  a  dwelling  house  and  counting  room,  or  other  place 
of  business  in  the  same  place  or  town,  notice  sent  to  either  is  suffi- 
cient. (Hank  of  Colunibia  v.  Lawrence,  1  Peters,  582,  583)  ;  and  it 
cannot  be  material  whether  the  residence  of  the  j)arty  and  his  jjlace 
of  business  be  in  the  same  town  or  not,  if  it  appears  that  he  is  in  the 
daily  or  constant  habit  of  receiving  letters  at  both  places.  The 
notice,  therefore,  was  sufFicicnl,  and  the  dcfi'iidant  was  legally 
charged. 

It  has  been  decided  l)y  this  court  that  deducting  interest  by  way 
of  discount  at  the  rate  of  seven  per  cent.,  upon  commercial  or  busi- 
ness paper,  is  not  usurious.  (Manhaitan  Company  v.  Osgood,  15 
Johns.  R.  168;  Banl-  of  Vlica  v.  Wager,  2  Cowen,  766,  767:  Bank  of 
fJiira  V.  Phillips,  3  Wendell,  408.  See,  also,  Flecliwr  v.  The  Hani-  of 
the  V.  S.,  8  Wlieaton,  838;  4  Yeates'  Rep.  220,  223;  9  Mass.  R.  19; 
3  Bos.  &  Pul.  154.) 

A  new  trial  must  be  granted,  on  the  ground  that  the  vci-dict  is 
against  evidence.' 


§  179  von  EL  r.  ST.VRR. 

132  Missoi  lu   Ai'i-KM.s.    I.'U).  —  IflOfi. 

JoF[N'SON,  J.  —  Action  against  the  indorscr  of  a  negotiable  promis- 
sory  note.     The   failure  of  the   holder   to  give   jiroper   notice   of   dis 
honor  is  the  defense  interposed.     Trial  was  hefdre  the  conit    wilhonl 
the  aid  of  a  jury,     .hidginetil  was  entered  for  defciidiint,  and  |ilaintilf 
ap[tealed. 

•  Accord:    Mnntfinmcry  Co.  Rank  v.  ]fnrHh,  7  N.  Y.  4nl ;  MtTccr  v.  Jjancnntcr, 
5  Til.  St.  IfiO:    Shrthurvc  linnk  v.  TounfiJry.   102  Mush.   177. 

WluTP  tlif  indcirHcr  livfs  in  a  (own  li:iviti>i  two  or  more  |io'<t()Hic<'«  a  noliop 
nfl(lr("4-*f'(l  to  liim  at  tlif  tf>\vn  f;cn<'rally  )■<  Huflipifn)  tinlcHs  (lie  lioidcr  know*  or 
nil^'lit  rcasonahly  know  liis  parlinilar  pfislodifc  n(I<lr«"<«.  t^ino  \nt.  Ilk.  v. 
Knuhorn.  fi.T  Mp.  310;  ffrtit:-r  v.  Doirnr,-.  'IW  Wond.  (  \.  V.)  (120 :  Morlnu  v.  Wrat 
eott,  H  Cush.   (MasH.)   425;  Uubvrts  v.  Tnft,  12U  Ma^.s.  1(1!).—  Ii. 


568  Noi'U'K  OK  msiiDNoK.  [art.  VIII. 

Tlie  note  in  question  is  us  lollous:  "$15.  Trenton,  Mo.,  Oct.  7, 
1895.  One  year  after  date,  I  promise  to  pay  to  the  order  of  0.  J. 
Starr,  forty-five  dollars,  for  valiu-  received  with  interest  at  the  rate 
of  ei^ht  per  cent,  per  annum  from  date,  until  paid,  and  if  not 
paid  annually,  the  same  to  heconie  a  part  of  the  principal  and  hear 
the  same  rate  of  interest  as  the  principal  debt.  Payable  at  the  First 
National  Baid<,  Trenton,  Mo.     C.  Millard." 

A  few  days  after  the  execution  of  the  note,  and  long  before  its 
maturity,  Starr,  the  payee,  sold  it  to  plaintiff  for  value,  and  imlorsed 
it  in  blank.  Later  plaintiff  deposited  it  with  the  Trenton  National 
Bank  for  collection.  On  the  last  day  of  grace,  October  10,  1896,  and 
within  proper  hours,  the  bank  handed  the  note  to  a  notary  public  for 
demand  and  protest.  Millard,  the  maker,  had  moved  to  Wisconsin,  and 
Starr,  the  indorser,  lived  in  the  country  about  13  miles  from  Trenton. 
The  notary  testified :  ^°  "  *  *  *  My  impression  is  that  in  regard 
to  Mr.  Starr's  address  the  bank's  best  information ;  that  is,  they  told 
me  they  were  not  certain  about  it.  That's  the  way  I  remember  it; 
that  it  was  Spickards,  Mo.  And  I  took  the  note.  It  was  payable  at 
the  First  National  Bank,  Trenton,  Mo.,  and  I  took  this  note  to 
the  building  that  had  been  occupied  by  the  First  National  Bank.  The 
First  National  Bank  at  that  time  had  gone  into  liquidation  in  con- 
nection with  the  old  Grundy  County  National  Bank.  Tt  had  its  first 
banking  room  at  the  five  corners;  and  the  First  National  and 
the  old  Grundy  County  National  consolidated  and  liquidated  through 
the  Trenton  National  Bank.  *  *  *  This  protest  shows  that  I 
took  it  to  that  building  and  presented  it  there,  and  found  no  one  there 
to  pay  the  note.  And,  after  that,  out  of  an  abundance  of  precaution, 
I  went  over  to  the  Citizens'  State  Bank,  which  was  diagonally  across 
the  street  from  the  building  formerly  occupied  by  the  First  National, 
and  I  presented  the  note  there,  to  the  cashier  of  that  bank,  as  the 
protest  shows,  and  demanded  payment  there.  T  think  Walter  P.  Ful- 
kerson  was  cashier  at  that  time,  and  there  w^as  nobody  there  that  would 
pay  the  note;  so  from  there  I  went  to  the  Trenton  National,  or  might 
be  probable  I  made  the  demand  there  before  I  went  to  the  other 
place,  at  any  rate,  I  presented  the  note  as  the  protest  shows  to  the 
cashier  of  the  Trenton  National  Bank,  Mr.  H.  M.  Cook,  and  demanded 
payment  of  the  note.  li.  M.  Cook  had  already  been  the  cashier 
of  the  First  National  Bank,  at  which  this  note  was  payable,  and  he 
was  winding  up  the  affairs  of  the  old  First  National  at  the  time,  and 
also  cashier  of  the  Trenton  National.  Then  I  made  inquiry  as  to 
where  Mr.  Starr  lived,  and  made  a  diligent  searcli,  as  T  thought. 
*  *  *  They  thought  Mr.  Starr  lived  near  or  got  his  mail  at 
Spickards,   Mo.,   and   so   T   made   some   other   inquiries   as  to  where 


10  Certain  portions  of  tlio  notary's  testimony  are  omitted.  —  C. 


II-    6.]  AT    WHAT   PLACE.  569 

Starr  lived,  at  the  banks,  Mr.  Cook  and  the  Citizens'  Bank  also,  and  I 
wouldn't  say  positiveh'  as  to  who  else  T  did  inquire  of  *  *  *  I 
mailed  the  notice  to  Starr  at  Spickards,  Mo.     *     *     *  " 

Starr  did  not  receive  the  notice  until  some  three  months  after  it 
was  mailed,  for  the  reason  that  Tindall,  and  not  Spickards,  was  his 
post-office.  The  farm  he  occupied  as  a  tenant  was  about  one  mile 
nearer  Spickards  than  Tindall,  either  by  wagon  road  or  as  the  crow 
flies,  and  Spickards,  though  a  small  town,  was  much  larger  than 
Tindall.  But  Starr  had  made  the  latter  place  his  post-office  address 
while  living  on  a  farm  nearer  to  it  than  to  Spickards,  and  continued 
to  get  his  mail  there.  Xo  doubt  is  suggested  in  the  evidence  of  the 
good  faith  of  the  notary  and  of  plaintiff's  collection  agent  in 
mailing  the  notice  to  Starr's  nearest  post-office,  nor  do  we  find  any- 
thing indicative  of  bad  faith  on  the  part  of  plaintiff,  the  owner  of 
the  note.  He  was  not  in  Trenton  on  the  date  of  the  protest,  nor 
had  he  imparted  to  his  collection  agent  the  information  he  possessed 
respecting  Starr's  post-office  address.  ITad  he  done  this,  we  perceive 
nothing  in  the  facts  known  to  him  to  support  the  conclusion  that  his 
collection  agent  and  the  notary  might  have  acted  differently.  The 
farm  where  plaintiff  lived  was,  perhaps,  two  miles  from  that  occupied 
by  Starr.  While  the  note  was  maturing,  they  met  occasionally  and 
casually  on  the  public  road,  at  Tindall,  or  at  a  neighborhood  church, 
but  plaintiff  did  not  know  that  Starr  received  his  mail  at  Tindall, 
and  it  appears  that  he  and  Starr  were  acquainted  only  slightly. 

While  it  is  true  that  the  holder  of  commercial  paper  for  collection 
must  be  regarded  as  a  separate  and  independent  holder  for  the  pur- 
poses of  presentment,  demand,  protest,  and  notice  of  dishonor  (Ren- 
shaw  V.  Triplett,  23  Mo.  213;  Griffith  v.  Assmann,  48  Mo.  66;  Ivory 
V.  Bank,  36  Mo.  475 ;  Bank  v.  Briedow,  31  Mo.  523 ;  Yonng  v.  Hud- 
son, 99  Mo.  102),  we  are  willing  to  concede  for  argument  that  it 
was  the  duty  of  plaintiff  to  communicate  to  his  collection  agent  the 
facts  in  his  knowledge  relating  to  the  post-office  address  of  the 
indorser,  but  we  do  not  sanction  the  contention  that  he  was  charged 
by  law  with  the  further  duty  either  to  notify  the  indorser  personally 
of  the  dishonor  of  the  note  or  to  make  inquiries  in  tlu;  neighborhood 
to  ascertain  the  place  where  the  indorser  received  his  mail.  The 
note,  by  its  terms,  being  payable  at  Trenton,  it  was  very  natural  tlint 
plaintiff  should  employ  an  agent  at  that  place  to  look  after  its 
collection,  and  that  he  should  rely  on  his  agent  to  take  the  necessary 
steps  to  hold  the  indorser.  We  arc  going  far  enough  when  we  assume 
that  it  was  his  duty  to  commnnicafe  to  his  agent  the  knowledge 
of  facts  material  to  the  pubjoct  of  the  employment  bo  had  or  might 
acquire  during  the  course  of  the  employment.  Tt  was  not  bis  duty 
to  perform  personally  the  very  duties  he  had  delegated  to  his  agent. 
When  a  person  employs  an  agent  to  do  a  thing,  he  should  not  be 
held    to    be    remiss    for    relying    on    his    agent    and    only    may    be 


'uO  NOTin-:  OF  msiioMOH.  [aut.  viii. 

hoUl  liable  for  the  negligent  or  wroiigl'iil  nets  of  the  agent  in  the 
perforninnoe  of  tlie  delegated  duly  under  (lie  j)riiieii)le  that  what  one 
does  hv  the  hand  of  another  he  does  himself. 

lni|Miting  to  the  coliection  agent  and  the  notary  knowledge  of  the 
facts  known  to  plaintilT,  our  chief  coneern  is  with  the  (luestion  of 
whetlier  the  notary  exercised  reasonable  diligence  in  the  giving  of 
notice  to  the  indorser.  Since  we  find  in  the  record  no  controversy 
over  material  facts,  the  question  is  one  of  law,  not  of  fact.  As  early 
as  the  case  of  LinvUlc  v.  M'clch.  21)  Mo.  20'.\,  it  was  decided  by  the 
Supreme  Court  that  what  is  due  diligence  in  giving  notice  of  dishonor 
of  a  bill  of  exchange  is  a  question  of  law  when  the  facts  are  un- 
disputed, and,  when  they  are  in  dispute,  the  court  should  give  hypo- 
thetical instructions,  leaving  the  facts  to  be  determined  by  the  jury. 
Sanderson's  Adm'r  v.  Reinsladler,  31  Mo.  483;  Fugitt  v.  Nixon,  44 
Mo.  295. 

Considering  the  case,  then,  from  the  standpoint  presented  by  the 
facts  known  to  plaintifT,  knowledge  of  wliich  we  ascribe  to  the  notary, 
and  by  the  facts  acquired  by  the  notary  from  his  own  inquiries,  and 
treating  tlie  question  of  due  diligence  as  a  question  of  law,  we  next 
turn  to  consider  the  principles  and  rules  by  which  the  holder  of  a 
bill  of  exchange  must  be  controlled  in  giving  to  an  indorser  notice  of 
dishonor.  The  liability  of  the  indorser  is  conditioned  upon  the  exist- 
ence of  two  facts,  viz:  (1)  That  the  maker  has  made  default  in  the 
payment  of  the  bill  at  maturity;  (2)  that  due  notice  of  that  fact  be 
given  the  indorser.  As  to  what  will  constitute  sufficient  notice,  it  is 
well  settled  that  personal  service  of  the  notice  is  not  required.  Con- 
structive service  will  suffice  if  reasonable  diligence  be  exercised  to  make 
it  in  the  manner  best  adapted  to  convey  actual  notice.  "  Where  the 
party  to  be  served  is  a  resident  of  the  city  or  town  where  the  protest 
is  made,  the  course  required  is  to  give  him  personal  notice  or  to  leave 
it  at  his  dwelling  or  place  of  business.  But  if  he  lives  in  the  country, 
then  a  notice  by  mail  to  his  postoifTice  will  be  sufficient."  Tiarrcll  v. 
Evans,  28  Mo.  331;  Sandersons  Adm'r  v.  Reinstadler,  supra.  When 
the  indorser  lives  in  the  country  and  his  postoffice  address  is  not  known 
to  the  holder,  it  is  the  duty  of  the  latter  to  make  reasonable  inquiries 
in  the  town  or  city  where  the  bill  is  payable,  and,  in  default  of  more 
specific  information,  to  address  the  notice  to  the  postoffice  nearest  the 
residence  of  the  indorser.  But  the  holder  is  not  justified,  in  all  cases, 
in  sending  the  notice  to  the  nearest  postoffice.  He  must  act  in  good 
faith  always  and  with  reasonable  diligence  to  learn  the  place  where  the 
indorser  receives  his  mail,  and,  learning  it,  must  send  the  notice  there, 
regardless  of  whether  it  be  the  nearest  postoffice. 

With  these  principles  before  us,  we  do  not  hesitate  to  declare  as  a 
matter  of  law  that  the  notary,  whose  good  faith  is  not  questioned,  ex- 
ercised reasonable  diligence  and  acted  on  the  information  he  received  in 
a  way  which  would  have  commended  itself  to  any  reasonably  careful 


II.    6.]  AT    WHAT    PLACE.  571 

and  prudent  person  in  his  situation.  He  made  inquiries  of  several  per- 
sons, all  of  whom  appeared  to  possess  some  information  on  the  subject, 
and  all  expressed  the  belief  that  Spickards  was  the  proper  address  of 
the  indorser.  Takin-T  tlicse  opinions,  in  eonnection  with  tlie  facts  that 
Spickard:^  was  the  nearest  town  to  the  indorser's  farm  and  was  a  much 
larger  pi;!.',  than  Tindall,  we  think  any  person  in  the  situation  of  the 
notary  would  have  come  to  the  conclusion,  as  he  did,  that  the  notice 
should  be  sent  there.  Findin.sr,  as  we  do,  that  the  notary  acted  properly, 
it  is  immaterial  that  the  indorser  failed  to  receive  the  notice  within  a 
reasonable  time.  That  was  his  misfortune,  for  which,  in  a  sense,  ho 
was  responsible.  Tie  was  justified  in  standing  strictly  on  his  right  to 
legal  notice,  but  presumably  he  knew  of  the  fact  of  the  maturing  of 
the  note,  and  from  all  the  circumstances  must  have  anticipated  that 
notice  of  dishonor  likely  would  be  addressed  to  him  at  Spickards.  The 
notice  was  sufficient. 

The  case  was  not  tried  in  accordance  with  the  views  expressed,  and 
it  follows  that  the  judgment  must  be  reversed  and  tlio  cause  remanded. 
All  concur. 


§  179  BANK  OF  COMMERCP]  v,  CHAMBERS. 

14  Missouri  Appeals,  152.— 1883. 

Action  against  maker  and  indorser.  Indorser  sets  up  a  want  of 
notice.  The  indorser  (Frost)  had  a  general  residence  or  domicil  in 
St.  Louis  and  a  general  j)lace  of  business  in  St.  T^ouis,  but  his  family 
were  sojourning  at  Selma,  Mo.,  a  place  without  a  postonire,  while  he 
was  sojourning  at  Washington,  as  a  member  of  Congress.  Notices 
were  mailed  to  him,  addressed  to  St.  Louis,  Washington  and  Selma, 
respectively.     Judgment  for  y)1aintifT. 

Thompson,  J.  [After  deciding  that  the  nr)1ic(:-  maileil  lo  St.  Tjouis 
were  insufficient  becaiiK^  holder  Mn<l  indorser  holii  resided  ifi  St. 
T.)Ouis.] 

We  are  of  opinion  that  the  general  notice  sent  by  mail  and  addressed 
"Hon.  H.  (Jraliam  Frost,  Washington,  1>.  ('.,  "  might,  properly  have 
been  regarded  bv  the  trier  of  facts  as  a  good  notice.  There  is  evidence? 
tending  to  show  that,  before  the  nf)tary  sent  this  notice,  he  went  to  the 
posloffice  and  there  in<|\iired  for  Mr.  Frost's  address,  and  was  told  it 
was  Washington,  I).  C.,  whereupon  he  mailed  the  notice  to  him  a.s 
stated. 

This  was  on  the  2M  of  December,  IHSO.  The  Congress  was  then 
in  regular  session,  but  it  had,  on  the  day  previous,  taken  the  usual 
holiday  recess,  as  was  shown  by  a  copy  of  the  Congressional  T?ecord 
put  in  evidence.  This  recess  wa"?  taken  from  the  3?d  of  December 
until  the  Tith  day  of  January  following.    That  a  notice  of  jtrolest  sent 


573  NOTUK    OF    DlSllONOK.  [ART.    VIII. 

bv  mail  to  a  mrnihor  of  Congress  while  engnged  in  discharging  his 
piihlir  duties  as  surli  at  \\'asliiiigton,  is  a  gooil  notice,  has  been  held, 
both  in  Massachusetts  and  Mississijipi.  {Chmtlcan  \.  Wchsler,  6  Mete. 
1;  Tuusiall  v.  ^yaWcr,  2  Snied.  I'v:  ]\I.  638.)  In  the  fonucr  of  tliese 
cases,  Daniel  Webster,  a  sciuitor  from  Massachusetts,  was,  when  the 
notice  of  protest  was  sent  to  him  by  mail,  at  Washington,  D.  C,  at- 
tending a  special  session  of  Congress  at  Washington,  and  he  had  at 
Boston,  just  as  Mr.  Frost  had  at  St.  Louis,  a  place  of  business  and  an 
agent  to  attend  to  his  business;  and  yet  tlie  court,  Chiel'  dust  ice  Shaw 
delivering  the  o])inion,  held  that  the  notice  thus  nuiilcil  to  him  was  a 
good  notice. 

The  fact  that  Congress  had  taken  this  temporary  recess  may  not 
have  been  known  to  the  notary,  aiul,  if  known,  it  would  not  necessarily 
indicate  to  him  that  IMr.  Frost  would  be  absent  from  the  capital  during 
such  recess.  If  it  should  indicate  this  it  would  not  impair  the  legal 
sufliciency  of  the  notice;  because  the  controlling  rule  is  that  where  the 
indorser  has  different  residences  and  dilferent  places  of  business,  the 
notice  must  be  sent  to  the  place,  where,  uj)on  diligent  inquiry,  it  seems 
most  likely  to  reach  him  with  certainty  and  promptness.  (Cabat  Bank 
V.  Rusself,\  Gray,  IGD,  -170,  per  Shaw,  C.  J.) 

Nor  can  the  circumstance  that  the  indorser  was  in  the  habit  of  re- 
ceiving his  mail,  not  at  the  general  postoffice  in  Washington,  but  at  a 
special  postoffice  in  tlie  capital  buililing,  impair  the  legal  sufficiency  of 
this  notice,  unless  this  fact  were  known  to  the  notary  or  would  have 
been  disclosed  to  him  upon  reasonalde  inquiry.  That  he  did  not  know 
this  appears  from  the  evidence,  and  that  it  was  not  disclosed  to  him 
r-^-n  the  inquiry  which  he  made  at  the  postofRce  in  St.  Louis  also 
sufficiently  appears.  Tt  seems  that  this  postoffice  was  the  most  proper 
place  at  which  to  make  such  an  intpiiry,  for  it  must  be  supposed  from 
the  nature  of  Mr.  Frost's  public  duties  at  the  time  that  numerous  let- 
ters were  constantly  received  at  the  St.  Louis  postoffice  for  transmis- 
sion to  him  at  his  official  residence  at  Washington.  At  all  events,  it 
cannot  be  said  that  this  testimony  was  not  sufhcient  to  take  the  case 
to  the  trier  of  tlie  fact  upon  the  question  of  diligence.  It  lias  been 
lield  several  times,  that  where  there  are  two  or  more  postoffices  in  the 
town  where  the  indorser  resides,  a  notice  sent  by  mail  to  the  town  gen- 
erally will  be  a  good  notice,  unless  a  reasonable  inquiry  would  have  dis- 
closed to  the  holder  or  the  notary  the  actual  postoffice  at  which  the 
indorser  commonly  received  his  mail.  (BurJivgame  v.  Foster,  128 
Mass.  125;  ^forfon  v.  Westcotf,  8  Cush.  42r>;  Cabot  Bank  v.  Russell, 
4  Gray,  167.) 

The  "towns"  here  spoken  of  are  not  cities  or  villages,  hut  Xow 
England  towns,  which  correspond  to  townships  in  T^Tissouri  and  Illi- 
nois, each  of  which  frequently  contains  several  villages  and  several 
postoffices. 


m.]  WHEN   DELAY   EXCUSED.  573 

[The  learned  judge  then  holds  that  notice  addressed  to  Selma  was 
good,  in  view  of  the  evidence  that  mail  addressed  to  Selma  was  reg- 
ularly sent  to  Crystal  City,  the  postoffice  nearest  Selma.  ^ 

Judgment  affirmed.  ^ 


III.  When  delay  in  giving  notice  excused. 

§  184  JAMES  V.  WADE. 

21  Louisiana  Annual,  548.  — 1869. 

Howe,  J.  —  The  defendant  is  sued  as  the  indorser  of  a  bill  of  ex- 
change drawn  by  W.  R.  Hughes  on  Moore  and  Browder,  of  New  Or- 
leans, and  by  the  latter  accepted,  payable  on  the  fifteenth  February, 
1863. 

On  the  day  of  its  maturity  the  bill  was  protested  by  a  notary  in  New 
Orleans,  and  a  notice  deposited  in  the  postoffice  in  that  city  addressed 
to  tlie  defendant,  at  Winnfield,  parish  of  Winn,  Louisiana. 

The  record  shows  that  in  February,  1863,  all  postal  and  commercial 
intercourse  was  suspended  between  New  Orleans  and  Winnfield.  The 
war  was  then  raging,  and  the  deposit  of  the  notice  in  the  postoffice  in 
New  Orleans  had  no  effect  in  converting  the  conditional  obligation  of 
the  indorser  into  an  absolute  liability.  (19  A.  43,  63,  64,  72,  90;  20 
A.  399.) 

If  the  holders  of  this  bill  desired  to  bind  the  indorser,  it  was  their 
duty  to  have  given  him  notice  of  dishonor  within  a  reasonable  time 
after  the  close  of  the  war,  and  the  resumption  of  commercial  inter- 
course. There  being  no  evidence  tliat  any  notice  except  the  one  de- 
scribed above  was  ever  given,  the  indorser  must  be  held  to  have  been 
discharged.    *    ♦    ♦ 

Judgment  affirmed.^ 


§  184  UNION  NATIONAL  BANK  v.  MARR'S  ADMINTPTRATOR. 
6  Bush  (Ky.  )  fill.  —  ISfif). 

Action  against  drawer  of  a  l)ill  drawn  in  Missouri  upon  a  drawee*  in 
New  Orleans  and  presented  July  17,  1861,  and  dishonored.  Jiulgment 
for  defendant. 

'JuDOB  Harden  delivered  the  opinion  of  the  pour^. 

1  Spc   Rank   v.    Hnmlnt,   4    VWnfl.   .328,  nntr.   p.   r,(\C,.  —  II. 

2  AcorH :  Graham  v.  Sanrjfitnn.  1  Mrl.  ."ift.  Rut  if  tlip  indorser  simply  vititN  a 
plaop  for  a  piirposp  rlcnrly  toniporary  and  Bpocial,  he  is  not  "sojoiirninK " 
within  the  tu\o  of  th*"  ahovo  cascR.     Walhrr  v.  Ntrtson,  14  Oh.  St.  80.  —  H. 

s  Accord:  ,Vorri«  v.  Drspard.  .18  Md.  487;  Dunbar  v.  Tylrr.  44  Miss.  1  :  Har- 
den V.  Rnyrr,  50  Harh.  (N.  Y.)  425.  So.  also,  dpiay  occasioned  liy  prpsrncp  of 
malignant  disease.     Tunnn  v.  I,a(}ur,  2  .Johns,  ('as.  (N.  Y.)   1.  — H. 


674  NOTicR  OF  nisiroNOH.  [aht.  viii. 

This  was  an  {irdinary  ai'tion  by  the  appclhuil,  as  (ho  holder  of  a  hill 
of  exchange  for  $1,26::^. 50,  datetl  at  I'harieston,  Missouri,  Ihi'  loth  day 
of  June,  1S()1,  drawn  by  P.  N.  Marr  upon  Samuel  Y.  'I'honuis,  Now 
Orleans,  Louisiana,  })ayahle  to  the  order  of  Thomas  Allen,  and  in- 
dorsed by  him  and  Shelby  Sheeks. 

It  appears  that  tiie  bill  was  presented  for  aeeeptanec  in  New  Or- 
leans on  the  17th  day  of  July,  1861,  and  thereupon  protested  for  non- 
aeccptanee,  of  which  notices  addressed  to  the  parties  were  mailed  by 
the  notary  to  the  agents  of  the  plaintiff,  but  it  does  not  appear  they 
were  legally  forwarded  to  the  defendants,  who  in  their  defense  denied 
that  due  notice  of  said  protest  was  given,  and  claimed  exoneration  on 
that  ground. 

The  principle  is  well  settled,  that,  although  the  Jiolder  of  a  bill  of 
exchange,  payable  at  a  given  time,  is  not  bound  to  present  it  to  the 
drawee  for  acceptance  until  it  becomes  due ;  yet  if  he  does  so,  and  the 
bill  is  dishonored,  he  is  bound  to  give  due  notice  of  the  fact  to  the 
parties  whom  he  intends  to  hold  bound.  (Landruni  v.  Troivhridge, 
2  Met.  281 ;  Story  on  Bills,  §§  227-228-384.)  But  the  appellant  ques- 
tions the  correctness  of  the  judgment  dismissing  the  petition,  on  a  trial 
of  the  case  by  the  court,  mainly  on  the  ground  that  at  the  time  of  said 
protest  the  civil  war  had  become  flagrant,  and  so  suspended  commer- 
cial intercourse  between  the  hostile  sections  of  the  country  as  to  dis- 
pense with  tlie  necessity  of  notice  of  protest  to  bind  the  drawer  and 
indorsers  of  said  bill;  and  especially  so  as  the  bill  was  not  protested 
till  after  the  passage  of  the  act  of  Congress  of  the  13th  of  July,  1861, 
authorizing  the  President  to  issue  his  proclamation  interdicting  com- 
mercial intercourse  between  the  citizens  of  certain  belligerent  states, 
although  the  proclamation  was  not  issued  till  the  16th  of  August, 
1861,  near  one  month  after  the  bill  was  protested. 

But  this  case  must  be  ruled  by  the  case  of  Lrnflirrs  v.  Tlir  Com- 
mercial Insurance  Co.  (3  Bush,  396),  in  which,  upon  a  careful  con- 
sideration of  the  subject,  this  court,  referring  to  the  proclamation  of 
the  16th  of  August,  1861,  as  public  notice  of  the  congressional  recog- 
nition of  a  state  of  w'ar,  held  that  "before  that  time  contracts  and 
other  acts  of  commercial  intercourse  were  not  made  illegal  by  the 
war." 

Notwithstanding  the  disturbed  condition  of  the  country,  winch  we 
know  judicially  to  have  existed  when  the  bill  was  protested,  it  docs  not 
appear  that  there  was  at  that  time  such  obstruction  of  inter-communi- 
cation between  the  southern  and  border  states  as  to  prevent  the  trans- 
mission and  delivery  of  notice  of  the  dishonor  of  said  bill. 

Wherefore,  it  not  appearing  to  have  boon  either  illegal  or  morally  or 
physically  impossible  to  give  notice  of  said  protest,  the  judgment  is  af- 
firmed. * 

♦  See  criticism  of  this  doctrine  in  2  Daniel  on  Neg.  Inst.,  §  1062.  —  H. 


^•1  WHEN   NOTICE   DIsrENSKD    WITH.  575 

IV.  When  notice  may  be  dispensed  with.^ 

1.  When  Notice  Need  Not  Be  Given  to  Drawhk. 

§  183  GOWAN  V.  JACKSON. 

20  Johnson   (N.  Y.)    176.  —  1822. 

^  ACTION  against  drawer  of   hill   drawn  on   Jackson   and    Brothers. 

Thfc.e  was  no  notice  of  dishonor,  but  to  excuse  this  phiintilf  offered  to 

prove  that  defendant  was  a  member  of  the  firm  on  which  the  bill  was 

drawn,  and  was  allowed  to  do  so.    Judgment  for  plaintilf. 

Spencer,  Cii.  J.  *  *  *  Considering  it,  then,  as  establislied,  (liat 
the  partnership  existed  when  the  bill  was  drawn  and  presente<l,  tlir 
question  arises,  whether  notice  of  non-acceptance  was  required  to  he 
given  to  the  defendant.  It  was  proved  that  the  bill  was  presented  for 
payment  on  the  16th  of  January,  1818,  and  was  then  protested  for 
non-acceptance;  and  it  was  presented  on  the  16th  of  April,  IRIS,  Un- 
payment,  and  protested.  In  the  absence  of  all  other  proof,  tlic  hill 
must  be  considered  as  drawn  hy  one  partner  of  the  firm,  on  the  firm  it- 
self, in  relation  to  the  partnership  business;  and,  if  so,  then  a  knowl- 
edge by  one  of  the  firm  of  the  dishonor  of  the  bill,  is,  in  point  of  law, 
knowledge  by  the  whole  firm.  Daniel  Jackson,  the  partner  in  London, 
had  notice  that  the  bill  was  refused  acceptance  and  payment,  for  lie 
was  the  person  who  thus  refused.  In  rnrfhoitse  v.  Parl-cr  and  nfhrra 
(1  Camp.  N.  P.  S2),  Lord  Ellenborongh  held,  that  where  a  hill  had 
been  accepted  by  one  of  the  defendants,  this  was  sudicient  evidence  of 
its  having  been  regularly  drawn;  aiul  that,  tiic  acceptor  being  likewise 
a  drawer,  there  would  be  no  occasion  for  the  phiiiil  i  (V  to  prove,  that  the 
defendants  had  re<cived  express  notice  of  the  dishonor  of  the  l»ill,  as 
this  must  necessarily  have  [)een  known  to  one  of  them,  and  the  knowl- 
edge of  one  was  the  knowledge  of  all.  This  is  a  vcrv  just  and  reason- 
able principle;  for  although  Joseph  Jackson  is  alone  sued  on  liie  bill, 
yet,  as  has  been  already  observed,  it  must  he  deemed  a  jiart nersliip 
tran-^action,  and  a  knowledge  by  one  of  the  lirni  of  the  dishonor  of  the 
bill  \\;\K  nil  that  ought  to  be  recpiireil. 

Judgment    for  the  phiintilTs.  " 

•'■  Spo  pjiws,  nntr.  iinfJor  §§  1.10-140-142.  —  ('. 

"Arrnnl:  Rhm  v.  r<«\  2  How.  (I'.  S.  )  I.'',:  ;  I'vllrr  v.  Ilnnprr,  r?  CrilV 
(MnHH.)    .1.1  J. 

FtcTiTinrs  Drawkk.  —  ExriiHo  of  |irpspntmfnt  inntr,  §  142),  nn«l  nofirc  in 
fh*  cnHr  f)f  n  flctifioim  tlrnwfc  Hccni'f  fn  ho  Imiod  upon  flio  mnsnn  flint  (lio 
drawf-r  miixt  know  flint  th"  (Ir.qw-'o  i«  firtitioim  nnd.  thcrpforp.  that,  tho  hill  can" 
not  ho  proHonfpH  or  pnid.  Ilo  i«,  tlion-foro.  from  tho  nnt'-of  tho  orif/irial  prom- 
JRor.     Nniith  V.  lirUnmy.  2  Stnrkip.  22.1:   Lrnrh  v.  UruiU.  4  'riinnt.  7.11. 

Drawkk  Wituoit  rATArFTY  Tf)  CONTRACT.  —  'Iho  rojixon  ill  this  rn«io  is  not 
HO  rl<«nr.  ProMorif nx'rif  dors  not  srvin  to  ho  dif-pon^od  with  (n»lr,  ^  1)2.  hut 
Boe  S   1.19).     Then  why  notice,  since  it  niiiy  Ik-  that  the  jlrnwec   (nay  an  infant) 


576  NOTICE  OF  nisiioNOR.  [art.  VIII. 

§  185  CATHELL  v.  GOODWIN. 

1  Harris  4  Giu,  (Md.)  468. —  1827. 

Action  by  payee  against  drawer  of  bill  of  exchange.  No  notice 
of  dislionor.    Judgment  for  defendant. 

DoRSKY,  J.  *  *  *  The  third  jiosition  was  that  most  obstinately 
contended  for,  which  was  conceived  to  be  impregnably  fortified  by  that 
part  of  the  rule  established  in  Eichelberger  v.  Finley  and  Van  Lear 
(7  Harr.  &  Johns.  381),  which  dispenses  with  notice  only  where  the 
drawer  had  no  reasonable  grounds  to  expect  tliat  his  bill  would  be  hon- 
ored. The  reasonableness  of  such  expectation  is  matter  for  the  court, 
and  not  for  the  jury,  to  decide.  If  the  facts,  upon  which  the  question 
arises,  be  admitted  or  be  undeniable,  then  the  question  becomes  exclu- 
sively a  matter  of  law  to  be  pronounced  by  the  court ;  but  if  the  facts 
be  controverted,  or  the  proof  be  equivocal  or  contradictory,  then  it  be- 
comes a  mixed  question  both  of  law  and  fact,  in  which  case,  the  court 
hypothetical ly  instruct  the  jury  as  to  the  law,  to  be  by  them  pro- 
nounced accordingly  as  they  may  find  the  facts.  What  are  the  facts 
to  be  found  in  this  case  justifying  the  drawer's  expectation  that  his 
draft  would  have  been  paid?  So  far  from  having  funds  in  the 
drawee's  hands,  he  was  his  debtor  —  no  proof  of  such  a  commercial  in- 
tercourse between  them  as  would  imply  a  mutual  credit  —  no  previous 
promise  by  the  drawee  to  accept  this  or  any  other  draft  for  the  drawer's 
accommodation  —  no  consignment  of  goods  to  the  drawee,  which  the 
drawer  had  any  reason  to  expect  would  be  received  in  time  to  meet  his 
bill,  but  the  only  proof  is,  that  the  drawee  informed  the  payee  that  he 
expected  funds  of  the  drawer  would  shortly  come  to  his  hands,  with 
which,  when  received,  he  would  pay.  That  funds  afterwards  did  ar- 
rive, but  whether  in  one  month,  or  five  years  after,  docs  not  appear. 
What  may  have  been  the  expectations  of  the  drawee,  as  to  the  receipt 
of  funds  from  the  drawer,  is  immaterial;  they  are  not  even  admissible 
evidence  in  this  cause.  But  if  they  were,  they  can  have  no  influence 
on  those  of  the  drawer  —  into  whose  expectations  only  is  the  inquiry 
to  be  made.  The  facts  in  the  case  of  Legge  v.  Thorpe  (12  East,  170), 
and  Claridge  v.  DaJton  (4  Maule  &  Selw.  226),  atTord  much  stronger 
evidence  of  a  reasonable  expectation  in  the  drawers  that  their  bills 

will  honor  and  pay  the  bill?    Sep  the  reasoning  in  Wyman  v.  Adams,  12  Cush. 
(Mass.)  210.  which,  however,  was  a  case  of  indorsement.     See  post,  §  186. 

Prksentment  to  Drawer.  —  This  clause  seems  to  cover  the  case  where  the 
drawer  is.  before  the  presentment,  appointed  the  executor  or  trustee  of  the 
drawee's  estate,  and  presentment  is.  therefore,  made  to  him  in  his  representative 
capacity.  Actual  knowledge  here  is,  therefore,  equivalent  to  notice.  Caunt  v. 
Thompson,  7  C.  B.  400.  Rut  presentment  must,  to  insure  this  result,  be  made 
to  him  in  his  representative  capacity.  Mnr/rnrJcr  v.  Bank,  3  Pet.  { U.  S.)  87. 
And.  it  seems,  to  him  personally.  Groth  v.  Gyger,  31  Pa,  St.  271.  See  foat, 
{  186.  —  H. 


IV.]  WHEN    NOTICE    DISPENSED    WITH.  577 

would  be  honored,  than  those  in  the  present  case ;  yet  there  they  were 
adjudged  insufficient.  The  "  reasonable  grounds "  required  by  law 
are  not  such  as  would  excite  an  idle  hope,  a  wild  expectation,  or  a  re- 
mote probability,  that  the  bill  might  be  honored,  but  such  as  create  a 
full  expectation,  a  strong  probability  of  its  payment;  such  indeed  as 
would  induce  a  merchant  of  common  prudence  and  ordinary  regard 
for  his  commercial  credit,  to  draw  a  like  bill.  The  facts  in  this  case  con- 
Btitute  no  such  reasonable  grounds.  We  therefore  think  that  the  County 
Court  erred  in  instructing  the  jury  that  the  plaintiff  was  not  entitled 
to  recover,  and  consequently  reverse  their  judgment. 

Judgment  reversed,  and  precedendo  awarded.  ^ 


2.  When  Notice  Need  Not  Be  Given  to  Indorser. 
§  186  HULL  V.  BYERS. 

90  Geobgia,  674. —  1892. 

Action  by  one  indorser  against  a  joint  indorser  for  contribution. 
Defense,  want  of  notice  and  protest. 

Notes  were  made  by  the  Augusta  Athletic  Association  and  indorsed 
by  plaintilf,  defendant,  and  others,  being  a  majority  of  the  directors 
of  the  association.     At  maturity,  the  association  was  insolvent. 

Bleckley,  Chief  Justice.  —  Good  sense,  good  morality,  mikI 
good  law  are  one  and  the  same  so  long  as  they  are  not  sundered  vio- 
lently by  legislation  or  ignorantly  by  judicial  error.  Their  unity  and 
identity,  so  far  as  one  of  the  (piestions  in  this  case  is  concerned,  we 
find  still  intact.  There  is  no  statute  to  drive,  neither  is  there  any  prece- 
dent to  lead,  decision  into  absurdity  or  injustice.  We  can  and  do  hold 
that  accommodation  indorsers  who  represent  their  insolvent  principal 
in  procuring  a  loan  of  money  for  the  jjrincipal's  use,  upon  a  promissory 
note  whicl)  they  cause  to  be  imide  in  his  name  and  which  they  indorse 
in  their  own  names,  they  having  at  the  time  full  control  of  his  business 
and  all  his  assets,  and  their  relation  to  him  being  such  as  to  make  it 
their  duty  to  see  that  the  note  is  [)rovidef|  for  and  paid  at  matnrity. 
are  not  entitled  to  notice  of  its  dishonor.  May  he  they  do  not  stand  in 
his  shoes;  if  they  do  not,  it  is  because  they  are  his  shoemakers  and  havt; 
suffered  him  to  become  and  remain  barefooted.  Though  the  debt  is  his 
and  not  their  own,  primarily,  yet,  having  all  his  assets  and  full  power 

7  Sep  also  ffohiniton  v.  ,1  nirs.  20  Johns.  ( N.  V.)  1  Ifi.  pnnl.  tJ81.  .Acromnm 
jation  HrawfTH.  who  iinitf  witli  tlu'  nccnmnioflafrrl  [inrfy  in  driiwin^'  the  liill, 
Hfp  pntitlpH  to  notiff  if  tlmy  li.-rj  rpn«on  to  holinvf  (hat  tho  latter  would  pro- 
vide funds  to  meet  the  hill.    Mimr  v.  Trni-in(irr'.s  KrerutnrR.  7  Oli.  St.  2H1.  —  H. 

[See  extract  from  Went  llrnnrh  lUmk  v.  llaimH,  l.').'j  Iowa,  .'{J.T,  in  not*-  H, 
inte,  p.  522. —  r.l 

NKOOT.  INSTRUM  KNTB  —  87 


578  NoTicK  oi'  Disiioxou.  [akt.  Vlll. 

over  tlioiu,  ami  over  all  his  business,  they  are  bouiul  to  know  all  that  he 
woulil  be  bound  to  know  were  iiis  business  and  assets  in  his  own  hand8 
and  under  his  own  nuvnageinent.  In  this  instance  the  principal  being 
a  corporation,  and  the  indorsers  the  corporate  directors,  the  latter  could 
have  no  right  or  reason  to  expect  tliat  funds  would  be  provided  for 
Ii(|uidating  the  debt  unless  it  was  done  by  their  procurement  or 
through  their  agency.  The  charter  of  the  '*  Augusta  Athletic;  Associa- 
tion ■'  is  not  before  us,  iind  in  its  absence  we  must  take  it  for  granted 
that  the  directors  of  that  corjioration  had  the  powers  and  were  under 
tiie  duties  which  appertain  to  corporate  directors  according  to  the  gen- 
eral rules  of  law.  Sjtecial  provisions  in  the  charter  might  vary  these 
powers  and  duties  in  the  given  instance,  but  such  provisions  would,  in 
order  to  gain  recognition,  have  to  be  brought  to  the  attention  of  the 
court.  The  usual  rule  is  that  all  the  assets  and  operations  of  a  cor- 
porate business  are  under  the  government  and  control  of  the  direct- 
ors. A  single  director,  or  even  a  minority  of  the  directors,  indorsing  a 
note  for  the  corporation,  might  be  entitled  to  notice  of  dishonor;  for 
one  only,  or  a  small  number,  might  have  a  right  to  suppose  that  the 
note  would  be  attended  to  at  maturity ;  but  when  the  whole  board,  or 
a  majority  of  its  members,  unite  in  the  indorsement,  each  and  all  so 
indorsing  should  be  charged  with  the  duty  and  I'csponsibility  of  pro- 
tecting the  paper,  since  the  power  to  control  the  conduct  of  the  cor- 
poration in  respect  to  paying  or  not  paying  would  be  in  their  own 
hands.  On  the  question  of  notice,  the  present  case  is  fairly  and  fully 
within  the  principle  of  Carney  v.  Da  Costa  (1  Espinasse,  .^03),  in 
which  it  was  held  that  wdiere  the  indorser  of  the  notes  of  an  insolvent 
person  took  effects  of  the  insolvent  to  the  full  amount  of  his  indorse- 
ment, he  could  not  avail  himself  of  the  want  of  notice  of  nonpayment 
of  the  notes  at  maturity.  The  facts  of  the  case  are  meagerly  stated 
in  the  re])ort,  but  they  indicate  that  the  indorser  took  the  maker's 
effects,  not  merely  to  hold  them  for  his  protection,  but  for  use  in  rais- 
ing funds  with  which  to  discharge  the  indorsed  paper,  lie  was  treated 
as  if  he  were  primarily  liable  and  the  debt  were  his  own.  Following 
the  reason  and  spirit  of  that  decision,  these  directors  ought  to  be  treated 
in  the  same  way.  ^ 

With  respect  to  the  want  of  protest,  it  is  true  that  the  letter  of  the 
Code,  §  2781,  makes  protest  necessary  .  in  order  to  bind  indorsers 
upon  any  bill  or  promissory  note  payable  at  a  ])ank,  thus,  in  effect, 
putting  all  such  paper  on  the  footing  of  foreign  bills  of  exchange  as 
to  this  commercial  solemnity.  But  the  re<|uirement  as  to  protest  was 
not,  we  think,  intended  to  be  more  comprehensive  than  the  require- 
ment as  to  notice.*     *     *     * 

^Contra:    f'hipp.i  v.  Tlardinq,  70  F'ed.  lvf>p.  468.  —  H. 

9  Protest  not  necessary  where  notice  dispensed  with.  Legge  v.  Thorpe,  12 
East,  171.  — H. 


IV.]  WHKX    NOTICE   DISPENSED    WITH.  579 

[The  court  then  holds  that  tlie  action  is  barred  by  the  statute  of 
limitations,  being  for  money  paid  to  the  defendant's  use  and  not 
founded  directly  on  the  notes.]  ' 


§  186      AMERICAX  NATIONAL  BANK  v.  JUNK  BROS. 

'J4  'lENNE«SLE,  024.  — 1894. 

Beard,  J.  —  This  suit  was  instituted  against  the  Junk  Bros.  Lum- 
ber and  Manufacturing  Co.,  a  corporation  with  its  situs  in  Nashville, 
as  the  indorser  for  value  of  certain  domestic  negotiable  notes.  The 
defendant  resisted  recovery  on  the  ground  that  notice  of  dishonor 
of  the  paper  was  not  given  as  the  law  requires.  A  decree  having 
been  pronounced  against  the  corporation,  it  has  filed  the  record  in 
this  court,  and  the  action  of  the  court  below  in  overruling  this 
defense  is  assigned  as  error. 

Before  coming  to  the  general  question  raised  by  the  assignments, 
it  is  proper  to  dispose  of  five  of  these  notes,  which  are  shown  by 
the  proof  to  iiave  been  made  for  the  accommodation  of  this  corpora- 
tion and  afterwards  indorsed  by  it  to  the  complainant.  As  to  these 
notes,  their  makers  stood  in  the  situation  of  sureties  to  the  indorser, 
and  it  was  the  latter's  duty  to  provide  funds  to  meet  them  at 
maturity,  and  it  was,  therefore,  bound  to  the  holder  witliout  present- 
ment, protest,  or  notice.  (2  Am.  &  Eng.  Ency.  of  Law,  399;  3 
Daniel  on  Neg.  Inst.,  §  1085;  3  Randolph  on  Com.  Paper,  §  1205; 
Blach  V.  Fizer,  10  Ileis.  18.)  Thus  disposing  of  those  five  notes,  the 
question  recurs  as  to  the  liability  of  the  defendant  as  indorser  of 
the  remaining  thirty-five. 

[The  court  then  holds  that  as  to  these,  notice  addressed  to  the 
company  and  received  by  its  assignee  for  the  benefit  of  creditors  is 
sullicient,  and  that  notice  addressed  to  the  assignee  is  equally  sulH- 
cient.J  ^ 

Judgment  affirmed.* 

'This  case  was  (liHlin^iiislied  in  Ennift  v.  Itixinoliln,  127  Ga.  112,  where  it 
was  h»'l(l  tli.it  the  fact  tlint  n  nnto  ih  |iaynl)li>  af  the  liarik  of  wliicli  the  indorser 
is  pri'sidrnt  and  a  din-rtor  doos  not,  of  itself,  dispense  with  the  neceHsity  of 
notic-e  and  prolest  to  rliar;/e  Ihe  indorser.  —  ('. 

2  See  also  Morcland'H  Adm'r  v.  CHizrnii'  Stiv.  Ilk..  114  Ky.  T)??,  post.  p.  (]W. 
—  C. 

3  Accord:  nicmlrrmmi  v.  /'nVv,  .lO  N.  J.  L.  200;  inirtt  v.  /'or.  '2  Mow.  ((I.  S.) 
457. —  If. 

tin  Mrrrantile  linnk  of  Memphis  v.  ItuHhy,  120  Tenn.  flri2,  067,  McAllister.  .1., 
said:  "In  onr  ofiinion  the  facts  disclosed  in  this  record  show  that  this  note 
was  in  reality  exeoited  for  the  henefit  of  every  [lerson  whose  name  apitenrs 
upon  it.  As  already  stated,  it  is  established  in  proof  that  this  was  an  fihlipa- 
tion  of  the  R.  1.  Rushy  corporation,  and  that  thes«'  parties  were  all  stock- 
holders and   directors,  and   that  the  note  wa»  executed   for   the  purpose  of  re- 


580  NOTICE   OF   DISHONOR.  [aBT.   VIII, 

3.  When  Notice  to  Drawer  or  Indorser  Dispensed  With. 

(a)  Due  diligence, 

§  183  Hansom  i-.  Mack,  2  Hill  (N.  Y.),  587,  593.— (1842). 
By  the  Court,  Bronson,  J.  —  The  next  inquiry  is,  whether  the 
defendant  was  discharged  in  consequence  of  the  misdirection  of  the 
notice.  It  was  sent  to  North  Adams,  when  it  should  have  been  sent 
to  the  Appling  office.  The  defendant's  place  of  residence  not  being 
known,  the  notary  made  inquiry  of  Robbins,  the  second  indorser, 
who  professed  to  be  able  to  give  the  necessary  information,  and  was 
interested  to  speak  truly.  The  answer  of  Robbins  was,  that  the 
notice  should  be  sent  to  North  Adams  —  that  being  the  office  where 
the  defendant  got  his  letters  and  papers.  Although  Robbins  was 
mistaken,  the  notary  was  well  warranted  in  acting  upon  information 
thus  obtained,  without  pushing  his  inquiries  further.  There  was 
due  diligence,  and  that  is  enough.  (Banl:  of  Utica  v.  Bender,  21 
Wend.  643.)  That  case  was  affirmed  on  error  brought  in  June,  1841. 
Drawers  and  indorsers  can  easily  prevent  mistakes  of  this  kind,  by 
writing  under  their  names  their  places  of  residence  or  the  place 
where  they  desire  notice  should  be  sent  in  case  the  bill  or  note  is 
protested.* 


(&)   Waiver. 

§  180  GOVE  V.  VINING. 

7  Metcalf  (Mass.)  212.  — 1843. 

Action  against  indorser.  Defense,  want  of  demand  and  notice. 
The  indorser,  shortly  before  maturity,  requested  the  holder  not  to 
sue  the  note  until  the  maker  saw  the  holder. 

Shaw,  C.  J.  *  *  *  The  court  are  of  o])inion  that  when  the 
indorser,  at  or  shortly  before  the  time  wlien  tlie  note  becomes  due, 
says  to  the  holder,  that  an  arrangement  for  its  payment  is  about 
being  made,  and  in  direct  terms,  or  by  reasonable  implication, 
requests  the  holder  to  wait  or  give  time,  it  amounts  to  an  assurance 
that  the  note  will  be  paid  —  that  the  promisor  or  indorser  will  pay 

newing  an  outstanding  indebtedness  of  the  corporation.  .  .  .  Our  conclu- 
sion on  this  branch  of  the  case  is  that  C.  B.  Blackburn  was  not  entitled  to 
notice  of  dishonor,  since  he  was  a  joint  maker  and  equalij'  interested  in  the 
note  with  his  co-makers  and  indorsers."  —  C] 

*  Accord:  Lambert  v.  Ghiselin.  9  How.  (U.  S.)  .5.52;  Central  N.  B.  v.  Arlams, 
lis.  Car.  452.  Merely  consulting  a  directory  is  not  due  diligence.  Bacon  v. 
Hanna.  137  N.  Y.  379.  Nor  casual  inquiries.  Spencer  v.  Bank,  3  Hill  (N.  Y.) 
520.     See  2  Daniel  on  Neg.  Inst.,  §§  1114-1123.  —  H. 


IV.]  WHEN    Nul'lCE    DISPEXSEU    WITH.  581 

it  —  and  is  a  waiver  of  demand  and  notice.  It  tends  to  put  the 
holder  oflf  his  guard,  and  induces  him  to  forego  making  a  demand  at 
the  proper  time  and  place ;  and  it  would  be  contrary  to  good  faith, 
to  set  up  such  want  of  demand  and  notice  —  caused  perhaps  by  such 
forbearance  —  as  a  ground  of  defense.  (LeffitigweU  v.  White,  1 
Johns.  Cas.  99;  Mechanics'  Bank  v.  Griswold,  7  Wend.  165;  Leonard 
V.  Gary,  10  Wend.  504;  Taunton  Bank  v.  Richardson,  5  Pick.  436; 
Thornton  v.  Wynn,  12  Wheat.  183;   Wood  v.  Brorvn,  1  Stark.  R.  217.) 

Judgment  for  the  plaintiffs.^ 

K  A  waiver  in  the  instrument  it«elf  binds  all  subsequent  indorsers.  Phillips 
V.  Dippo,  9.3  Iowa,  .35.  It  is  not  therefore  a  material  alteration  in  such  a  case 
to  write  above  the  indorser's  name,  "  Payment  guarantied."  Iowa  \'alley  State 
Bank  v.  Sigstad,  96  Iowa,  491. 

P.\Roi-  \V.\ivKR  AT  Time  of  Indorsement.  —  In  some  jiirisdictions  it  is  held 
that  a  parol  waiver  made  at  the  time  of  the  indorsement  may  be  shown  on  the 
theory  that  such  evidence  does  not  vary  the  terms  of  the  written  contract  but 
establishes  the  waiver  of  a  condition  otherwise  imported  into  the  contract  by 
the  rules  of  the  law  merchant.  Schmicd  v.  Fratik,  86  Ind.  250;  Lane  v.  .Steward, 
20  Me.  98;  Dye  v.  Ficolt,  35  Oh.  St.  194;  Anmnlle  Xat.  Bk.  v.  Kettering,  106 
Pa.  St.  531.  In  other  jurisdictions  it  is  held  that  such  evidence  does  vary  the 
terms  of  tiie  written  contract,  and  is  therefore  inadmissible.  Goldman  v.  Davis, 
23  Cal.  250;  Farwell  v.  St.  I'aui  Trust  Co.,  45  Minn.  495;  Rodney  v.  Wil.ion, 
67  Mo.  123;  Beelrr  v.  Fro.ft,  70  Mo.  185;  Bank  v.  Smith,  47  Barb.  (N.  Y.), 
489.  Some  jurisdictions  now  provide  by  statute  that  all  waivers  must  be  in 
writing.     Maine  R.  S.,  c.  32,  §  10. 

A  parol  waiver,  subs<qucnt  to  the  time  of  the  indorsement,  is  (independent 
of  statute)  good.  Marklnnd  v.  MrDnuirl,  51  Kans.  350;  Rodney  v.  Wilson, 
67  Mo.  123;  2  Daniel  on  Neg.  Inst.,  §  1098. 

A  promise  to  pay  the  instrument,  made  by  an  indorser  after  ninturity  and 
after  he  is  discharged  for  want  of  demand  or  notice,  is,  in  analogy  with  the 
promi.se  to  pay  a  debt  barred  by  the  statute  of  limitations,  held  to  be  biiuliiig. 
Rosa  V.  liurd,  71  N.  Y.  14;  Rindf/p  v.  Kimball,  124  Mass.  209;  Breed  v.  Hill- 
house,  7  Conn.  523;  Oxnard  v.  Varnum.  Ill  Pa.  St.  193;  Smith  v.  Curlee, 
59  111.  221;  I'arsons  v.  DirkiiiNon,  23  Mich.  50.  (ontra:  Sebree  Depo-sit  Bank 
V.  M (Ireland,  90  Ky.  150,  where  it  is  held  that  such  a  promise  is  presumptive 
evidence  that  demaiul  and  notice  were  had,  but  that  the  i)ii'siiniiit  ion  may  be 
rebutted. 

In  order  that  the  indorser  niay  be  bfiund  liy  such  subse(|uent  promise  he 
must  have  knowleilgc  of  the  laches,  and  all  tlie  material  facts  const  it  uting 
Buch  laches.  /VirA.v  v.  Smith.  155  Mass.  20;  Bank  v.  Bank.  49  Oh.  St.  351; 
Rchierl  v.  Bauwel.  75  Wis.  00.  B\it  it  is  not  necessary  that  he  should  )inder- 
stand  the  legal  efTeet  of  such  laches.  Cheshire  v.  Taylor,  29  Iowa,  492;  (livens 
V.  Bank,  85  III.  444;   Mattheun  v.  .Allen,  10  Gray   (Mass.)   5!t4. 

Waiver,  at  or  before  nuiturity,  of  presentment  and  notice  upon  an  instrument 
indorsef!  by  a  partnersliiji  may  be  by  one  of  the  |)artners.  ;is  agent  of  the 
others,  and  this  even  though  the  partnership  is  dissrdved,  since  it  does  not 
create  a  new  liability.  Seldner  v.  Mount  .faekson  N.  B.,  00  Md.  488;  Star 
Waffon  Co.  v.  Sirezey,  52  Iowa,  391.  But  it  seems  that  waiver  after  maturity, 
the  firm  being  discharged  for  want  of  [in-sentment  or  notiee,  would  not  revive 
the  obligation.  2  Daniel  on  Neg-  Inst..  §  1109a,  citing  Hurt  v.  f,on(i.  1  Rob. 
(Ln.)  83;  Mauney  v.  Coit,  80  N.  (.'.  300;  Baer  v.  Leppert,  12  Ilun  (N.  Y.^ 
516. —  H. 


582  NOTICK    ()!•'    DISIION'OI!.  [akT.    VIII. 

§  180       BURGETTSTOWN  NATIONAL  BAxNK  u.  NlLl.. 

213  Pknnsyi.vania  Statk,  450.  —  IJIOC. 

Action  against  indorsor  who  eightoon  months  aftor  maturity  in- 
dorsed on  the  note  a  waiver  oT  prolcsl.  .Iiulgment  for  phiinlilV  ami 
dcl'eiuiant  appeals. 

Mkstkkza'P.  .1.  *  *  *  Tiie  j)laintiH"s  cashier  called  on  the  de- 
fendant in  March  or  April,  1904,  and  secured  his  signature  to  tlie 
writing  on  the  back  of  the  note  waiving  protest.  Until  that  time  the 
defendant  says  he  had  no  notice  that  Svvaney,  the  maker,  had  not 
paid  the  note.  He  was  then  told,  as  averred  in  the  atlidavit,  "  that  the 
note  in  the  form  in  which  it  then  was,  not  having  been  protested  and 
no  notice  of  dishonor  having  been  given  to  affiant  or  demand  made 
upon  affiant  for  the  payment  thereof,  was  objected  to  by  the  bank 
examiner."  The  defendant,  therefore,  knew  before  he  signed  the 
waiver  of  protest  tliat  no  demand. for  payment  had  been  made  and  that 
no  notice  of  the  dishonor  of  the  note  liad  been  given  him  as  the 
indorser.  Hence  he  had  full  knowledge  of  the  laches  of  tlie  lioldo-r 
of  the  note  when  he  Avaived  protest  of  the  instrument.  Under  these 
facts,  which  are  disclosed  by  tlie  affidavit  of  defense,  the  defendant 
could  waive  the  laches  of  the  holder  in  making  demand  for  payment 
and  in  giving  notice  of  the  dishonor  of  the  note.  4  Am.  &  Eng.  Enc. 
Law  (2d  Ed.)  453;  Day  v.  Ridgway,  17  Pa.  303;  Annvilh  National 
Banl-  V.  Kettering,  lOG  Pa.  531.  "An  indorser  is  entitled  to  notice 
of  protest  of  a  negotiable  note,"  says  Mr.  Justice  Coutler  in  delivering 
the  opinion  in  Day  v.  Ridgway,  "  because  the  contract  is  that  the 
maker  will  pay  at  maturity;  and  the  strict  punctuality,  which  is  the 
life  of  the  commercial  law,  authorizes  the  indorser  to  presume  that 
he  has  paid,  in  the  absence  of  any  notice  to  the  contrary.  But  the 
right  to  receive  notice  in  order  to  make  him  liable,  like  any  other 
right,  may  be  waived  by  the  indorser."  In  the  Kettering  Case,  Ster- 
rett,  J.,  delivering  the  opinion,  says  (page  533)  :  "  Xo  principle  of  the 
law  merchant  is  better  settled  than  that  demand  and  notice  of  the  non- 
payment of  a  negotiable  note  may  be  waived  by  the  indorser,  either 
orally  or  in  writing,  or  by  acts  clearly  calculated  to  mislead  the 
bolder  and  prevent  him  from  treating  the  note  as  he  otherwise  wouM  ; 
but  there  is  some  diversity  of  opinion  as  to  what  constitutes  a  waiver 
of  these  necessary  prerequisites  to  charge  the  indorser." 

Tlie  indorser  may  waive  protest  after  the  date  of  maturity  of 
the  note  with  like  effect  as  if  done  prior  to  that  date.  Barclay  v. 
Weaver,  19  Pa.  396;  Jloadley  v.  Bliss,  9  Ga.  303;  Sheldon  v.  Horton, 
43  N.  Y.  93;  Ross  v.  Hurd,  71  N.  Y.  14;  Rindge  v.  Kimhall,  124 
Mass.  209 ;  1  Parsons  on  Notes  and  Bills,  594 ;  2  Randolph  on  Com- 
mercial Paper,  §  1450.  Tn  Barclay  v.  Weaver,  this  court  said  (page 
401)  :  "  Tt  seems,  therefore,  that  the  duty  of  demand  and  notice,  in 
order  to  hold  an  indorser,  is  not  a  jiart  of  the  contract,  but  a  step 


IV.]  WHEN    NOTICE   DISPENSED    WITH.  683 

in  the  legal  remedy,  that  may  be  waived  at  any  time  in  accordance 
with  the  maxim  '  QuUihet  potest  renunciare  juri  pro  se  introducto.' " 
In  some  jurisdictions  it  is  held  that  the  waiver,  when  made  after  the 
maturity  of  the  note,  must  be  with  full  knowledge  of  the  indorser's 
laches  and  that  it  requires  a  new  consideration.  But  it  is  settled  by 
numerous  American  authorities  that  a  waiver  of  protest  need  not  be 
supported  by  a  new  consideration.  Neat  v.  Wood,  23  Tnd.  533; 
Hughes  v.  Bowen,  15  Iowa,  446;  Cheshire  v.  Taylor,  29  Iowa,  492; 
Sheldon  v.  Horton,  43  N.  Y.  93;  Tehhets  v.  Dowd,  23  Wend.  379; 
Watt  V.  Bry,  1  La.  Ann.  312;   Lane  v.  Steward,  20  Me.  98. 

We  know  of  no  decision  of  this  court  holding  that  such  waiver  must 
be  supported  by  a  new  consideration.  The  contrary  rule,  however, 
is  distinctly  recognized  in  Barclay  v.  Weaver,  19  Pa.  396.  In  that  case 
Mr.  Justice  Lowrie,  in  construing  the  contract  of  an  indorscr  of 
negotiable  paper,  says  (page  400):  "The  most,  therefore,  that  can 
be  said  of  an  indorsement  of  negotiable  paper,  is  that  from  it  there  is 
implied  a  contract  to  pay,  on  condition  of  the  usual  demand  and  notice, 
and  that  this  implication  is  liable  to  be  changed  on  the  appearance 
of  circumstances  inconsistent  with  it,  whether  those  circumstances  be 
shown  orally  or  in  writing.  But  it  may  well  be  questioned  whether 
the  condition  of  demand  and  notice  is  truly  part  of  the  contract,  or 
only  a  step  in  the  legal  remedy  upon  it.  If  it  is  part  of  the  contract, 
how  can  it  be  effectually  dispensed  with  without  a  new  contract  for 
a  sufficient  consideration,  especially  after  the  maturity  of  the  note? 
Yet  there  are  decisions  without  number  that  a  waiver  of  it  during 
the  currency  or  after  the  maturity  of  the  note  will  save  frotn  the 
consequences  of  its  omission.  This  could  not  he  if  it  was  a  condition 
of  the  contract,  for  then  the  omission  of  it  would  discharge  the  in- 
dorscr both  morally  and  legally;  and  no  now  promise  afterwards,  even 
with  full  knowledge  r)f  the  facts,  could  be  of  any  validity.  Tf,  how- 
ever, an  indorsement  without  other  circumstances  he  regardccl  as  an 
implied  contract  to  pay,  provided  the  holder  use  such  diligence  that 
the  indorscr  loses  nothing  by  his  negligence  or  indulgence,  then  it 
accords  with  all  these  decisions.  Then  the  law,  and  not  the  contract, 
declares  the  usual  demand  aii<l  notice  to  be  in  nil  cases  cotu  liisive, 
and  in  some  cases  riecessary  evidence  of  such  diligeiKc  *  *  *  ]|^ 
fthe  law]  tlierefori'  is  perfectly  consistent  in  (ic(  hiring  th;it  ;in  in- 
dorscr is  bound  by  a  new  j)rr>mise,  after  he  knows  of  the  omission 
of  demand  and  notice;  for  this  is  an  admission  that  he  was  not 
entitled  to  it,  or  has  not  suffererl  for  want  of  it.  It  declares  demand 
and  notice  necessary,  in  some  cases,  to  save  an  indorscr  from  Iors, 
and  it  declares  that  his  own  admission  may  be  submitted  for  them." 
It  is  manifest,  therefore,  that  from  the  nat\ire  of  the  inrlorser's  contract 
a  new  consideration  is  not  re(|nired  to  support  a  waiver  of  protest 
before  or  after  maturity  of  the  j)aper.      *      *      * 


f)8-t  NOTIC'li    OF    DISHONOR.  [.Viil.    Vlll. 

The  assignments  of  onur  aru  ovorruled,  ami  i\\r  jinl^niiont  of  the 
rourt  holow  is  affirmed." 


§  182  SHAW  I'.  McNeill. 

95  North  C.\rouna,  535.  —  1886. 

Action  against  iudorser  of  inland  hill  oi  exchange  for  5^90  tipon 
the  margin  of  which  were  the  words  "  No  protest."  There  was  no 
notice  of  dishonor.  After  dishonor  defendant  offered  to  pay  $G0  for 
the  draft.     Judgment  for  plaintilf. 

AsiiE,  J.  *  *  *  Jlis  Honor  charged  the  jury  that  they  might 
consider  the  words  "  No  protest,"  on  the  draft,  and  the  language 
and  conduct  of  defendant  when  he  was  informed  by  the  plaintiff  of 
the  non-payment,  and  the  offer  to  pay  $00.00 ;  and  that  if  the 
defendant  had  offered  to  pay  $G0.00,  as  alleged  by  Shaw,  it  amounts 
to  a  waiver. 

We  find  no  such  error  in  the  charge  as  entitles  the  defendant  to  a 
new  trial.  There  is  some  fluctuation  in  the  decisions  of  the  courts 
upon  the  question,  how  far  a  promise  to  pay  a  part  of  a  draft  is  a 
waiver  of  demand  and  notice  of  non-payment.  For  instance,  it  has  been 
held  by  some  of  the  autliorities,  that  when  the  promise  is  only  as  to  part 
of  the  sum,  it  is  only  a  waiver  pro  ianto,  and  the  plaintiff  could 
only  recover  that  amount.  {Fletcher  v.  Froggart,  2  Car.  &  P.  569, 
12  E.  C.  L.  R.)  On  the  other  hand,  it  has  been  held,  that  "a 
promise  to  pay  generally,  or  a  promise  to  pay  a  part,  or  a  part  pay- 
ment made  with  a  full  knowledge  that  he  has  been  fully  released 
from  liability  on  the  bill  by  the  neglect  of  the  holder,  will  operate 
as  a  waiver,  and  bind  the  party  who  makes  it  for  the  payment  of  the 
whole  bill."  (Dixon  v.  Elliot,  5  Car.  &  P.  437;  Margetson  v.  Aitkifi, 
3  Car.  &  P.  388;  Harvey  v.  Troupe,  23  Miss.  538.)  So  it  would 
seem,  that  the  weight  of  the  authorities,  supported  the  charge  of  the 
judge  in  this  particular. 

But  aside  from  this,  his  Honor,  in  his  charge  to  the  jury,  told 
them  they  might  consider  the  words  "  No  protest,"  written  on  the 
margin  of  the  draft,  as  evidence  of  a  waiver  of  notice  of  presentment 
and  non-payment.  The  words  "  No  protest,"  written  on  the  margin 
of  this  draft,  must  have  been  put  there  with  an  object,  and  we  can 
conceive  of  none  other  than  to  dispense  with  the  notice  of  present- 
ment and  refusal  to  pay,  otherwise  it  is  unmeaning. 

«This  case  is  reported  with  notes  in  3  L  N.  S.  1079  and  in  5  A.  &  E.  Ann. 
Cas.  476. 

See  also  Sehree  Deposit  Bank  v.  Moreland,  96  Ky.  150,  reported  in  29  L.  R. 
A.  305,  with  exhaustive  note  entitled  "  Necessity  of  new  consideration  to  sup- 
port a  waiver  of  failure  to  pive  notice  of  dishonor  or  subsequent  promise  by 
indorser."  —  C. 


IV.]  WHEN    NOTICE   DISPENSED  WITH.  585 

It  is  well  settled  that  protest,  being  a  part  of  the  custom  of  mer- 
chants wiiich  is  essential  in  foreign  bills  to  fix  the  drawee  and 
indorsers  with  liability,  is  not  necessary  for  such  a  purpose  in  inland 
bills.  {Hubbard  v.  Troy,  2  Ircd.  134;  1  Parsons  on  Notes  and  Bills, 
6-13.)  But  e'.en  in  foreign  bills  the  protest  may  be  waived.  There 
the  words,  ""  I  waive  protest,"  or  "  Waiving  protest,"  or  any  similar 
words,  infer  that  the  protest  is  waived,  and  when  applied  to  foreign 
biM^,  was  universally  regarded  as  expressly  waiving  presentment  and 
notiic,  the  protest  being,  according  to  the  law  merchant,  the  formal 
and  necessary  evidence  of  the  dishonor  of  such  an  instrument.  In 
waiving  "  protest,"  the  party  is  considered  not  only  as  dispensing 
with  a  formality,  but  as  dispensing  with  the  necessity  of  the  steps 
which  must  precede  it,  and  of  which  it  is  merely  the  formal,  though 
necessary,  proof  of  what  the  law  required.  (2  Daniel  on  N'eg.  Inst., 
§  1095.)  But  when  tlie  waiver  of  protest  is  applied  to  inland  bills,  the 
protest  having  no  application  to  such  instruments,  there  is  a  diversity 
of  opinion  in  the  courts  and  text-books,  whether  such  a  waiver  would 
have  the  effect  of  dispensing  with  notice  in  an  action  upon  an  inland 
bill.  But  the  better  opinion  is,  that  as  the  word  "protest"  has  by 
general  usage  a  well-known  signification,  and  wherever  it  is  used,  it 
is  supposed  to  mean  something  more  than  the  formal  declarations  of 
a  notary.  Hence,  Mr.  Daniel,  who  is  a  very  high  authority  on  the 
subject,  says,  "  The  weight,  as  well  as  the  number  of  authorities, 
predominates  in  favor  of  construing  a  waiver  of  *  protest '  to  signify 
as  much  when  applied  to  inland  bills  and  notes,  as  when  used  in 
respect  to  a  foreign  bill." 

"Inland  bills  and  promissory  notes  may  be  protested,  by  statutory 
onactmonts,  in  many  statfs,  and  the  protest  is  accorded  the  same 
effect  as  to  them,  when  it  is  made,  though  it  is  not  necessary  to 
make  it,  and  the  weight,  as  well  as  the  number  of  authorities,  pre- 
dominate in  favor  of  construing  a  wnivor  of  protest  to  signifv  as 
much  whrn  applind  to  inland  bills  and  notes,  as  when  nsed  in  respect 
to  a  foreign  bill."     (§  lOi'Tta,  and  tho  cases  cited  in  note  2.) 

The  doctrine  there  laid  down,  must  then  apply  to  this  bill,  for  wo 
have  a  statute  which  provides  tlint  when  it  mav  be  nofcssarv  to 
prove  a  demand  upon,  or  notice  to,  Ww  driiwi  r  or  indorscr  of  a  bill 
of  ex'liange,  or  a  promissory  note,  or  otlior  negotiable  secnritv.  the 
protest  taken  before  a  proper  officer  shall  bo  prima  facte  evidonrc 
that  such  demand  was  made,  or  notice  given,  in  the  manner  set  forth 
in  the  protest.     (The  Code,  §  49.) 

Our  conclusion  is,  there  was  no  error.  The  judgment  of  the 
Superior  Court  is  therefore  alTirmcd. 

No  error.  Affirmed.^ 


1  Waivpr  of  prnf4"st  ih  WBivrr  of  prPBPntmpnf  nnd  notJc««.  Thpr«>  spririH  to  hi« 
no  dpcJHion  f>n  this  point  n8  far  Jis  concr-rns  n  fort'iifn  bill  of  pxclianirp.  altliiMiph 
the  text  writers  lay  Mown  the  rule  in  jjositivc  terms.     2  DjuiicI  on  Ncg.  Inst. 


'»<^t>  NOrii'i;  ()!•    IIIMIONOK.  |AKI'.    Vlll. 

((•)  Xoficr  of  iion/nn/nintl  irhcrr  arccpfaurc  refused. 
^  187  Dl-:  I;A  'roiMJK  r.  liAIU'LAY. 

1     SlAHKlK     (  K.     I-?.)     7.  —  1H14. 

Action  Ji,y;iiins(  drjiwcr  of  ;i  hill.  Dcrnisc,  want  of  [trotest  and 
iiotico. 

I'll!  on  fiirtlici-  ini|iiir\,  il  (iii'ru'd  oiil  liial  (he  defendants'  objec- 
tinii  (lid  not  relate  to  Hie  want  of  pi'dlcsl  upon  the  first  disbonoi'  of 
the  hill,  hnt  to  th(>  want  of  protest  on  the  hill  hcing  refused  payment 
on  a  snhseqneTit  ]iresent  nient  al  tlie  defendants'  request. 

"Upon  this  explanation.  Tiord  Ellenhorouijh  was  of  o])inion  thnt 
the  answer  amounted  to  an  admission  of  liahilitv,  since  the  second 
protest  was  perfectly  <jratuitous  and  unnecessary." 

§  100.5:  Brmin  v.  Tlvll.  ?,?,  flriitt.  (Va.)  23,  31  (iHcltnn).  Tn  llic  ens-  of  inland 
bills  and  promissory  notes,  the  conclusion  is  Ercnnrnl  lliat  "waiving  protest" 
waives  presentment  for  payment  and  notice  of  dishonor.  Lanvaster  First  N. 
B.  V.  Hariman,  110  Pa.  St.  I!1G;  Johvson  v.  Parsons,  140  Mass.  173;  Jaccard  v. 
Anderson.  37  Mo.  91;  Carprntrr  v.  Rr;/no^'Js,  42  Miss.  807;  ffond  v.  IlnUcnhrclc, 
7  Hun  (N.  Y.)  364;  Porter  v.  KemhnlK  r)3  Barb.  (N.  Y.)  407;  Coddingtnn  V. 
Davis,  1  N.  Y.  186.  —  H. 

[In  f<prague  v.  Fletcher.  K  Or.  3(17,  the  defendaiil,  wlio  was  an  aeeomiiioda- 
tion  indorspr,  indorsed  on  the  back  of  a  note  before  i]\\r  Hicse  wnrds:  "I 
hereby  waive  notice  of  protest  for  nonpayment."  Held,  not  tn  Ito  a  waiver 
of  demand  of  pni/tuent  from  tlie  maker  when  due.  A<jreements  of  this  character 
are  to  be  construed  strictly,  and  not  extended  beyond  the  fair  import  of  the 
terms.  Prim,  J.,  at  p.  300,  said:  "  Tn  this  case  the  indoj-.ser  does  not  say  that 
he  will  waive  demand  of  payment,  but  that  he  will  '  waive  notice  of  protest 
for  nonpayment.'  Demand  and  notice  are  two  distinct  things,  both  of  which 
are  necessary  to  charge  an  indorser,  and  only  one  of  them  is  waived  by  the 
indorser  in  this  case.  But  it  is  claimed  by  appellant  that  the  indorsement 
operated  as  waiver  of  both,  and  the  follnwinp  decisions  are  cited  to  su  tain 
the  proposition.  (Coddivpton  v.  Davis,  3  Denio.  10;  Matthey  v.  (laUei/,  4 
(al.  63;  19  Ind.  110).  In  Coddington  v.  Dar-is.  the  indorser  wrote  to  the 
holder  as  follows:  'You  need  not  protest.  '1.  P..  (  .'s  nete  due.  etc.  1  will 
waive  the  necessity  of  protest.'  This  w;is  hidd  -udicicnt  to  ili^perise  wiih  a 
presentment  nnd  notice  of  non-payment,  on  the  prnnnd  that  the  %vord  '  protest,' 
as  used  by  the  indorser,  in  connection  with  the  promissory  note,  was  under- 
stood to  mean  the  taking  of  such  steps  as  were  required  by  law  to  charge  an 
indorser;  that  is,  proie.-t  was  understood  to  include  both  demand  and  notice. 
Although  in  a  technical  sense,  the  term  protest  menns  only  a  formnl  declara- 
tion dr<awn  up  and  signed  by  the  notary,  yet  as  used  by  eommercinl  men  it 
includes  all  the  steps  necessary  to  charge  an  indorser.  (Burrill's  Law  Diet. 
349;  2  Ohio,  N.  S.  345.)  The  case  in  4  California  is  in  fioint,  but  not  a  single 
case  is  cited  in  the  opinion  to  sustain  it.  The  cn.se  in  19  Indiana  does  not 
come  up  to  this  case.  There  the  ntrreement  was  that  '  protest  and  notice  of  pro- 
test were  waived,'  and  were  hold  sufficient  to  include  waiver  of  demand.  Thus 
it  will  be  seen  that  none  of  the  cases  cited  sustain  the  proposition  of  appellant 
except  the  California  enso,  while  there  are  numerous  decisions  holding  tlie  con- 
trary doctrine.  (6  ATa=s.  524:  Freeman  v.  O'Brien,  38  Iowa,  406;  Rcott  v. 
Ore'en,  10  Penn.  St.  103.)  "  — C.l 


IV.]  WHEN    NOTICE   DISPENSED   WITH.  587 

(d)   Effect  of  omission  lo  (jive  notice  of  non-acceptance. 

§  188  DUNN  V.  O'KEEFE. 

5  Mauxe  &  Selwin    (King's  Bench)   282. —  1816. 

Defendants  drew  a  bill  of  exchange  on  Kiekets,  Thorne,  George 
&  Co.,  dated  June  1!»,  ISi:?,  and  payalile  one  month  after  date  to  the 
order  of  one  Sinclair.  Before  the  maturity  of  the  hill,  Sim-lair 
indorsed  it  to  the  plaintiff,  who  on  July  13,  181  ;3,  presented  it  to 
the  drawees  for  acceptance.  The  drawees  refused  to  accept,  and 
plaintiff  thereupon  duly  notified  defendants  of  the  dishonor  of  the 
bill. 

The  defendants  pleaded  in  bar  of  the  action  that  before  the  indorse- 
ment of  the  bill  to  the  i)laintiff  and  its  presentment  by  the  latter 
for  acceptance,  the  bill  had  been  presented  by  Sinclair  to  the  drawees 
for  acceptance,  that  they  had  refused  acceptance,  and  that  notice  of 
such  refusal  had  not  iieen  given  to  the  defendants. 

Judgment  for  plaintiff,  and  defendants  bring  error. 

IjORD  ELLKNnonoroii,  C.  J.  —  At  a  very  late  period,  after  tlie  law 
nierchant,  as  it  regards  the  subject  of  bills  of  exchange,  had  obtained 
for  many  centuries,  the  cases  of  Bfesard  v.  Hirst  ^  and  Goodall  v. 
DoUey '  were  decided.  I  do  not  mean  to  insinuate  anything  against 
the  authority  of  those  decisions.  They  establish  this,  that  if  the  jiarty 
holding  a  bill  of  exchange,  receive  notice  of  its  dislionor,  he  is  hound 
to  communicate  this  to  the  drawer.  But  it  has  not  yet  been  determined 
that  the  want  of  notice  operates  further  than  a  personal  (]is(Iiarge  of 
the  drawer,  as  against  the  party  failing  to  give  the  necessary  notice, 
nor  that  an  innocent  indorsee  shall  be  barred  of  his  aclion  by  any 
latent  defect  in  the  transfer,  or  concoctiiui  of  llip  hill,  cvcci*!  in  (he 
two  cases  of  the  hill  being  given  on  a  gaining  or  nsnrions  considei-;])  ion. 
The  inconvenience  of  ;i  more  extended  do(  Irine  nmsl  he  appanMil  ;  for, 
suppose  the  holder  to  he  the  eleventh  person  into  whose  hands  an  un- 
accef>ted  bill  has  passed,  in  succession,  by  indorsement;  the  bill  arrives 
at  maturity,  and  is  jtresenfed,  in  due  course,  for  paynienl,  nnd  pav- 
irient  is  refusefl,  and  notice  is  given  to  the  diawer.  .According  to  the 
doctrine  of  to-day,  the  holder  is  not  in  ;i  (onr|iiii,ii  to  maintain  his  ac- 
tion, urdcHS  he  can  steer  clear  of  any  vice  which  the  bill  mjiv  have  ae- 
(jnired,  by  having  been  tendered  for  accej»tanc(>  by  some  one  of  the 
numerous  holders  through  who.se  hands  it  has  passed.  A  long  i?npiiry 
must  be  instituted  through  the  whole  series  of  indorsees,  in  order  to 
asrertain  if  any  previouR  presentment  was  made,  and  in  what  man 
ner  it  was  dealt  with.  Would  it  be  pf)ssible  to  conduct  the  tU'L'of  iatioi\ 
of  bills  of  exchange  if  all  this  investigation   were  necessary?     What 

«  .'■.  Burr.  2670.  —  T. 
»  I  Tprm  Rep.  712. —  C. 


588  NOTICE  OF   DISHONOR.  [ART.    VIII. 

iiit'ans  has  the  hohler  of  gaining  tliis  information?  Must  it.  be  ob- 
tained by  piivule  inquiry  i*  That,  as  it  t^eenis  to  uie,  woukl  tend  Il» 
cast,  about  bills  of  e.xehange,  a  precarious  eharaeter,  lliat  would  alfeet 
their  credit,  and,  perluips,  totally  exclude  them  from  eii(  illation.  The 
cases  of  lllci^ard  v.  //i"/>7  and  (ioodall  v.  DuUcy,  decided,  that  the  in- 
dorsor  shoultl  be  discharged,  but  that  was  as  between  the  indorser  and 
tlie  party  guilty  of  laches,  which  the  plaintilT,  in  botli  those  cases, 
was.  It  may  be  nuiterial  to  give  tlio  drawer  notice,  in  order  to  enable 
him  to  withdraw  his  elfects.  This,  therefore,  may  form  a  sound  ex- 
ception as  against  the  party  guilty  of  laehos,  but  it  is  a  very  different 
consideration,  whether  it  shall  vitiate  the  bill  in  the  hands  of  an  in- 
nocent indorsee,  like  the  rases  of  usury  or  gaming.  Tt  is  argued  that 
the  drawer  is  only  conditionally  liable,  if  the  bill  be  dishonored  by  non- 
acceptance  or  nonpayment,  provided  he  has  notice.  But  it  is  no  part 
of  the  condition,  that  he  shall  be  discharged  quoad  every  holder,  if  the 
dishonor  be  not  within  the  knowledge  of  the  holder.  Such  a  position, 
I  lielieve,  is  not  laid  down  in  any  case,  and  would,  as  it  seems  to  me, 
be  carrying  the  doctrine  furthei'  than  is  necessary  or  convenient,  in- 
volving, perhaps,  the  negotiation  of  bills  of  exchange  in  precarious  un- 
certainty. The  drawer  who  issues  his  bill  into  the  world,  without  pro- 
curing its  acceptance,  is  not  without  some  degree  of  blame.  lie  issues 
it  in  an  imperfect  state,  and  cannot  justly  complain  of  the  neglect  of 
any  indorsee  who  takes  the  bill  in  this  state,  being  cognizant  of  no 
circumstances  to  vitiate  it,  and  looking  merely  at  the  names  upon  it. 
Upon  the  whole,  it  appears  to  me.  that  no  antliority  has  pronounced 
that  a  bill  of  exchange  shall  he  void  security,  in  the  hands  of  an  inno- 
cent indorsee,  who  has  no  knowledge  that  the  bill  lias  ever  been  dis- 
honored, because  a  former  holder  has  omitted  to  give  notice  to  the 
drawer  that  the  drawee  has  refused  acceptance  :  and  that  such  a  doc- 
trine would  be  destructive  of  the  very  policy  and  effect  of  this  species? 
of  instrument,  by  rendering  its  credit  of  so  precarious  a  nature,  that  no 
person  would  l)e  found  willing  to  trust  to  it,  especially  if  a  member  qI 
names  were  indorsed  upon  it. 

Bayley,  J_  *  *  *  '^X''|]e  drawer  might  avoid  all  ditficulty  by  draw- 
ing the  bill  payable  to  his  own  order,  and  procui-i ng  an  acceptance  be- 
fore issuing  it.  If  he  draw  it  payable  to  a  third  person,  and  issue  it 
in  its  unaccepted  state,  the  imperfection  lies  at  hia  door,  and  he  must 
take  the  consequence.    *    *    * 

IIoLROYD,  J.  —  I  am  of  the  same  ojdnion,  that  there  ought  to  be 
judgment  for  the  defendant  in  error.  This  conclusion,  I  think,  fol- 
lows from  some  of  the  principles  laid  down  in  argument  on  the  other 
side.  T  agree  in  the  position  that  the  drawer  undertakes  that  the 
drawee  shall  accept  and  pay.  If  the  holder  tender  the  bill  for  accept- 
ance, and  acceptance  is  refused,  he  kniows  that  the  drawer  is  thereby 
defeated  in  his  expectation:  therefore,  it  becomes  his  duty  to  "-jve 
jioticp  to  tbr>  drawer,  nnd   if  ho  pe?lect  thi^.   he  i-   "rniltv  of  lachp?, 


v.]  PROTEST    AS    EVIDENCE.  589 

and  ought  to  suffer  for  his  negligence  rather  than  the  drawer.  This 
was  the  ground  on  which  the  case  of  Blesard  v.  Hirst  was  determined. 
But  such  is  not  tlie  present  case,  where  the  bill,  in  its  unaccepted  state, 
has  passed  into  the  hands  of  a  bona  fide  indorsee  to  whom  no  laches  is 
imputable.  Upon  the  principle  already  laid  down,  the  drawer,  in  such 
a  case,  holds  out  to  the  indorsee  that  the  bill  will  be  accepted  and  paid ; 
and  if  this  fails,  ought  he  not  to  suffer  rather  than  the  indorsee  who 
hath  no  knowledge  whatever  that  the  bill  has  been  dishonored  ?  The 
case  of  Roscotv  v.  Hardy  '"  differs  from  this,  because  there  the  plaintiff 
took  up  the  bill  of  his  own  wrong,  after  the  holder  by  his  laches  had 
discharged  the  drawer  and  prior  indorsers,  and  therefore  it  was 
properly  holden,  that  the  plaintiff  could  not  recover  against  a  prior 
indorser.  The  greater  part  of  the  learned  counsel's  argument  would 
apply  to  the  case  of  a  stolen  bill,  where  the  felon  has  indorsed  it  to  a 
bona  fide  holder;  but  what  says  the  law  in  such  case?  Not  that  the 
indorsee  takes  the  bill  on  the  individual  credit  of  the  felon,  so  that 
he  must  stand  or  fall  by  the  felon's  title,  but  that  he  shall  recover  on 
his  own  title,  seeing  that  he  might  take  the  bill  on  the  credit  of  all  the 
names  which  appear  on  the  bill.  Usury  and  gaming  considerations 
render  the  bill  void  in  its  original  formation.  I  remember  the  case  in 
DougIas^\  where  the  court  reluctantly  yielded  to  that  doctrine.  This 
is  not  the  case  of  a  void  bill ;  the  indorsee  is  chargeable  with  no  negli- 
gence, and  T,  therefore,  think  that  the  drawer  is  still  liable. 

Judgment  affirmed. 


V.  Duties  of  holder:  protest. 

§  189  SUSSEX  BAXK  v.  BALDWIN.  " 

[Reported  herein  at  p.  fffiO.] 


§  189  BAXK  OK  !?()(•  11  KSTKK  v.  CRAY. 

2    UtUh    (N.    Y.)     227.— 1842. 

Action  against  indorser.  Dofcnse,  want  of  nolico.  The  bill  was 
drawn  in  Rocliesler,  N.  Y.,  payable  in  Boston,  Mass.  Tt  was  presontoH 
by  a  notary  in   Boston  and  on  dishonor  a  certificate  of  protest  was 

1"  12   Kast,  434. —  C. 

II  Spf  f,mrr  v.   Wnllrr,  Poii^j.  7.Tf>. 

•  2  Whon  protoHt  is  npcPHsnry,  tho  prntrst  iron  mny  ho  rnrnvrrod  ns  dnmnprs. 
Morfian  v.  Rrintzrl,  7  Cranrh   (  U.  S. )  27.T:   Tirknnr  v.  lirnnrh  Hank.  3  Ala.  13r». 

Wh»Tf"  protost  is  iisfN'Hs,  [)rntrst  fcfs  cnnnot  ho  rorovorod.  German  v.  Ritchie, 
9  Kans.  inO;  Wnnlry  v.  Ian  \  alkrnhurf/h,  1(1  Kans.  20;  WaHHrll's  Surrrssinn. 
44  La.  Ann.  .301.  Whoro  prntost  is  propor.  hut  not  nooossary.  a»  wtwro  it  in 
authorizoH  hy  statnto  in  rasp  of  Hishnnor  of  an  inland  hill  or  a  promisnory 
notp,  protest  fppH  may  hp  rpcovprpd.  /-''/';  v.  Vinal.  105  Mass.  5.55;  Mrrritt  v. 
lientrm.  in  Wond.  (N.  Y.)  117;  2  Daniol  on  Noe.  In"!..  §  1)33.  ("ontra: 
Johnson  v,   Hnnk.  20  Cn.  200.     1    Pnrsons  N.  *    B.  010—  IT. 


590  NOTKM':  OK  DISHONOR.  [ART.    VIII. 

drawn  up  in  due  form,  statin^',  anion<^  other  tilings,  that  the  notary 
transmitted  notice  of  dislioiior  to  (lie  drawer  and  indorsers,  etc.     This 
certifieate  was  tlie  only  proof  of  notice  of  dishonor  offered  by  plaintiff. 
Ihj    the   Court,   Cowkn,   J.     [After   deciding   that   a   notarial   seal 
stamped  directly  upon  the  paper,  without  the  use  of  a  wafer,  is  not 
a  gooil  common-law  seal].     Supjtose  the  protest  had  been  duly  authen- 
ticated, was  the  addition  of  a  certificate  stating  notice  of  protest  to  the 
defendant  admissible?     It  was  said  to  be  evidence  by  Johnson,  J.,  in 
Cape  Fear  Bank  v.  Stinemetz  (1  TTill's  T^aw  Eep.  S.  Car.  45)  ;  and 
what  T  said  in  Ilallidai/  v.  McDoiifjall  (20  Wend.  85),  is  now  relied 
ujion,  and  perhaps  rightly,  as  intimating  an  impression  that  he  was 
right.    The  point  decided  in  the  last  ease  was,  however,  that  the  giving 
of  notice  being  the  usual,  not  otTlcial  duty  of  the  foreign  notary,  and 
he  being  dead,  the  entry  in  his  ofTicial  record  of  notice  being  sent 
might  he  received  by  way  of  memorandum  as  secondary  evidence.     I 
admitted  that  it  might  not  be  his  official  business ;  and  instituted  no 
particular  examination  whether  it  was  or  not.     The  learned  counsel 
for  the  plaintiffs  has  not  been  able  to  furnish  anything  more  than 
what  T  have  there  mentioned,  going  to  support  the  notary's  certificate 
as  evidence  of  notice.     I  have  been  equally  unsuccessful  after  consider- 
able search.     On  the  contrary,  I  find  it  expressly  asserted  in  Brooke's 
Office  of  Notary  (pp.  79  and  139),  that  the  giving  of  notice  is  no  part 
of  his  province  or  duty  as  notary.    In  the  late  case  of  Filler  v.  Morris 
(6  Whart.  40fi,  415,  March  T.  1841),  this  very  question  was  a  good 
deal  considered  by  the  Supreme  Court  of  Pennsylvania;  and  they  held, 
that  though  by  the  local  law  of  that  state,  the  giving  of  notice  is  a 
notarial  act,  and  on  that  ground  proveable  by  his  certificate,  yet  this 
is  an  exception  to  the  common  law.    They  therefore  refused  to  receive 
a  notarial  certificate  made  in  Alabama,  as  evidence  of  notice,  or  any- 
thing beyond  the  presentment  and   non-acceptance.      I   am  entirely 
satisfied  that  such  is  the  law  of  England  and  this  state. 

It  is  scarcely  necessary  to  observe,  that  our  statute  (Sess.  56,  p. 
395),'^  relative  to  proof  of  notice  by  certificate,  applies  to  none  other 
than  notaries  of  this  state.  ' 

There  must  be  a  new  trial ;  tlie  costs  to  abide  the  event. 

New  trial  granted.  ^ 

13  L.  183.3,  c.  271,  §  8.  Re-enactorl  in  substance  in  N.  Y.  Code  Civ.  Proc. 
§  923. —  H. 

lit  is  now  provided  (Code  Civ.  Proc.  §  925),  that  proof  of  dishonor,  and 
notice  of  dishonor,  of  an  instrument  payable  in  another  state  or  country,  may 
be  made  in  any  manner  authorized  by  the  law  of  the  state  or  country  where 
it  is  payable.  McAndrew  v.  Radxi:ay,  34  N.  Y.  511;  Lawson  v.  Pinckney, 
40  N.  y".  Super.  Ct.   187.  — H. 

2  A  notarial  certificate  is  not  competent  proof  of  service  of  notice  in  the 
absence  of  statute.  Rml  Estate  Bank  v.  Bizzrll.  4  Ark.  189;  Rives  v.  Pnrmley, 
18  Ala.  256;  fiehneider  v.  Cnehrnne^  9  Ln.  Ann.  235;  f>rhorr  v.  Woodlief, 
23  La.  Ann.  473;   Swayze  v.  Britton,  17  Kans.  625.     Statutes  now  generally 


ARTICLE  IX. 

Discharge  of  Negotiable  Instruments. 

I.  Discharge  of  the  instrument. 

1.  Payment  and  Ee-transfer. 

§  200  STODDARD  r.  BURTON. 

41   Iowa,  582.  —  1875. 

Action  against  the  maker  on  a  lost  or  stolen  promissory  note  pay- 
able to  A,  the  bearer,  on  or  before  Jan.  6,  1868.  Defense,  payment 
to  the  holder  (Thompson)  on  Oct.  11,  1866.    Judgment  for  plaintiff. 

Day,  J.  *  *  *  The  defendant  asked  the  court  to  instruct  the 
jury  as  follows : 

"  12.  The  note  in  controversy  was  payable  on  or  before  a  certain 
date.  This  made  the  note  payable  at  a  fixed  time  absolutely,  and 
sooner  if  defendant  saw  fit  to  pay  it  sooner.  Such  were  tlie  express 
terms  of  the  contract,  and,  therefore,  no  presumption  of  bad  faith 
can  arise  from  the  simple  fact  that  defendant  paid  when  he  did, 
though  by  its  terms  payment  could  not  have  been  demanded  or  enforced 
at  the  time.  Defendant  had  the  right  to  pay  whenever  he  chose  to  do 
so. 

The  court  refused  this  instruction,  and  gave  the  following: 

"  8.  A  promissory  note,  payable  on  or  before  two  years  after  date, 
is  due  at  the  end  of  two  years  and  not  before ;  the  rule  of  law  being 
that  the  note  becomes  due  at  the  time  when  the  payee  or  legal  holder 
or  owner  of  the  same  has  the  right  to  demand  payment,  and  this  is 
true,  although  the  note  provides  that  the  payor  may  at  his  option 
pay  the  same  before  the  time  fixed  when  it  shall  absolutely  become 
due.  " 

"  fl.  Tlie  payment  of  a  note  by  tlie  payor  before  it  becomes  due,  to 
a  stranger  who  may  have  possession  of  the  note,  will  not  protect  and 
discharge  the  maker,  if  said  note  has  been  stolen,  or  otherwise  sur- 
reptitiously comes  into  the  hands  of  the  party  presenting  the  same.  " 

Other  instructions  given  embrace  the  same  doctrine. 

make  a  notarial  c^rtificnto  prima  fnrir  pvidrncc  of  (ho  pivinp  of  notice.  Aa 
to  thpRP  stnfiitf*  nnfl  tlioir  rnn«tnirtinn.  soc  4  .\m.  *  Kntr.  Knryr.  T,nw  f2nd 
ed.),  pp.  .189-393.  Whom  n  nntnry'n  cprtifioatc  may  inrhulo  a  rfrtiflcatp  of 
notipp  of  (liMlionnr.  snrh  rorf ifiratc  of  nntirp  may  \h-  written  hrlow  fbf  body 
of  thf  oprtifirntf  and  rvon  Ix-lnw  tho  «ral.  Olcott  v.  Tioffa  K.  Co.,  27  N.  Y. 
646;   Jnrflnn   v.    I,onr).    1(»9    .Ma.    414.     -TT. 

[Mil 


59'J  DlSt'llAUr.K  OV    INSTRUMENT.  I.A"T.    IX. 

There  was  error  in  giving  these  instruelions,  and  in  refusing  that 
asked.  The  note  was  j>ayahle  to  the  hearer,  and  there  is  a  presumption 
that  the  person  in  j^ossession  of  it,  and  wlio  jjresented  it  for  payment, 
was  the  owner.  It  lias  heen  deehired  in  general  terms,  that  the  'pay- 
ment of  a  note  whieh  has  been  lost  or  stolen,  hefore  it  is  due,  does 
not  discharge  tlie  maker  from  liability  to  the  real  owner,  because 
the  payment  is  out  of  the  ordinary  course  of  business.  (2  Parsons  on 
Notes  and  Bills,  2i>r>,  and  cases  cited. )^ 

But  the  note  in  (]ues(ion,  by  its  express  provisions,  at  the  option 
of  the  maker,  is  payable  at  any  time  within  two  years  from  its  date. 
Whilst  the  holder  could  not  enforce  payment  before  January  6,  18G8, 
yet  the  maker  might  claim  the  right  to  make  payment  before  that  time. 
It  cannot  be  said  to  be  out  of  the  ordinary  course  of  business  for  tlie 
maker  to  insist  upon  a  provision  which  was  incorporated  for  his 
benefit.  Xo  p]|3Sumption  against  the  buna  jidcs  of  the  defendant  can 
arise  from  the  time  of  making  payment. 

The  defendant  asked  the  court  to  instruct  in  substance  that,  if  Bur- 
ton paid  the  note  to  Thompson  in  good  faith,  Thompson  being  in  pos- 
session of  it,  and  believing  him  to  be  the  owner,  without  actual  notice 
or  knowledge  that  it  was  stolen,  then  Burton  was  protected  by  such 
payment,  and  that  mere  suspicion  on  Burton's  part  as  to  Thompson's 
right  to  demand  payment  or  negligence  in  making  inquiries  was  not 
enough  to  invalidate  payment ;  but  to  do  so,  it  must  appear  that  Bur- 
ton had  acted  in  bad  faith.  The  court  refused  this  instruction,  and  in 
substance  directed  that  a  payment  made  under  circumstances  that 
would  put  a  reasonably  prudent  man  upon  inquiry  as  to  Thomp- 
son's right  to  receive  payment  would  not  protect  nor  discharge  de- 
fendant. 

Tliis  action  was  erroneous.  Mere  suspicion  that  a  person  in  pos- 
session of  a  note  payable  to  bearer  may  not  be  the  owner,  will  not 
e.xonerate  the  maker  from  payment;  but  there  must  be  circumstances 
amounting  to  clear  proof  that  lie  is  a  fraudulent  holder.  ^  (Story  on 
Prom.  Notes,  §  613,  and  cases  cited;  Gage  v.  Sharp,  24  Iowa,  15; 
Lake  v.  Reed,  29  Id.  258;  Goodman  v.  Simonds,  20  How.  343;  1  Par- 
sons on  Notes  and  Bills,  238;  2  Id.  212,  279.) 

For  the  errors  discussed,  the  judgment  is 

Reversed. " 


1  Disapproved  in  Bainbridfje  v.  City  of  Louisville,  83  Ky.  285.  — H. 

2  See   §  95.  — H. 

8  See  §  148.  Cf.  Buehler  v.  McCormirk,  160  Til.  260.  If  an  instrumont, 
is  paid  hpforo  maturity  and  a  nanor^llation  Ippond  ptampod  npon  it,  and  it 
is  afterwards  stolen,  the  cancellation  mark  effaced,  and  the  instrument  put  into 
circulation,  a  p\irchaser  for  value  without  notice  cannot  recover  on  it  apainst 
the  maker.  District  of  Cnlumhin  v.  Cornell,  130  IT.  S.  655.  [Distinguished 
in  Ehrlich  v.  Jmnivfia.  78  S.  f.  260.  —  C^ 

If  a  negotiable  instrument  is  lost  or  stolen  and  the  true  owner  duly  notifies 
the  maker,  the  latter  must,  at  his  peril,  make  sure  that  a  subsequent  payment 


I-    IJ  I'AVAiExNT    AND    liETliAXsFER.  593 

§  200         AUAWAxM  NATIONAL  BANK  v.  DOWNING. 
169  Massachusetts,  297. —  1897. 

Action  against  Edward  B.  Downing  as  maker  of  a  note.  After  the 
note  niatuied,  plaintiif  took  a  new  note  for  $450  from  the  indorser, 
William  B.  Downing,  which  included  the  amount  of  the  note  in  suit 
and  another  note  of  $2UU  given  hy  X.  Plaintiff  retained  possession  of 
the  note  in  suit  and  said  note  of  $200. 

MoKTON,  J.  — The  defendant  is  the  maker  of  the  note  in  suit,  As 
hetween  him  and  William  B.  Downing,  tlie  indorser,  it  was  an  accom- 
modation note.  But  there  is  notliing  to  show  that  tliis  was  known  to 
the  plaintiff,  or  that  it  took  the  note  otherwise  than  in  good  faitli  and 
for  value.  Whether  the  $450  note  operated  as  payment  of  it  was  a 
<|uestion  of  fact  depending  on  the  intention  of  the  parties,  and  the 
other  circumstances  surrounding  the  transaction.  (Brigham  v.  LaJly, 
130  Mass.  485;  Dodge  v.  Emerson,  131  Mass.  467;  Green  v.  Russell, 
132  Mass.  536;  Eames  v.  (hishman,  135  Mass.  573;  Woods  v.  Woods, 
127  Mass.  141  ;  Cotton  v.  Bonh,  145  Mass.  45,  12  N.  E.  850.)  The  couri 
must  have  found  that  it  did  not,  and  its  finding  is  conclusive.  (Brig- 
ham  V.  Laliy,  supra.)  There  was  nothing,  we  think,  in  the  arrange- 
ment l)etween  the  plaintiff  and  William  B.  Downing  that  operated  to 
release  the  defendant.  His  liahility  to  the  j)laintiff  was  an  ahsolute 
one.  Delay  on  its  part  lo  enforce  ])ayment,  from  whatever  motive,  or 
however  long  continued,  if  not  for  six  years,  would  not  release  him. 
We  do  not  see  that  the  case  is  altered  because  the  delay  was  at  the 
request  of  the  indorser,  and  accompanied  by  an  agreement  between  the 
plaintiff  and  him  that  the  defendant's  overdue  note  should  be  re- 
garded as  security  for  the  new  note  given  by  William  B.  Downing. 

Exceptions  overruled.* 

is  to  a  holdfr  in  dm-  onurso.      Bainbridfje  v.  Cilj/  of  LimixvUlr,  8.3    Ky.   285; 
rhnppchar  v.  Martin,  4f)  Oh.  St.   120. 

If  imyiiiciit  l)c  iiiadf  to  (inc  who  hns  no(  the  f)OHs<'s.siori  of  the  instruniciil,  it 
in  at  thi'  |M'iil  of  the  jmyor.  Whccirr  v.  duiltl,  20  Tick.  (Mass.)  CyAry.  So  also, 
it  Hcow,  if  the  oni-  to  wliorii  piiyiiiciit  is  tiiad*'  dofs  not  actnallv  produce  fh<' 
inHtnuncnt  Murphy  v.  Hnriinnl.  I(;2  Mass.  72.  Soc  also  Hi/rr/x  v.  Aultmait, 
(U  (}u.  544;  luivrrsihf  Hani:  v.  Turk.  !M!  On.  4fir).  If  tlic  instrument  is 
indorsed  in  full,  |/;»wnent  to  any  one  exfe|it  the  indorsee  (even  !•»  one  in 
poH-ession  of  the  instriinient  )  is  at  the  peril  of  the  payor.  Douhlnldif  \  h'rr.s.s 
50  N.  Y.  410.  —  M. 

♦  Whether  n   renewal   note  is  taken  in  payment  of  the  former  note,  or  mrrelv 
in  extension  of  the  ol)lij,Mtion  of  I  nc  former  note,  is  a  (piestion  of  the  intention 
of  the  partiet.     Mutter  ,,f  ftirn   \'iitional  Urcintuj  Co.,  154  N.  V.  208. —  IL 
NKOOT.  INBTKLMKNTB— yy 


594  DISCIIAUUE   OF   INSTRUMENT.  [AUT.    IX. 

§200  MADISON  SQUAKK  BANK  v.  PIERCE. 

137  New  York,  444.  —  1893. 

Action  on  a  promissory  note.     Defense,  part  payment  by  indorser. 
Judgment  for  plaint i IT. 

Finch,  J.  —  We  have  a  novel  and  interesting  question  before  ua 
on  this  appeal,  although  its  apparent  importance  will   lessen  as  we 
pass  from  first  impressions  to  some  slower  reflection.     Tt  arises  upoi. 
farts  which  are  very  brief  and  simple  and  may  at  once  be  stated.    The 
defendant.  Pierce,  made  his  promissory  note  payable  to  his  own  order 
and  indorsed  it  to  the  Pntos,  Co.,  Limited,  which  indorsed  it  to  the 
plaintitT  bank ;  the  latter  discounting  it  and  paying  the  proceeds  over 
to  the  immediate  indorser.     Thereafter  the   Bates   Co.   became   in- 
solvent and  passed  into  the  hands  of  a  receiver,  who  paid  to  the  bank 
upon  tlie  liability  of  the  indorser  seventy-three  and  one  quarter  per 
cent,  of  the  amount  secured  by  the  note.    Later,  the  bank  sued  Pierce, 
the  maker,  and  recovered  judgment  for  the  full  amount  of  the  note 
in  spite  of  the  proof  showing  the  payment  made  by  the  receiver,  and 
in  disregard  of  the  claim  asserted  by  the  defendant  that  he  should 
only  be  held  liable  for  the  balance  remaining  unpaid.     That  judgment 
has  been  affirmed  by  the  General  Term,  Judges  Daniels  and  Barrett 
each  writing  very  strong  and  valuable  opinions  in  support  of  their 
doctrine,  and  relying  upon  the  authority  of  Jones  v.  Broadhurst   (9 
M.  G.  &  S.  177;  67  Eng.  Com.  L.  175),  which  fully  warrants  their  con- 
clusion.   The  question  does  not  seem  ever  before  to  have  arisen  in  this 
country,  and  we  are  left  at  liberty  to  examine  the  English  rule  and  to 
follow  it  or  not  as  we  approve  or  disapprove  its  logic  and  its  conse- 
quences. 

We  are  not  to  regard  the  note  as  being  accommodation  paper,  but 
must  assume  its  transfer  for  value.  The  form  of  the  transaction  is 
equivalent  to  what  it  would  have  been  if  the  Bates  Co.  had  been  named 
as  payee,  and  loses  none  of  its  force  by  the  intervention  of  the  maker 
as  first  indorser.  That  indorsement,  in  the  form  adopted,  was  needed 
for  the  regular  transfer  of  title,  but  does  not  change  or  affect  the  nature 
and  character  of  the  maker's  liability.  He  remains  the  ultimate  debtor, 
the  person  who  ought  lo  pay  the  debt,  in  preference  to  and  in  exonera- 
tion of  all  other  par  lies  to  the  paper,  who  in  some  form  or  other  are 
entitled  to  have  final  recourse  to  him. 

And  it  is  to  the  case  of  such  a  maker  of  the  note  or  such  an  acceptor 
of  the  bill  of  exchange  that  the  English  rule  alone  applies;  and  it  is 
explicitly  declared  inapplicable  where  the  indorser  or  drawer  is  the 
real  debtor,  although  in  form  only  secondarily  liable. 

Pierce,  therefore,  was  the  ultimate  debtor,  and  the  party  who  ought 
to  pay  the  note,  both  in  discharge  of  the  obligation  to  the  holder  and 
in  exoneration  of  the  indorser.  When  the  bank  sued  on  the  note,  it 
was  the  legal  holder  and  the  legal  party  in  interest.    Upon  production 


I.    1.]  PAYMENT   AND  EETEANSFEB.  595 

of  the  paper  and  the  usual  proof,  judgment  against  the  maker  for  the 
full  amount  was  inevitable,  unless  some  defense  should  be  interposed. 
The  only  possible  one  for  Pierce  was  part  payment,  and  he  was  com- 
pelled to  assert,  and  his  counsel  are  compelled  to  argue,  that  the  money 
paid  by  the  indorser  to  the  holder  inured  to  the  benefit  of  the  maker  as 
a  payment  on  his  debt.  But  that  doctrine  cannot  prevail  for  very 
obvious  reasons.  The  indorser's  payment  did  not  in  the  least  lessen  or 
satisfy  tiie  maker's  debt.  lie  owed  it  all  exactly  as  before.  What  had 
happened  possibly  changed  somewhat  the  real  creditor,  but  left  the 
whole  debt  due  and  unpaid.  To  whom  he  should  pay  might  become  a 
new  question,  but  how  much  he  should  pay  in  discharge  of  the  note 
was  not  made  doubtful  in  any  degree.  What  the  receiver  advanced  to 
the  holder  is  familiarly  described  as  a  payment;  but  it  was  such  rela- 
tively to  the  indorser's  liability  alone;  while  relatively  to  the  obliga- 
tion of  the  maker,  it  was  an  equitable  purchase  instead  of  a  payment. 
That  view  of  it  was  taken  in  a  very  early  case,  the  decision  of  wnich 
depended  necessarily  upon  it.  In  Callow  v.  Lawrence  (3  Mau.  &  Sel. 
95),  it  appeared  that  one  Pywell  drew  a  bill  upon  Lawrence  to  his  own 
order,  which  Lawrence  accepted.  The  drawer  indorsed  the  bill  to  Tay- 
lor, who  discounted  it  and  thereafter  indorsed  it  to  Barnott.  It  was 
protested  for  nonpayment.  The  drawer  paid  Barnett  the  full  amount 
and  took  the  bill,  and,  striking  off  the  indorsements  of  Taylor  and  Bar- 
nett, transferred  the  bill  to  Callow,  who  sued  the  acceptor  upon  it.  The 
latter  claimed  that  the  bill  was  paid  and  extinguished,  which  the  court 
denied,  saying  that  the  drawer  "  became  the  purchaser  of  the  bill  " 
when  he  paid  and  took  it  out  of  Barnett's  hands ;  that  it  was  not  paid 
by  the  drawer,  animo  solvendi,  in  order  to  extinguish  it,  but  only  to 
redeem  himself  from  the  situation  in  which  he  stood.  That  must 
always  be  true  of  payment  by  indorser  to  holder,  where  the  maker  is 
the  ultimate  debtor.  To  the  extent  of  the  money  paid,  the  indorser 
becomes  equitably  entitled  to  be  substituted  to  the  rights  and  remedies 
of  the  holder,  and  becomes  pro  tanto,  tlie  beneficial  owner  of  the  debt; 
80  that  the  maker's  obligation  to  pay  the  note  in  full,  at  first  due  to 
the  bolder  solely  in  his  own  right,  becomes,  after  the  part  payment  by 
the  indorser,  still  wholly  due  to  the  holder,  but  partly  in  his  own  right 
and  i)artly  as  trustee  for  the  indorser.  A  court  of  law  cannot  split  the 
note  into  parts,  and  must  act  upon  the  legal  interest  and  ownership. 

In  the  present  (,'ase  there  was  no  privity  between  maker  and  indorser 
aa  it  respects  the  action  of  the  latter.  He  paid  not  as  the  agent  of  the 
maker,  nor  at  his  refjuest,  not  for  his  benefit,  and  under  no  duty  to 
relieve  him,  but  independently,  upon  his  own  obligation,  to  lessen  his 
own  responsibility,  and  not  at  all  to  discharge  the  ultimate  debt  which 
it  was  the  maker's  duty  to  pay.  It  seems  very  clear,  therefore,  that 
the  maker  cannot  utilize  for  his  own  benefit  a  payment  which,  as  to 
him,  is  not  a  payment  upon  thf  debt.  If  becomes,  as  T  have  said,  merely 
a  question  to  whom  he  shall  pay  and  who  may  sue  for  and  collect  the 


5i)G  UlSCllAKcii;   OK    INSTKUMKNT.  [aKT.    IX, 

Nvholo  unpaid  sum.  la  Lliat  quesljon  tli(.,'  nuikor  lias  no  couceru  beyond 
the  iiujuiry  whether  he  may  beeunu'  liable  to  ditt'ereiit  persons  for  tlie 
same  ik'bt  and  encounter  the  danger  of  paying  it  twiee.  I  can  dis- 
cover no  sucii  peril.  The  judgmejit  in  favor  of  the  holder  is  a  bar  to 
any  other  suit  on  the  same  note,  and  payment  to  the  liolder  discharges 
the  note  utterly.  Ordinarily,  the  indorser  cannot  recover  except  upon 
the  note  and  as  holder  and  in  accordance  with  the  law  merchant.  If 
he  ever  has  any  other  right  of  action  against  the  maker,  it  is  either 
in  equity  or  by  force  of  some  facts  beyond  the  bare  relation  established 
by  the  paper.  And  where  the  note  is  merged  in  the  holder's  judgment 
or  paid  in  full  to  him  by  the  maker,  the  indorser's  only  right  is  through 
the  judgment  or  against  the  proceeds,  if  he  has  made  a  partial  payment 
to  the  holder.  That  does  the  indoi'ser  no  wrong.  If  he  is  not  content 
that  the  holder  shall  collect  to  some  extent  as  his  trustee,  he  may  pre- 
vent it  by  payment  in  full  to  the  holder  and  so  entitle  himself  to  the 
possession  of  the  note  on  which  to  sue,  or  if  judgment  has  been  ob- 
tained, to  be  subrogated  to  all  of  the  rights  of  the  plaintiff  therein. 

I  think  this  result  is  clearly  indicated  by  our  own  decisions.  In 
Mechanics'  Bank  v.  Hazard  (13  John.  353),  the  maker  of  the  note  had 
been  arrested  in  an  action  upon  it  and  his  bail  sought  to  relieve  them- 
selves by  force  of  a  payment  made  by  the  indorser  to  the  holder,  but 
such  effect  was  denied  to  it;  the  court  saying  that  it  was  not  a  pay- 
ment by  or  on  behalf  of  the  maker,  or  of  which  he  or  his  bail  could 
avail  themselves.  And  in  Guernsey  v.  Burns  (25  Wend.  411),  where 
the  suit  was  by  the  holder,  representing  the  legal  title  and  interest,  it 
was  said  to  be  no  defense  to  the  maker  and  no  concern  of  his  that 
some  property  in  the  note  was  in  another. 

It  thus  becomes  apparent  that  there  is  no  very  great  importance  in 
the  question  which  method  of  securing  payment  from  the  maker  is 
adopted,  since  the  same  result  follows  from  each,  and  that  it  narrows 
down  to  the  inquiry  whether,  as  matter  of  correct  doctrine  and  of  con- 
venience in  practice,  the  holder  may  recover  the  whole  debt  against 
maker  or  acceptor  for  himself  and  as  trustee  for  the  indorser  to  the 
extent  of  his  acquired  interest;  or  whether  he  shall  take  judgment  only 
for  the  balance,  leaving  the  indorser  to  sue  in  some  way  and  on  some 
theory,  which  apparently  could  not  be  upon  tlie  note,  because  already 
merged  in  the  judgment,  but  might  be  for  money  paid  for  the  use 
of  the  maker,  since  he  gets  the  benefit  of  it  in  the  reduction  of  the 
judgment,  as  was  held  in  Pownal  v.  F errand  (6  B.  &  Cress.  439), 
where  the  holder  deducted  the  indorser's  payment  from  the  levy 
again.st  the  maker.  The  former  seems  to  me  to  bo  the  logical  and  con- 
venient method  and  so  T  think  we  should  follow  the  English  doctrine. 

I  have  not  underrated  the  assault  made  upon  it  by  the  appellant. 
He  asserts  that  Jones  v.  Broadhvrst  is  contrary  to  the  earlier  cases 
and  has  been  criticised  and  shaken  by  the  later  ones.  T  have  examined 
them  all,  with  some  wonder  at  the  amount  of  learning  and  ingenuity 


i-    1-j  PAYMENT   AND   KETJiANSi^ER.  59? 

expended  upou  the  subject.  {Pierson  v.  Dunlop.  Cowper,  571 ;  Wal- 
wyn  V.  ^7.  Quintin,  1  Bos.  &  P.  65:3;  Bacon  v.  Searles,  1  H.  Bl.  88; 
Hemmitig  v.  Brook,  1  Car.  &  M.  57;  Randall  v.  il/oon,  12  C.  B.  261; 
Cook-  V.  Lister,  13  C.  B.  [X.  S.]  543;  Solomon  v.  I>at'is,  1  Cahabe  & 
Ellis,  83;  Thornton  v.  Maynanl,  10  Com.  Pi.  L.  R.  695.)  The  prior 
cases  were  very  fully  and  carefully  reviewed  by  Baron  Cresswell  in 
the  opinion  rendered  in  Jones  v.  Broadhurst,  and  of  the  subsequent 
cases  T  deem  it  only  necessary  to  say  tiiat,  along  with  some  criticism 
and  occasional  doubt,  the  doctrine  has  remained  substantially  un- 
shaken, and  the  case  last  cited  was  declared  by  Lord  Coleridge  to  be  the 
accepted  law. 

It  must  not  be  forgotten,  however,  and  I  may  prudently  repeat,  that 
the  doctrine  has  no  application  to  accommodation  paper,  and  rests 
wholly  upon  the  actual  and  ultimate  indebtedness  of  maker  or  ac- 
ceptor as  the  party  who  ought  to  pay.  In  such  a  case  as  that,  which 
correctly  describes  the  one  now  before  us,  and  where  no  disturbing 
facts  atfect  the  relations  of  the  parties  as  fixed  by  the  paper  itself,  I 
think  the  holder  may  sue  and  recover  the  full  amount,  receiving  so 
much  of  the  proceeds  as  represents  a  part  payment  by  the  indorser  as 
trustee  for  him. 

It  follows  that  the  judgment  sliould  be  affirmed,  with  costs. 

All  concur,  except  AIaynaku,  J.,  dissenting. 

Judgment  affirmed.  ^ 


§200  LANCEY  r.  CL.\RKE. 

04    Ni:\v    ^■()UK,   'im. —  1870. 

Action  by  holder  against  maker.     .Iiidtrmciit  f(.r  plaintiff  at  circuit 
Judgment  reversed  at  (icneral  'rt'iiii.      riaintitV  jippciils. 

Kaiu.,  J.  —  'i'lie  defendant  made  tlie  note  in  suit  for  tlie  benefit  and 
accommodation  of  the  fiirii  of  Lambert  nnd  Lincoln.  It  was  dis- 
(rounted  and  the  proceeds  pas.M'd  to  their  credit  liy  the  North  River 
Bank.  Each  member  was  therefore  hound,  us  to  the  mal<er,  to  pay 
the  note,  and  thus  save  him  from  liability  on  account  thereof.  Before 
the  note  became  due  the  firm  was  dissolveil.  and  Lincoln  was  to 
close  up  its  business.  Plaintiff  lived  in  ( ';ni;i(l;i,  imd  Limoln  wrote 
him,  requesting  him  to  take  up  the  note  and  furnish  the  money 
for  that  purjKjse.  Plaintiff,  a  few  days  before  the  maturity  of  the 
note,  .sent  Tiincoln  the  mf)ney,  which  \\v  placed  in  the  bank  to  his 
individual  credit.  f)n  the  day  the  note  fell  due  he  went  to  the  bank, 
and,  by  his  individual  check,  |)aid  the  note  to  the  discount  clerk, 
who   knew   at   the   time   that    it   was   an    accommodation    note.      He 


»  Payment  for  honor  must  also  b*-  fliHtinguished.     See  Npg.  Inst    L     §§  30O- 
306.  —  H. 


598  DlSCUAUQE  OF  INSTUUMENT.  [aUT.    IX. 

did  not  assume  to  tut  as  agent  for  any  one,  and  did  not  ask  to 
have  the  note  transferred  to  any  one,  and  did  not  mention  plaintiff's 
name  in  any  way.  It  is  true  that  he  asked  to  have  the  note 
protested  so  tliat  lie  could  hold  tlie  indorser  and  maker,  hut  he  did 
not  disclose  why  he  wanted  to  hold  them.  After  he  had  thus  paid 
and  taken  it,  he  sent  it  to  the  plaintiff. 

Upon  such  a  state  of  facts,  did  plaintiff  take  his  title  from  the 
bank  or  from  Lincoln?  If  lie  took  it  from  the  bank,  he  took  the 
place  of  the  bank,  and  his  title  and  right  to  enforce  it  were  as  good 
as  those  of  the  bank  at  the  tinie  he  took  it.  But  if  he  took  it  from 
Lincoln,  it  being  past  due,  he  took  it  subject  to  any  defense  defend- 
ant could  have  made  if  sued  by  Lincoln,  and  in  such  case  defendant's 
defense  would  have  been  perfect,  lie  could  not  be  siu-cessfully  sued 
by  either  of  the  persons  for  whose  accommodation  he  made  the  note. 

Plaintiff  did  not  take  title  from  the  bank.  It  matters  not  that  he 
furnished  the  money,  and  that  Lincoln  promised  to  use  it  in  taking 
up  this  note  for  him.  It  matters  not  that  the  note  was  protested  so 
that  the  indorser  and  maker  could  be  held,  or  that  the  bank  did  not 
intend  absolutely  to  discharge  and  cancel  the  note.  The  question 
is,  did  the  bank  transfer  or  sell  the  note  to  the  plaintiff?  To  make 
a  sale  or  transfer  takes  two  parties,  one  to  sell  and  the  other  to  buy, 
and  the  bank  could  not  be  made  a  seller  without  its  knowledge  or 
consent.  It  was  not  bound  to  sell  or  transfer  the  note.  All  it  was 
bound  to  do  was  to  surrender  it  upon  payment  by  the  person  liable 
to  pay  it.  A  seller  in  such  a  case  incurs  some  obligation  by  the 
sale,  although  he  does  not  indorse  the  paper.  Tie  impliedly  warrants 
that  the  paper  is  genuine  and  all  it  purports  to  be  on  its  face,  and  he 
cannot  be  drawn  into  this  implied  warranty  without  his  consent. 
{Eastman  v.  Plumer,  33  N.  H.  238;  Delaware  Bank  v.  Jarvis,  20 
N.  Y.  226;  Morrison  v.  Currie,  4  Duer,  79;  AJdrich  v.  Jackson.  5 
R.  I.  218;  2  Parsons  on  Notes  and  Bills,  2d  ed.  37.)  All  the  bank  did 
in  this  case  was  to  take  payment  of  the  note,  and  deliver  it  up  to  a 
party  paying  and  liable  to  pay,  after  protesting  it,  so  that  he  could 
make  such  use  of  it  as  the  law  and  the  facts  would  authorize.  It  did 
not  transfer  or  intend  to  transfer  it.  The  plaintiff,  therefore,  took 
no  title  to  it  from  the  bank,  but  he  took  it  from  Lincoln,  and  can- 
not, therefore,  enforce  it  against  the  defendant. 

The  order  of  the  General  Term  must,  therefore,  be  affirmed,  and 
judgment  absolute  ordered  against  the  plaintiff,  with  costs.  All 
concur. 

Order  affirmed  and  judgment  accordingly.® 

8  If  an  instrument  i^  rctransffrred  to  the  maker  or  acceptor  at  or  after 
maturity,  the  transaction  is  treated  as  a  payment,  and  the  instrument  cannot 
be  reissued  or  negotiated.  TJarmer  v.  (Steele,  4  Exch.  Rep.  1;  Ballard  v.  Green- 
hush,  24  Me.  33fi;  Ferree  V.  yew  York,  etc.  Co.,  74  Vc(\.  Rep.  7f)9.  But  if  it  be 
transferred  to  the  maker  or  acceptor  before  maturity,  the  transaction  may  be 


I.    2.]  CANCELLATION    OR   DENUNCIATION.  599 

§200  WOLSTENHOLME  v.  SMITH. 

[Reported  herein  at  p.  63^.] 

2.  Cancellation  or  Renunciation. 

§  203  LARKIN  v.  HARDENBROOK. 

90  New  York,  333.  —  1882. 

This  action  was  brought  to  recover  the  amount  of  a  promissory 
note  executed  by  defendant  to  Isaac  C.  Loper,  plaintiff's  testator, 
which  the  comphiint  alleged  had  been  lost  or  destroyed. 

The  referee  found  that  said  Loper  executed  to  defendant  a  deed 
of  certain  premises,  and  in  consideration  thereof,  the  note  in  suit 
was  executed,  and  delivered  to  the  grantor,  who  thereafter  volun- 
tarily and  intentionally  canceled,  destroyed,  and  surrendered  up  the 
same  to  the  defendant. 

Miller,  J.  —  The  note  described  in  the  complaint  was  given  by 
the  defendant  to  the  plaintiff's  intestate,  upon  the  conveyance  to 
him  of  certain  real  estate,  and  as  a  consideration  therefor,  on  the 
11th  day  of  October,  1870.  The  referee  before  whom  the  trial  was 
had  has  found  that  in  or  about  the  month  of  January,  1871,  the  grantor 
voluntarily  and  intentionally  canceled,  destroyed,  and  surrendered 
up  to  the  defendant  said  security  and  note,  and  as  a  conclusion  of 
law,  the  intestate  discharged  the  defendant  thereon,  and  that  no 
recovery  could  be  had  either  on  Die  note  or  on  the  original  con- 
sideration. We  think  that  the  finding  of  fact  by  the  referee  is  suffi- 
ciently supported  by  the  evidence,  and  that  the  conclusion  arrived 
at  was  the  legal  and  necessary  result  of  said  finding.  The  rule 
seems  to  be  well  settled  by  the  authorities  that  where  an  obligee 
delivers  up  the  obligation  which  he  holds  against  anotlier  i)arty, 
with  the  intent  and  for  the  purpose  of  discharging  the  debt,  whore 
there  is  no  fraud  or  mistake  alleged  or  proven,  that  such  surrender 
operates  in  law  as  a  release  and  discharge  of  the  liability  thereon; 
nor  is  any  consideration  required  to  support  such  a  transaction  when 
it  has  iM'cn  fully  executed.  (Houv.  Law  Diet.,  title  release;  Afhcrt't. 
Kj'ra  v.  Zirfjlcr's  Ei'rs,  'Z\)  Vvwu.  St.  TjO  ;  licach  v.  Endrcss.  T)!  Barb. 
570;    n<,lii  V.  Wilson.  T)  Lans.  10.) 


shown  to  be  a  purchase  and  not  a  payment  and  the  instrument  may  be  re- 
issued. Attrnhornuiih  v.  Mnrkrnzir.  2.5  T..  J.  Ex.  244;  Ffnqcrs  v.  dallaqhcr, 
49  III.  182;  W'r.it  liostnn  Hank  v.  ThonipKon,  124  Mass.  SOft ;  Nunpr  v.  Rosn, 
40  I'a.  St.  18f!;  Hrkrrt  v.  Cnmeron,  4.'J  l'«.  St.  120.  Contra:  Ijontf  v.  Cynthiana 
Hank.  1   Litt.   (Ky.)  2JtO;    Ntark  v.  Alfonl,  40  Tex.  200. 

If  an  inHtniment  it  rotransferred  to  (ine  of  two  or  more  joint  makers,  hrfore 
maturity,  and  re-isHued  by  bim,  it  seems  that  his  transfere<'  pets  only  a  rifjht 
of  contribution  atrainst  the  other  joint  makers.  The  ease  in  flistinfjuished  from 
that  of  a  xinj^le  promisor.  SIrrrti.s  v.  llonuan.  80  Mich.  305;  B.  c,  88  Mich. 
13;    Kneeldan  v.  A/t/r,*,   (Tex.)  24  S.  W.  Rep.  1113. —  H. 


GOO  DisciiAKca:  or  iNsriiUiUKNT.  [Aiii".  ix. 

'I'liere  i-ertainly  toiild  not  lie  liit;lu'i'  fvicleiue  of  an  intention  lo 
dis(  har^v  and  lann  1  a  tit  lit  than  liy  a  ilest ruction  and  surrender  of 
the  instiiinient  uliiili  iieattd  il.  In  a  |iarty  who  is  liaMi'  by  virtue 
of   till'   same.      '''      ''■'      ''•' 

dudiiinent  atlirnied. 


§203  SLADE  r.  MUTKIE. 

inn     ^lASSACIUTSlOTTS,     1<).  —  1892. 

Ac'i'iox  lo  reetiver  the  balaiiee  of  a  promissory  note.  The  defend- 
ant paid  the  plaintitfs  $125  and  reeeiveil  a  reet'i])t  "  in  full  settle- 
ment of  all  accounts  to  date/'  and  the  note.  (Miai'ge:  That  if  the 
plaintirt's  sunendered  the  note  to  he  cancelled  iidciiding  to  give  the 
defendant  the  balance  of  the  dcbl.  jjlaintilfs  could  not  recover;  but 
if  the  note  was  delivered  in  oidcr  that  defendant  jnight  p.xhibit  it 
antl  upon  defendant's  promise  to  ]r,\y  the  balance,  ])laintiflfs  could 
recover. 

The  jury  returned  a  s])ecial  (indin'.;-  thai  the  plaintilfs  intended  lo 
receive  the  one  hundred  and  twenty-live  dollars  "  in  full  for  the  debt 
then  due,"  and  further  ret\irned  a  general  verdict  for  the  defendant; 
and  the  plaintitfs  alleged  exceptions. 

Field,  ('.  J.  —  The  counsel  for  the  defendant  concedes  that,  by 
the  law  of  this  Common  wealth,  the  j)ayment  of  a  part  of  a  debt  after 
the  whole  debt  has  become  payable  is  not  a  sufTicient  consideration 
to  su]>port  a  promise  not  under  seal  to  dischaige  the  remainder  of 
the  debt.  (Brools  v.  White,  2  Met.  283;  Uarrlman  v.  llarrirnan, 
12  Gray,  341;  Potter  v.  Green,  6  Allen,  412;  Grinnel  v.  Hpinl-,  12b 
Mass.  25;  LatJtrop  v.  Page,  129  Mass.  19;  Tyler  v.  Odd  Fellows' 
Relief  Association,  145  Mass.  134,  137;  Foalccs  v.  Beer,  9  App.  Cas. 
605.)  , 

The  jury,  in  returning  a  general  verdict  for  the  defendant,  must 
have  found  on  the  judge's  charge  that  the  note  was  surrendered  by 
the  plaintiffs  to  the  defendant  that  it  might  be  cancelled,  and  that 
the  plaintiffs  intended  by  delivering  the  note  to  the  defendant  to 
give  him  the  note  and  discharge  the  remainder  of  the  debt. 

For  certain  purposes,  a  bill  of  exchange  or  a  jiromissory  note  is 
regarded  in  this  Commonwealth,  not  merely  as  evidence  of  a  debt, 
but  as  the  representative  of  a  debt,  or  the  debt  itself.  Each  ma} 
be  the  subject  of  a  gift,  hut  to  constitute  a  gift  there  must  be  a 
delivery  by  the  owner  to  the  donee,  with  the  iiitention  of  passing 
the  title.  (Grover  v.  Grover,  24  Pick.  261  ;  Sessions  v.  Moseley.  4 
Gush.  87  ;  Bates  v.  Kempton,  7  Gray,  382  ;  Chase  V.  Redding,  13  Gray. 
418.  See  Sheedy  v.  Roach,  124  Mass.  4  72;  Pierce  v.  Boston  Five 
Cents  Savings  Bank,  129  IVIass.  425;  Taft  v.  Bowl-er,  132  Mass.  277; 
McCann  v.  Randall,  147  Mass.  81  ;  Cochraur  v.  Moore,  25  Q.  B.  D. 
57;   Gammon  Theological  Sem.  v.  Robbins,  128  Ind.  85.) 


I.    2.J  CA^■CJ:;LLATION    OR    KENUNCIATION  601 

It  follows  from  this,  that  the  delivery  of  a  promissory  note  by  the 
holder  to  the  maker,  with  the  intention  of  transferring  to  him  the 
title  to  the  note,  is  an  extinguishment  of  the  note,  and  a  discharge 
of  the  obligation  to  pay  it.  {llaJe  v.  Rice,  124  Mass.  292;  Stewart 
V.  Hidden,  13  Mi m.  43;  EUsworth  v.  Fogg,  35  Vt.  355;  Vanderbeck 
V.  Vanderbeck,  3  Stew.  265;Jaffray  v.  Davis,  124  N.  Y.  164,  170.) 

Exceptions  overruled.' 


§  203  LEASE  v.  DEW. 

102  Appellate  Division   (N.  Y.)  529.  —  1905.8 

Action  on  note  given  by  defendant  to  plaintiff's  testator. 
The  defendant  offered  proof  that  after  testator's  death  the  note  in 
question  was  found  among  his  papers,  inclosed  in  an  envelope  together 
with  the  following  paper,  all  in  tlie  handwriting  of  the  testator,  except 
the  signature  of  the  witness: 

"  New  York.  Nov.  25,  1901. 
"  To  my  executors. 

"  Gentlemen:  Tlie  enclosed  note  I  wish  to  be  cancelled  in  case  of  my  death, 
and  if  the  law  does  not  allow  it  I  wish  you  to  notify  my  heirs  that  it  is  my 
wish  and  orders. 

"  Truly  yours,  Oliver  W.  Buckingham. 

"  Witness : 

"  Frank  \V.  Woglom." 

Judgment  for  plaintiff  and  defendant  appeals. 

Hatch,  j.  *  *  *  -^p^ig  brings  us  to  the  main  question  in  the 
case  —  the  construction  of  the  written  declaration  of  the  testator, 
which  was  found  in  the  envelope  which  contained  the  note  after  his 
death.  It  is  prohahly  true  that  this  declaration  was  sunicient  to  dis- 
charge defendant's  obligation  upon  the  promissory  note,  within  the 
authority  of  Wekeil  v.  Raby,  2  Brown's  House  of  Lords  Rep.  386. 
The  declaration  therein  was  made  a  few  days  before  the  death  of  the 
testator,  in  these  words:  "  T  have  Raby's  bond,  which  T  keep;  T  don't 
deliver  it  up,  for  I  may  live  to  want  it  more  llmii  lir;  h-if  wlicn  T 
die  he  shall  have  it,  ho  shall  not  bo  asked  or  troubled  for  it."  Suit 
having  been  brought  upon  (he  bond,  it  was  ordered  to  1>p  delivered 
up  and  canceled,  and  such  decision  was  affirmed  by  i'-e  IToiise  of 
Lords  upon  appeal.  The  declaration  in  the  presi'n^  cmsi-  ic.  in  one 
view,  stronger  than  the  declaration  in  that  case,  for  therein  t'lere  was 
the  express  intention  of  the  testator  to  keep  the  bond  as  a  snhsisting 


t  Hec  the  provi«ion«  of  §  fi2.  siib«pr.  1  of  the  Pills  of  Kxchn'i '.•  \rt.  (cor- 
respondinc  to  §  20.1  of  the  Xe^r.  In-^t.  L. ),  eonstrwed  in  Edunnh:  y.  Wnltrrn, 
189fi.  2  r  h.  157,  where  it  was  held  that  a  delivery  to  the  devi'^-e  of  t'"  ninker 
•wnn  not  n  delivory  to  the  mnker,  thouph,  srmhlr,  a  delivery  to  the  oxeputor  or 
Administrator  wonM  be.  —  Tf. 

"Affirmed   in    184   N.  Y.  509,  no  opinion. — C, 


602  DISCIIAIKJE  OF   INSTKUMENT.  [aHT.    IX. 

obligation  against  Raby,  and  it  was  not  to  be  enforced  save  in  the  event 
of  his  (loath,  when  it  was  to  take  ofTcu-t.  In  the  writing  under  con- 
sideration in  this  case  there  is  no  such  expression  in  terms.  A 
similar  doctrine  was  announced  in  Brinckcrhoff  v.  Lawrence,  2  Sandf. 
Ch.  412.  Therein  the  Kaby  case  is  cited  with  approval.  The  declara- 
tion therein  was,  like  the  present,  limited  in  its  operative  force  to 
events  which  might  liaj)pcn  subsequently  to  the  death  of  the  declarant. 
These  cases  applied  the  common-law  rule,  and,  while  they  are  authori- 
tative declarations  of  the  etTect  of  this  instrument  at  common  law, 
they  are  not  controlling  in  its  construction  at  the  present  time,  for  the 
reason  that  tlie  force  and  effect  of  an  instrument  of  renunciation  is 
now  governed  by  the  provisions  of  section  203  of  the  Negotiable 
Instruments  Law  (Laws  1897,  p.  744,  c.  612).  It  reads:  "The 
holder  may  expressly  renounce  his  rights  against  any  party  to  the 
instrument  before,  at  or  after  its  maturity.  An  absolute  and  uncondi- 
tional renunciation  of  his  rights  against  the  principal  debtor  made  at 
or  after  the  maturity  of  the  instrument,  discharges  the  instrument. 
But  a  renunciation  does  not  affect  the  rights  of  a  holder  in  due  course 
without  notice.  A  renunciation  must  be  in  writing  unless  the  instru- 
ment is  delivered  up  to  the  person  primarily  liable  thereon." 

This  statute  was  taken  from  an  act  passed  by  the  British  Parlia- 
ment in  1882,  known  as  the  "  Bills  of  Exchange  Act."  It  has  been 
quite  generally  adopted  in  various  states  of  the  American  Union. 
Its  provisions  are  as  follows : 

"  (1)  When  the  holder  of  a  bill  at  or  after  its  maturity  absolutely 
and  unconditionally  renounces  his  rights  against  the  acceptor,  the  bill 
is  discharged.  The  renunciation  must  be  in  writing,  unless  the  bill 
is  delivered  up  to  the  acceptor.  (2)  The  liabilities  of  any  party  to  a  bill 
may  in  like  manner  be  renounced  by  the  holder  before,  at,  or  after  its 
maturity,  but  nothing  in  this  section  shall  affect  the  rights  of  a 
holder  in  due  course  without  notice  of  the  renunciation." 

It  is  readily  seen  that  these  two  statutes,  in  character  and  import, 
are  alike.  The  only  difference  is  c'^ange  in  the  form  of  phraseology, 
but  it  affects  neitlier  the  sense  nor  the  construction.  A  single  case  has 
arisen  in  England  under  the  provisions  of  this  statute.  In  re  George, 
L.  Ji.  44  Ch.  Div.  627,  decided  in  1890.  Therein  it  appeared  that  the 
testator  desired  to  have  destroyed  a  note  for  £2,000  given  by  Mrs. 
Francis.  Search  was  made  for  the  same,  that  it  might  be  destroyed, 
hut  it  could  not  be  found.  At  tlie  instance  of  the  decedent,  the  nurse  in 
attendance  upon  him  wrote  at  his  dictation:  "30th  August,  1889. 
It  is  by  Mr.  ffeorge's  dying  wish  that  the  checque  [sic]  for  £2,000 
money  lent  to  Mrs.  Francis  be  destroyed  as  soon  as  found."  The  nurse 
added  to  this  declaration  the  words :  "  Mr.  George  is  perfectly  con- 
scious and  in  his  sound  mind.  ("Signed]  Nurse  T."  This  transaction 
took  plafp  two  or  ttiroo  hours  before  death.  The  testator  therein  left 
a  will,  in  which  he  bequeathed  to  Mrs.  Francis,  his  niece,  the  sum  of 


I.    2.]  CANCELLATION    OB   EETRANSFER.  603 

£6,000.  The  executors  of  the  will  declined  to  pay  the  bequest  in  full, 
and  thereupon  the  legatee  brought  an  action  to  determine  the  question 
as  to  whether  the  promissory  note  had  been  duly  canceled.  The  court, 
under  the  provisions  of  the  statute  above  quoted,  determined  that  the 
renunciation  was  insufficient  to  discharge  the  note.  Upon  the  ease 
there  presented,  I  should  be  disposed  to  hold  that  it  amounted,  within 
the  terms  of  the  act.  to  an  unconditional  renunciation  of  the  rights 
of  the  testator  against  the  maker  of  tlie  note.  The  expression  that  it 
was  the  testator's  wish  that  it  be  destroyed  would  seem  to  constitute 
an  announced  declaration  to  destroy  the  instrument,  and,  as  such,  it 
was  a  clear  expression  of  a  renunciation  of  his  right  to  enforce  it.  In 
the  declaration  of  renunciation,  it  is  stronger  than  the  instrument 
relied  upon  in  the  present  case. 

There  is  some  obscurity  in  the  provisions  of  our  statute.  In  its  first 
sentence  it  provides  for  the  renunciation  of  the  rights  of  the  holder 
against  any  party  to  the  instrument  which  may  be  made  before,  at,  or 
after  its  maturity.  In  the  second  sentence  it  provides  for  an  absolute 
and  unconditional  renunciation  of  the  rights  of  the  holder  against  the 
principal  debtor  at  or  after  the  maturity  of  the  instrument,  and  dis- 
charges the  instrument.  The  first  relates  to  the  party;  the  second,  to 
the  instrument.  It  is  somewhat  difficult  to  see  how  there  could  be  an 
absolute  discharge  of  a  party  to  an  instrument  without  discharging  the 
instrument  as  an  obligation,  so  far  as  he  is  concerned.  We  do  not 
clearly  perceive  why  this  distinction  should  have  been  made.  It  is 
immaterial,  however,  to  the  rights  of  the  parties  to  the  present  action. 
The  instrument  of  renunciation  contains  no  express  declaration  of  the 
testator  to  renounce  his  rights  in  the  note  against  the  party,  or  of  his 
right  to  enforce  it  as  a  subsisting  obligation.  The  expression  is :  "I 
wish  [the  note]  to  be  canceled  in  case  of  my  death."  There  is  nothing 
in  these  words  which  can  be  construed  as  expressing  a  renunciation  of 
any  rights  either  against  the  party  or  upon  the  instrument.  Had  it 
been  delivered  to  the  defendant  during  the  lifetime  of  the  testator,  it 
would  not  have  precluded  the  latter  at  any  time  upon  maturity  from 
enforcing  the  note.  There  is  nothing  indicating  an  intent  upon  his 
part  not  to  enforce  it  during  his  lifetime.  There  was  no  delivery  of 
it  to  anybody,  and,  while  doubtless,  it  was  sufficiently  authenticated  to 
accomplish  a  renunciation,  it  had  no  operative  eflfect  whatever,  as  it 
did  not  fall  within  the  statute  or  comply  with  its  terms. 

In  principle,  the  question  raised  by  this  case  has  been  decided  by 
this  court.  Dimnn  v.  Kerry.  .^)  1  -App.  Div.  .31 H.  Therein  the  plain- 
tiffs intestate  loaned  to  the  defendant  a  sum  of  money,  taking  her 
promissory  note  in  writing,  wherein  she  agreed  to  p.'iy  the  same,  with 
interest,  on  demand.  At  the  time  the  note  was  delivered,  the  testator 
indorned  thereon  the  words:  "At  my  death  the  above  note  becomes 
null  and  void.  Stephen  T'.  Dimon."  Dimon  continu(>d  to  retain  pos- 
BCBsion  of  the  note,  and  the  defendant  paid  interest  thereon,  but  nq 


604  DISCliAKGK  OF   liNSTKU  MKNT.  [AUT.    IX. 

principal.  Dinion  died  about  tliree  years  after  the  execution  and 
(iolivcry  of  the  note.  In  an  action  to  enforce  the  same  by  his  adminis- 
trator, tlie  dcfcnthint  was  held  liable  tliercon,  as  the  indorsement  was  a 
mere  declaration  by  (he  jiaycc  of  the  note  as  to  his  intention  concern- 
ing it,  but  that  it  was  insufficient  as  constituting  either  a  gift  of  money, 
or  an  agreement  to  discharge  it  as  an  obligation.  Tlie  court  therein 
did  not  discuss  the  statute  which  is  here  the  subject  of  consideration. 
Jt  is  manifest,  however,  that  the  declaration  indorsed  upon  the  note 
was  not  a  renunciation  of  the  liability  of  the  maker  during  the  life- 
time of  the  deceased,  or  of  any  renunciation  of  the  obligation  of  the 
instrument;  and,  as  it  did  not  constitute  a  gift  or  an  agreement,  it 
neither  fell  within  the  terms  of  the  statute,  nor  exempted  the  de- 
fendant, for  either  reason,  from  liability  thereon.  In  the  instrument 
relied  upon  in  this  case,  so  far  as  the  direction  for  cancellation  in  the 
event  of  death,  and  a  command  to  his  heirs  to  obey  his  wish  and 
follow  his  orders,  the  language  is  no  stronger  tlian  the  indorsement 
upon  the  back  of  the  note  in  tlie  Dimon  case.  Nor  is  it  as  strong, 
because  the  language  there  used  was  a  declaration  that  the  note  at 
death  "  becomes  null  and  void."  Here  there  is  simply  the  expression 
of  a  wish  to  have  it  cancelled,  and  a  direction  to  the  heirs  to  obey  the 
wish.  Consequently  the  Dimon  case  becomes  a  direct  and  controlling 
authority  in  the  disposition  of  this  controversy.  As  there  was  no  valid 
renunciation  of  right  of  the  testator  to  enforce  the  note  against  the 
party,  or  of  renunciation  from  liability  upon  the  instrument,  and  as 
nothing  contained  in  the  declaration  otherwise  operates  to  relieve  the 
defendant  from  liability,  it  follows  that  the  note  remains  a  valid  and 
subsisting  obligation. 

The  judgment  enforcing  it  should  therefore  be  affirmed,  with  costs. 
All  concur.® 

9  In  BaUhrin  v.  Daly  et  al.,  41  Wash.  416,  it  was  held  that  the  defendant 
Peter,  in  an  action  apainst  him  as  surety  on  a  note,  could  not  show  by  parol 
evidence  that  the  plaintiff  had  released  him  from  liiibiiity  on  the  note.  After 
quoting  §  122  of  the  Wnshinpton  Negotiable  Instruments  Law  fN.  Y.  §  20.^1. 
Fullerton,  J.,  on  pape  410,  said:  "This  plainly  provides  that  the  renunciation 
of  a  debt  must  be  in  writing  where  the  debt  is  evidenced  by  a  negotiable  in- 
Btrument,  and  if  '  renunciation  '  is  used  therein  in  the  sense  of  '  release,'  there 
can  be  no  question  that  appellant  must  show  a  written  renunciation  in  order  to 
prove  the  allegations  of  his  answer,  ('ounsel  for  the  appellant  argues  that  the 
word  is  used  in  a  sense  different  from  that  of  release,  and  that  while  a  re- 
nunciation must  be  by  a  writing,  a  release  may  be  proved  by  parol.  But  we 
cannot  think  that  the  statute  permits  of  this  distinction.  The  words,  'The 
holder  may  expressly  renounce  his  rights  against  any  party  to  the  instrument,' 
must  refer  to  the  release  and  discharge  of  a  party  from  his  obligation  to  pay 
it,  else  they  can  have  no  legitimate  meaning." 

Followed  in  PUt  v.  JAttlr.  lOS  Pac.  (Wash.)  941,  where  it  was  hold  that  the 
maker  of  a  promissory  note  could  not  show  by  parol  that  the  payee  had  re- 
leased him  from  liability  on  the  note.  —  C. 


I.    1.]  CANCELLATION   OR   RENUNCIATION.  605 

§  204  LYNDONVILLE  NATIONAL  BANK  v.  FLETCHER. 
68  Vermont,  81.  — 1895. 

Action  against  a  surety  on  a  promissory  note.  Judgment  for 
plaintiff. 

RowELL,  J.  —  The  defendant  was  surety  for  Walter  on  a  second 
renewal  note  to  the  plaintiff  bank.  Walter  had  put  $20,000  of  securi- 
ties into  the  defendant's  liands,  in  consideration  of  which  he  agreed 
to  and  did  indorse  for  him  to  that  amount,  of  which  said  note  was  a 
part.  The  bank  knew  that  the  defendant  was  surety,  but  did  not 
know  that  he  had  security.  Said  note  was  taken  up  by  a  note  that 
Walter  sent  to  the  hank,  signed  by  him  and  purporting  to  be  signed 
by  the  defendant,  but  on  which  he  had  forged  the  defendant's  name. 
There  were  several  like  forged  renewals,  but  the  defendant  had  no 
knowledge  of  any  of  them  till  the  bank  notified  him  of  the  approach- 
ing maturity  of  the  last  one  and  informed  him  that  it  would  not  be 
renewed;  whereupon  he  went  to  the  bank,  saw  the  note,  pronounced 
his  name  thereon  a  forgery,  and  refused  to  pay  it,  and  thereupon,  at 
its  maturity,  this  suit  was  brought  thereon  and  on  the  three  genuine 
notes  and  another  of  the  forged  renewals. 

When  the  last  genuine  note  was  thus  taken  up,  the  bank  stamped 
it  "  Paid,"  and  sent  it  to  Walter,  who  carried  it  to  the  defendant, 
who,  when  he  saw  it,  was  thereby  induced  to  believe  and  did  believe 
that  it  was  paid  and  extinguished  and  he  released  therefrom,  and 
thereupon,  relying  on  that  belief,  be  signed  another  note  for  Walter 
for  the  same  amount,  which  otherwise  he  would  not  have  done,  and 
whereby  he  was  damnified. 

The  defendant  never  had  anything  to  do  with  the  l)ank  concern- 
ing any  of  the  notes  except  as  aforesaid,  but  the  business  was  all 
done  by  Walter. 

The  defendant  conceded  Ibnt  tlic  b;ink  believed  the  forged  renewals 
were  genuine,  and  acted  upon  that  belief  in  tnking  them,  and  other- 
wise would  not  have  taken  them;  but  he  (IniuKHl  that  the  cashier 
was  negligent  in  taking  the  tiisl  forged  renewjil  and  stamping  and 
giving  up  as  paid  the  last  genuine  reiiewiil.  ff)r  tluit  th(>  forsiery 
was  so  manifest  that,  as  a  careful  and  pruiieiil  man,  with  both  notes 
before  him,  he  ought  to  have  detected  it;  and  he  asked  to  po  to 
the  jury  on  that  question,  claiming  that  if  the  negligence  was  found, 
the  plaintiff  would  be  therel)y  estopped  from  recovery  on  the  last 
genuine  note. 

The  defendant  also  cl.'iimed  lb;it  by  slumping  snid  last  ttientioned 
note  "Paid"  instead  of  "  Henewed,"  jis  the  fact  was,  the  h.ink 
made  a  false  statement,  to  its  knowledge,  and  that  when  it  sent  the 
note  to  Walter  thus  stamped,  it  ought  to  have  known  that  he  would 
show  it  to  the  defendant,  arul  that  the  defeiidnnt  would  l>e  thereby 
induced  to  believe  it  was  paid  and  extinguished,  and  to  act  accord- 


nO()  I)IS(MI.\li(;i'.   OK    INSTKUMKNT.  [ART.    IX. 

iiiijly,  to  his  pivjudiif,  or,  al  IrasI,  that  it  ()u<;hl  to  liavc  known  that 
siK'h  woukl  naturally  and  [uohaltl}  he  the  fact,  and  that  if  the  jury 
should  tlnd  thai  llic  hank,  in  the  oxorcise  of  the  requisite  care  and 
})rudenre,  ou,i,dil  lo  have  so  known,  then  what  it  did  in  this  hehalf 
amounted  to  a  representation  !)_v  it  to  the  dct'endant  that  the  note 
was  in  fai't  paid  and  (>xtin<j:uished  ;  and  if  it  was  further  found  that 
the  defendant  acted  ujton  that  representation  to  his  prejudice,  the 
plaint  ill'  would  he  estopped  from  recovery  on  that  note. 

The  defendant  further  (dainuMJ,  that  if  the  parties  are  to  be  re- 
garded as  equally  innocent  in  the  matter,  and  the  taking  of  the 
first  forged  renewal  and  the  stamping  and  giving  up  as  paid  of  the 
genuine  renewal  were  a  mere  mistake  on  the  part  of  the  bank,  then 
the  loss  must  still  rest  upon  the  phiintiif,  which  made  the  mistake, 
and  on  which  the  chances  of  business  have  placed  it. 

But  the  court  ruled  against  the  defendant  on  all  his  claims,  and 
directed  a  verdict  for  the  plaintiff  for  the  amount  of  the  last  genuine 
renewal,  to  which  the  defendant  excepted ;  and  he  now  makes  sub- 
stantially tlie  same  claim  that  he  made  below. 

It  was  undoubtedly  the  duty  of  the  haid<  to  act  in  good  faith 
towards  the  defendant  in  the  matter,  but  it  was  under  no  further 
duty  to  him.  (Batil-  of  Newbury  v.  Richards,  35  \^t.  281,  284.)  The 
presentation  by  Walter  of  the  first  forged  renewal  was  a  representa- 
tion by  him  that  it  was  genuine,  and  the  hank,  certainly  with  nothing 
to  arouse  its  suspicion,  owed  the  defendant  no  duty  to  distrust 
Walter  and  to  examine  the  two  notes  to  see  whether  his  representa- 
tion was  true  or  not.  No  case  is  cited  nor  principle  suggested 
requiring  that.  A  bank  is  bound  to  know^  the  signature  of  its  depositor, 
and,  therefore,  if  it  pays  a  forged  check  purporting  to  be  his,  it  must 
bear  the  loss.  So  the  acceptor  of  a  bill  is  bound  to  pay  it  although 
the  drawer's  name  is  forged,  for  the  presentation  of  the  bill  is  a 
direct  appeal  to  him  to  accept  it  or  to  reject  it.  It  is  an  inquiry  as 
to  its  genuineness,  addressed  to  the  one  who,  of  all  others,  is  sup- 
posed to  be  best  able  to  answer  it,  and  wdiose  answer  is  most 
satisfactory.  He  is,  moreover,  the  person  to  whom  the  bill  itself 
points  as  the  legitimate  source  of  information  to  others,  and  if  lie 
were  permitted  to  dishonor  the  bill  after  he  has  once  honored  it,  the 
very  foundation  of  confidence  in  commercial  paper  would  he  shaken. 
But  the  drawee  of  a  bill  is  not  bound  to  know  the  signature  of  the 
payee,  nor  to  examine  and  ascertain  whether  the  indorsement  is 
genuine:  and  if  he  pays  on  a  forged  indorsement,  though  to  an  inno- 
cent holder,  he  can  recover  the  money.  (Corn  Exchange  Bank  v. 
Nassau  BanJr,  01  X.  Y.  74;  Insurance  Co.  v.  Bank,  fiO  N.  II.  442.) 
Nor  is  a  bona  fide  indorsee,  whether  before  or  after  acceptance, 
bound  to  inquire  into  the  genuineness  of  a  bill,  in  order  to  retain 
the  money  received  by  him  from  the  drawee  in  payment  thereof. 
(Price  v.  Neale,  3  Burr.  1354,  a  case  that  has  never  been  departed 


I.    2.]  CANCELLATION    OR    RENUNCIATION.  607 

fjom.)  So  if  a  bank  receives  as  genuine,  fraudulently  altered  bills 
of  its  own,  and  passes  tlieni  to  the  credit  of  a  depositor  who  acts  in 
^ood  fait;  ,  it  is  bound  bv  the  credit  thus  given,  for  it  was  its  duty 
to  know  its  own  bills.  {Bank  of  the  United  States  v.  Bank  of  (/eorgia, 
]()  Wheat.  333.) 

But  the  cr.se  at  bar  is  unlike  the  case  of  a  drawee  who  pays  or 
ateepts  a  forged  i)ill,  or  of  a  bank  that  receives  as  genuine,  forged 
notes  pui ported  to  be  its  own,  for  here  the  bank  was  not  bound  to 
know  the  defendant's  handwriting,  and  it  was  not  its  duty  to  examine 
with  reference  to  ascertaining  a  thing  that  it  was  not  bound  to  know. 
But  by  tl;is  we  do  not  mean  to  say  that  it  could  shut  its  eyes  that  it 
might  not  see,  or  turn  away  lest  otherwise  facts  might  be  disclosed 
at  variance  with  what  it  represented  to  exist,  for  that  would  be  bad 
faith  and  breach  of  its  duty.  It  follows,  therefore,  that  as  here 
was  no  duty  to  examine,  there  was  no  negligence  in  not  examining. 

Xor  v/as  the  representation  of  payment  that  the  bank  made,  false 
to  its  knowledge,  as  claimed,  but  true  in  its  belief,  in  substance  and 
effect,  for  had  the  forged  note  been  genuine  it  would,  in  law,  have 
paid  the  other  note  and  extinguished  it  as  affording  a  cause  of  action 
against  the  defendant;  and  as  knowledge  of  the  falsity  of  tiie  repre- 
sentation is  not  imputable  to  the  bank,  as  it  was  not  in  a  po.^ition 
that  it  ought  to  have  known,  there  can  be  no  estoppel  on  this  score. 

The  case  comes  to  this,  then,  that  said  representation  was  a  mis- 
take on  the  part  of  the  I)aid\,  arising  from  its  non-culpable  ignorance 
of  the  truth,  and  brought  about  by  the  fraud  of  Walter;  and  it 
would  seem  that  a  representation  induced  by  fraud  will  not  estop. 
(Big.  Estop.,  3d.  ed.  }!)].) 

I?ut  it  is  claimed  that  if  n  mistake,  the  case  is  one  that  calls  f(ir 
the  application  of  the  rule  that  when  a  mistake  has  Ix-cn  made  from 
which  one  of  two  innocent  [)arti('S  must  suffer,  he  nuist  suffer  who 
made  the  mistake,  esfyecially  when,  as  here,  the  chances  of  business 
have  placed  the  loss  upon  him  :  and  The  Olourpffter  Bank  v.  I'he 
Salew  Honk  (17  ^tass.  ."..■?)  is  cited  in  siipyiort  of  this  projjosit ion. 
That  was  a  case  in  which  the  plaiiitiir  lind  paid  to  tix-  defendant, 
notes  on  which  the  name  of  its  president  had  been  forge. I,  bnt  whicli 
were  otherwise  genuine,  and  had  neglected  for  fifteen  days  to  retiivn 
them;  and  the  court  stated  the  (|uestioti  to  be,  whether,  as  between 
tlie  parties  who  were  equally  innocent  and  ignorant,  the  loss  should 
renjain  on  the  plaintiff,  where  the  chances  of  business  had  placed  it, 
or  be  shiftcfl  back  upon  the  defendant,  which  had,  by  good  fortune, 
rid  it.'^elf  of  it.  Tt  then  went  on  to  say,  that  in  all  such  cases  the 
just  and  sound  principle  of  decision  had  been,  that  if  the  loss  could 
be  traced  to  the  fault  or  neglect  of  either  party,  it  should  be  fixed 
on  him;  but  that  generally,  when  no  fault  or  negligence  was  im- 
putable to  either  party,  the  lo^^s  had  been  suffered  to  remain  where 
the    course    of    business    had    placed    it.      I'lit    the    first    part    of    that 


tiOS  DISCHAIHJK   OK    1  NSIliU  M  KNT.  [aHT.    IX. 

priiu'iple  is  not  applicable  hero,  fur  the  Iobs  is  not  traceable  to  tlie 
fault  nor  the  ueglei  t  ul'  tlie  plaintill.  Nor  is  the  second  part  any 
more  appliiable,  Tor  it  can  hardly  be  said  that  the  chani'es  of  busi- 
ness have  placetl  (he  loss  on  (he  plaindlV,  but  radier  on  the  defend- 
ant, but  if  it  can,  tlic  plaintill',  in  Ici^al  cITccl,  holds  (he  defendant's 
note,  and  i(  has  not  been  |tai<l,  and  (he  plaintill'  is  n()(  estopjietl  from 
collectinfT  it  of  him.  In  (bcsc  circumstances,  the  chances  of  bu-inesa 
can  avail  the  defendant  n<)thin_l,^ 

Judgment  allirnied.^ 


§204  McCOEMICK  r.  SHEA. 

[Reported  herein  at  p.  626.} 


3.  Altioration. 


§  205        HORN  AND  LONG  v.  NEWTON  TTTY  BANK. 

32  Kax.^as,  5 is.—  18S4. 

Action  against  makers  of  a  promissory  note.  Judgment  for  plain- 
tiff against  both  defendants. 

The  note  was  given  by  defendants  to  a  named  payee  foi'  i^u'  pur- 
chase price  of  a  tlircshing  machine  which  defendants  intended  to  run 
as  partners.  Horn  and  the  payee  aiithoi'ized  tlio  note  to  he  changed 
so  as  to  make  one  TTildreth  the  payee.  Long  did  not  know  of  or 
afterward  consent  to  the  change. 

The  opinion  of  the  court  was  delivered  by  — 

HoRTON,  C  J.  —  It  is  the  contention  of  Long,  one  of  the  plain- 
tiffs in  error — a  defendant  below  —  that  there  had  been  a  material 
alteration  in  the  note  sned  on  without  his  consent,  thereby  releasing 
him  from  all  liability  upon  it.  'JMie  note  was  orii^inally  di"aw!i  pay- 
able to  "  H.  A.  Pitts'  Sons  Manufacturing  Comnany,"  and  al'tei'  hav- 
ing been  given  to  that  company  it  was  altered  by  subslitutins;  the 
name  of  "  O.  B.  liildreth  "  for  the  original  payee.  'J'his  alteration 
was  made  without  the  knowledge  or  consent  of  Long,  and  he  has 
never  consented  to  or  ratified  the  same.  Witliin  all  the  authorities, 
the  substitution  of  0.  B.  liildreth  in  the  place  of  the  original  payee 
was  a  change  of  the  personality  of  one  of  the  paities  lo  the  note,  and 
therefore  a  material  alteration.  (Banl-  v.  IhiJJ,  1  llal.^t.  X.  J.  L. 
215;  Stoddard  v.  Peiiniwan,  in,S  :^rass.  300;  Drriprr  v.  Wood.  11 2  Id. 
315;  17  Am.  Rep.,  pp.  92,  lOG;  2  Daniel  on  Neg.  List.,  §§  1387- 
1390.)  2 

'  Accorfl :      riumhnhU  Bnuk  v.  liossing,  95  Iowa,  1.  —  H. 
2  See  §  206,  sub^pc.  4.  —  U. 


I.    3.]  ALTERATION.  609 

If  Horn  and  Long  had  been  associated  together  in  a  trading  part- 
nership, then  either  member  of  the  firm  might  have  bound  his  co-part- 
ner by  executing  a  promissory  note  in  the  name  and  on  behalf  of  the 
firm,  in  any  transaction  pertaining  to  their  partnership  business.  We 
suppose  that  under  such  circumstances,  the  material  alteration  of  a 
note  executed  by  the  firm,  witli  the  knowledge  and  consent  of  one  part- 
ner, would  bind  his  co-partner,  if  the  note  had  been  given  within  the 
apparent  scope  of  the  business  of  the  firm,  as  it  is  a  general  principle 
relating  to  trading  partnerships  that  each  partner  is  the  lawful  agent 
in  the  partnership  in  all  matters  within  the  scope  of  the  business. 
{Deitz  V.  Regnier,  27  Kans.  94.) 

A  non-trading  partnership,  however,  is  controlled  by  rules  differing 
from  those  controlling  a  commercial  or  trading  one.  {Deitz  v.  Reg- 
nier, supra.)  Under  the  findings  of  the  court,  Horn  and  Long  were 
partners  only  in  the  running  of  a  threshing  machine,  and  such  a  part- 
nership is  ^ne  of  occupation  or  employment  only.  It  is  not  a  com- 
mercial or  trading  partnership.  There  was  joint  ownership  between 
Horn  and  Long  in  the  threshing  machine,  and  there  was  a  co-partner- 
ship between  them  in  the  matter  of  operating  the  machine,  with  the 
intention  of  dividing  the  profits  and  losses  equally;  but  yet  their  busi- 
ness did  not  require  the  execution  of  negotiable  paper  as  the  proper, 
convenient,  and  usual  mode  of  conducting  it.  In  a  partnership  to 
XoperatfiLa-th^r^shing  machine  there  does  not  exist  the  implied  power  in 
k;he  several— n^emlwT!^  to  make  promissory  notes,  and  thereby  bind 
/the^'Brm.  Whoever  deals  with  an  individual  jointly  interested  with 
/another  in  tlie  operation  of  a  threshing  machine  must,  at  his  peril, 
!  inform  himself  of  the  nature  of  the  partnership.  The  note  in  suit 
was  signed  by  the  makers  in  their  individual  names,  and  not  as  a  firm. 
Therefore,  u[)on  the  face  of  the  note  one  of  the  makers  had  no  right 
to  bind  the  other  without  his  consent  to  any  material  alteration.  Horn 
had  no  authority  to  make  a  promissory  note  in  the  name  of  the  firm 
or  to  bind  Long,  unless  the  latter  had  been  |)reviously  consulted.  mikI 
consented  to  the  transaction.  {Lanier  v.  McCuhe,  2  Fla.  33  ;  Prince  v. 
Crawford.  50  Miss.  3  11;  Crosslliirail  v.  Ross,  1  Huiiipli.  [Tenn.|  2',\ ; 
t^milh  v.  t>loanc,  37  Wis.  285,  19  Am.  Hep.  757;  Deanlorf  v.  Thatcher, 
78  Mo.  128;  1  Daniel  on  Neg.  Inst.,  8§  35.'')-358.)  Tf  he  had  not  the 
authority  tf)  make  promissory  notes  and  draw  hills  of  exchange  and 
thereby  hind  the  firm,  he  had  no  right  lo  aulliorizi'  a  change  of  payee 
in  the  note  executed  by  him  and  Long  so  as  to  bind  Long  thereby. 
The  material  alteration  of  a  note  with  the  consent  of  a  maker  is 
virtually  making  a  new  note  and  antedating  it. 

We  therefore  conclude  that  the  material  alteration  of  the  note  in 
question  released  I^ong.  ( Proiiffhtrm  v.  Fuller,  9  Vt.  373.')  That 
the  bank  purchased  the  note  before  nuiturity,  for  a  valuable  considera- 
tion, and  is,  therefore,  a  hnnn  fide  holder  of  the  note,  does  not  prevent 

NEOOT.  INBTRUMKNTS  —  39 


610  i)is(MiAiu;i';  of  ins'iui'mknt.  [art.  ix. 

Loiiij:  from  asserting  (he  luatorial  alloration  of  the  note  as  a  defense.' 
{Wait  V.  Pomcroy,  v'O  Mith.  l'.^);  Benedict  v.  Cowden,  49  N.  Y.  396; 
Bank  v.  StowcU,  123  Mass.  196;  2  Daniel  on  Neg  Inst.,  §§  1410- 
1413.) 

[Omitting  a  question  of  practice.] 

The  judgment  against  Long  will  be  reversed  and  the  cause  re- 
nunuled,  with  direction  to  the  court  below  to  render  judgment  in  his 
favor  upon  the  findings  of  fact.* 


3  "  It  is  urged,  however,  that  the  plaintiff,  being  an  innocent  liolder  for  value, 
can  recover  notwithstanding  the  alteration,  because  tliey  propose  to  recover 
only  the  amount  of  the  note  as  it  was  before  the  alteration.  If  such  were  the 
law  forgeries  by  alteration  would  be  protected  by  the  law.  The  fraudulent 
payee  would  run  no  risk  of  loss  because  he  would  only  have  to  transfer  the 
note  to  an  indorsee  who  might  recover  the  original  amount  of  the  note  by  sim- 
ply proving  that  he  was  innocent  of  the  fraud.  But  the  law  is  not  so  charit- 
able to  this  class  of  persons."  —  Gcttyshnry  Kiat.  Bk.  v.  Chisolm,  1G9  Pa.  St. 
504,  509;  Citizens  \at.  Bk.  v.  MAUiams,  174  Pa.  St.  06  (doubting  the  correct- 
ness of  Kountz  v.  Kennedy,  03  Pa.  St.   187,  contra). 

There  is  some  authority  for  the  proposition  that  a  banker  after  payment,  has 
the  right  to  hold  an  altered  check  for  its  correct  amount  as  against  the  maker. 
Hall  V.  Fuller,  5  B.  &  C.  750;  Susquehanna  Bk.  v.  Loomis,  85  N.  Y.  207;  (cf. 
Crawford  v.  West  Side  Bank,  100  N.  Y.  50,  57)  ;  Redint/ton  v.  Woods,  45  ("al. 
406.  Compare  Bills  of  Exchange  Act,  §  60,  as  to  payment  under  forged  in- 
dorsement. 

Under  §  205  the  holder  in  due  course  of  an  instrument  fraudulently  altered 
is  now  permitted  to  enforce  payment  according  to  the  original  tenor.  Prior 
to  the  statute  this  could  not  be  done,  though  it  seems  to  have  been  allowed  in 
the  exceptional  case  of  Worrall  v.  Ohenn,  39  Pa.  St.  388.  Where  the  alteration 
is  by  a  stranger,  or,  if  by  a  party  to  the  bill,  is  innocent,  many  American 
courts  allow  a  recovery  upon  the  original  consideration.  See  cases  follow- 
ing. —  H. 

*  There  may,  of  course,  be  a  subsequent  ratification  of  an  unauthorized 
alteration.  2  Daniel  on  Neg.  Inst.,  §§  1401-1403;  Dickson  v.  Bamberf/er,  107 
Ala.  293;  Matlock  v.  Wheeler,  29  Ore.  64.  Blanks  left  in  an  instrument  import 
a  prima  facie  authority  to  the  holder  to  fill  tliem.  Neg.  Inst.  L.,  §  33.  But 
an  alteration,  although  made  in  order  to  correct  a  mistake,  and  conform  the 
written  instrument  to  the  actual  intention  of  the  parties,  is  fatal  and  destroys 
the  validity  of  the  instrument.  'Newman  v.  King,  54  Oh.  St.  273,  citing  cases 
contra;  Evans  v.  Foreman,  00  Mo.  449.  [  Mut  see  Wallace  v.  Tiec,  32  Or.  283, 
post,  p.  012,  and  Osborn  v.  Hall,  100  Ind.  153,  in  note  8,  post,  p.  614.  —  C] 

A  restoration  of  the  instrument  to  its  original  form  will  not  revive  liability 
upon  it.  Citizens'  Nat.  Bank  v.  Richmond,  121  Mass.  110;  Locknane  v.  Emmer- 
son,  11  Bush  (Ky.)  69;  Fulmer  v.  Seitz,  68  Pa.  St.  237  (doubting  Kountze  v. 
Kennedy.  03  Pa.  St.  187)  ;  Citizens'  N.  B.  v.  Williav^s,  174  Pa.  St.  66;  McDaniel 
v.  Whitsett,  90  Tenn.  10. 

Matrri.m,  .'\i.teratton.  —  As  to  what  changes  constitute  a  material  altera- 
tion, see  §  200:  2  Daniel  on  Neg.  Inst.,  §§  1373-1404;  2  Am.  &  Eng.  Encyc.  L. 
(2d  ed.),  pp.  222-248;  Ives  v.  Farmers'  Bank.  2  Allen    (Mass.)   236. 

BuRDEX  OF  Proof.  —  There  is  a  hopeless  conflict  as  to  the  presumption  and 
burden  of  proof  in  the  case  of  the  apparent  alteration  of  an  instrument.  One 
class  of  cases  requires  the  one  offering  the  paper  to  explain  any  apparent  altera- 
tion.    Croswell  v.  Labree,  81   Me.  44;   Simpson  v.  Stackhouse,  9   Pa.   St.   186; 


I.    3.]  ALTEIIATION.  Gil 

§205  SULLIVAX  r.  RUDISILL. 

03  Iowa,  158.  —  1884. 

Action  on  a  note  and  upon  orii>"inal  indebtedness.  After  the  note 
was  given  by  defendant,  with  Fuller  as  surety,  the  plaintill:  innocently 
procured  W.  A.  K.  to  sign  also  as  surety.  The  court  held  the  note 
void,  but  allowed  a  recovery  against  defendant  upon  the  original 
consideration.     Action  dismissed  as  to  Fuller. 

Beck,  J.  —  This  court  has  held  that  the  signing  of  a  promissory 
note  by  one  as  a  joint  maker,  after  the  execution  by  the  oi-iginal 
maker,  witiiuut  his  knowledge  and  consent,  is  a  materia!  alteration, 
which  will  defeat  the  instrument.  (Hamilton  v.  Hooper,  el  ciL,  -Ki 
Iowa,  515;  Dicl-erman  v.  l\Hner,  43  Id.*  508;  Hall's  Adm'x  v. 
Mrlfennj,  1!)  Id.  521.)  '■ 

It  has  also  been  ruled  by  this  court  tlmt,  when  a  promissory  note 
has  been  innocently  altered,  without  any  fraudulent  purpose,  (he  payee 
may  recover  in  an  action  brought  upon  the  original  consideration. 
(Krause  v.  Meyer,  32  Iowa,  506;  Cloiigli  v.  Seay.  49  Id.  ill;  Morri- 
son Bros.  V.  Ilitggins,  et  ah,  53  Id.  7(5;  Eel-erl  d"-  Williams  v.  Ficl-el, 
59  Id.  545.) 

Upon  tbi'  facts  found  by  the  referee,  which  are  not  bi-ouglit  in 
f|uestion,  and  under  the  petition  which  sought  to  recover  upon  the 
original  consideration,  the  Circuit  Court  rightly  rendered  judgment 
for  plaintiff." 

(IrtiiiKhurt,  \.  n.  V.  riiisolw.  If.O  Pn.  St.  riC,4  :   Eh;in  v.  rinlJ.  S2  Va.  fiSO;  Cole 

V.  Hills.  44  N.  II.  227:  (loirdey  v.  Robhin.i.  .3  .^pp.  Div.   (N.  Y.)   .•?r)3 :   Evniifi  v. 

Drminti,  20  W'kly.  Dij?.   (N.  Y.)   71. 

AnotlitT  and  jieiliaps  weifjiitior  class  of  omsos  raisps  no  pro^uiiiiition  against 

tlir-  papr-r  hilt  casts  the  hiinicn  upfiii  the  (Icfciidant  to  prove  any  allcjicd  altoia- 

tions.     Wilfinn  v.  fJai/rs.  40  Minn.  5.31  ;   Woljcrmnn  v.  Brll.  fi  Wasli.  84;  Ynhima 

N.  B.  V.  Knipr.  fi  Wash.  348;    Hnfian  v.  Mrrvhnnl.ii' .  rfr.  fns.  Cn..  81   Iowa.  321  ; 

Neil  V.   (Jasc,  25    Kans.  510;    I-Wanhlin  v.    nakrr.  48   f))i.   St.   200:    Nnnixm  v. 

Kin;/,  54  Oh.  St.  273.     Sec  2  Daniel  on  NC-.'.  In^^l.  §§  1417-1421;  2  Am.  .*^   Knj?. 

Kncyc.  L.   (2nd  od.).  pp.  272-270.  —  II. 

o'Contra:      Mrrswnti  v.   W'l-rqrs.  112  H.  S.   139;   Roi/.tr  v.  SUntr  Bank    ( Nch. ) . 

09  N.  VV.  301:   liiil„(„k  v.  Murnni,  58  Minn.  385.     Soc.  however,  Nes,'.  Tnsl.  L.. 

§  200,  Hiihsec.  4.—  II. 

"Accord  ( wliere  alteral  inn  innocent):  Voqli-  v.  liifipir.  31  III.  10(1;  thri»  v. 
JInll,  70  Md.  t)7:  Booth  v.  Poirrrs.  50  N.  Y.  22;  York  v.  Jatirs.  43  N.  .1.  L.  332; 
Milhr  V.  Sliirk.  148  I'a.  St.  104:  (Innlrn  v.  Ifohrrlson.  48  Wis.  403;  h'rrnr  v. 
W'rtks  {]{.  I.).  3.3  Atl.  440.  A  snhsr'(|iient  indorsee  must  he  treated  also  jis  an 
assi^ne*'  of  this  rif^ht  of  action  njifm  the  oriijinal  consideration  in  order  to 
maintain  nn  action.  Bururll  v.  Orr.  84  III.  405:  Stole  Bonk  v.  Khaffrr.  !l  \(  h. 
1;  I'ort  Huron  First  V.  B.  v.  ('arson.  00  Mich.  432.  If  "tiic  instrnment  eon^li- 
tiitcH  the  only  ohiitration.  all  remi-dies  are  lost  hy  a  material,  tlnni'/h  innocent, 
alterntion.  Crnirfonl  v.  WrsI  Si,lr  Bank.  100  N.  Y.  50;  Talr  v.  Fhlrlirr.  77 
Ind.  102. 

A  franihilcnt  alteration  exl  infjuishes  .ill  remedies.  Smith  v.  Unrr.  11  \.  If. 
553;  dnrn  v.  .S'»rr//.  101  Ala.  205.  Kxceid.  under  Ne-r.  In^t.  I,..  S  205  :<-  to 
snhser|iient  holders  in  due  course  uf  negotiahlf  instruments.  See  ante,  p.  587, 
note.  —  II. 


GlXJ  DlSlII.VKCi:   OK    IN'STlfliMKNT.  [aKT.    IX. 

§205  WALLACE   v.  TICE. 

;12  Okkcion,  liH3.  —  1898. 

On  August  11,  181)1,  defendant  Tice  arranged  with  plaintiff  for  a 
loan,  agreeing  to  give  his  note  with  one  Herrall  as  security.  Plaintiff 
wrote  out  the  note,  dating  it  "Aug.ll,"  and  making  it  payable  one 
year  alter  date,  'i'iee  took  it  to  Herrall  the  same  day,  signed  it,  pro- 
cured llerrall's  signature,  and  returned  to  plaintiff  with  the  note  the 
following  day.  Before  delivering  her  check  for  the  money,  plaintill 
changed  the  date  in  his  presence  from  "  11  "  to  "  12."  Plaintiff  testi- 
fied that  she  made  the  change  to  correspond  with  the  agreement  of 
the  parties,  and  Tice  testified,  in  substance,  that  plaintiff  made  the 
change  without  objections  from  him. 

In  an  action  on  the  note  against  Tice  and  against  the  administra- 
tor of  Herrall,  deceased,  judgment  was  rendered  for  plaintiff,  and 
the  administrator  appealed. 

WoLVEHTON,  J.  —  This  is  a  suit  to  restore  the  original  conditions  of 
a  promissory  note  which  it  is  alleged  were  changed  by  the  payee,  under 
mistake  and  misapprehension  of  the  rights  and  agreements  of  the 
parties,  and  to  recover  thereon  against  the  makers. 

Three  questions  remain  for  solution:  (1)  Has  a  court  of  equity 
jurisdiction  of  the  cause,  as  it  remains  dismembered  of  the  alleged 
trust  relations?  (2)  Can  a  recovery  be  had  upon  the  altered  note? 
And  (3)  is  the  name  "  Geo.  Herral,"  appended  to  said  note,  his  gen- 
uine signature?  "^ 

It  may  be  conceded  that  the  alteration  made  is  material,  and  upon 
this  premise  we  will  determine  the  legal  effect  thereof.  The  rule  may 
be  said  to  be  settled  that  a  material  alteration  made  fraudulently,  and 
with  vicious  intent,  by  the  party  claiming  a  benefit  under  it,  will  avoid 
the  note,  and  extinguish  the  liability,  and  henceforth  no  recovery  can 
be  had.  VogJe  v.  Ripper,  34  111.  100.  There  is  a  strong  current  of 
authority,  however,  which  holds  to  the  doctrine  that  while  an  altera- 
tion, though  material  and  unauthorized,  which  was  innocently  and 
honestly  made,  and  without  any  fraudulent  or  i7n])ro))er  motive,  avoids 
the  note,  nevertheless  an  action  will  lie  upon  the  original  indebtedness 
if  it  is  independent  of  the  note,  and  has  not  been  discharged  by  its 
execution.  (Booth  v.  Powers,  56  N.  Y.  22,  30,  31  ;  Lewis  v.  Schencic,  18 
N.  J.  Eq.  459 ;  Baril-  v.  Shaffer,  9  Neb.  1  ;  Hunt  v.  Gray,  35  N.  J.  Law, 
227;  VogJe  v.  Ripper,  supra.)  And  many  authorities  permit  the  action 
to  be  maintained  upon  the  note  itself.  ( fforsf  v.  Wagner,  43  Iowa,  373; 

2  Pars.  Notes  &  B.  570;  Duker  v.  Franz,  7  Bush,  273 ;  Adams  v.  Frye, 

3  Mete.  (Mass.)  103;  Smith  v.  Dunham,  8  Pick.  246;  Milbery  v. 
Stover,  75  Me.  69 ;  Croswell  v.  Lahree,  81  Me.  44 ;  Rogers  v.  Shaw,  59 
Cal.  260;  Murray  v.  Graham,  29  Iowa,  520;  McRaven  v.  Crishr,  53 

T  The  portion   of  thu  opinion  relating  to  the  third  question  is  omitted.  —  C. 


I.    3.]  ALTERATION.  613 

Miss.  542;  Foote  v.  Tlambricl-,  70  Miss.  157.)  It  was  early  held  in 
Bowers  v.  Jewell,  (2  N.  H.  545,)  that  "  it  is  reasonable  and  just  to  per- 
mit a  party  to  show  that  the  alteration  was  by  consent  of  those  inter- 
ested, was  by  accident,  or  under  circumstances  rebutting  every  pre- 
sumption of  improper  motives."  In  Lewis  v.  Schenck,  supra,  the 
agent  of  the  payee  altered  the  note  soon  after  its  execution,  in  the 
absence  of  the  makers,  by  inserting  the  words  "  with  interest  from 
date,"  honestly  believing  that  he  could  legally  make  the  change  to 
correspond  with  what  he  supposed  to  be  the  real  agreement  of  the 
parties,  entered  into  prior  to  the  execution  of  the  note;  and  it  was 
held  that  the  alteration  was  under  a  mistake  of  fact,  and  the  plaintiff 
was  permitted  to  recover.  In  Croswell  v.  Lahree,  supra,  the  words  "  or 
bearer  "  were  inserted  by  the  payee  after  delivery,  and  without  the 
knowledge  or  consent  of  the  maker.  It  was  ruled  by  the  lower  court 
that  if  the  alteration  was  made  innocently,  without  any  fraudulent 
or  improper  motives,  it  would  not  avoid  the  note,  and  the  ruling  was 
sustained  by  the  Supreme  Court.  And  in  Duker  v.  Franz,  supra,  the 
change  was  from  "  1868  "  to  "  18G9,"  by  making  a  "  9  "  over  the  "  8," 
and  it  was  held  that  it  did  not  destroy  the  legal  efficacy  of  the  note. 

We  think  the  following  deduction  is  within  the  cases:  That  where 
the  alteration  is  prompted  by  honest  and  pure  motives,  with  a  purpose 
of  correcting  the  instrument  to  correspond  with  what  the  party  hon- 
estly and  in  perfect  good  faith  believed  to  be  the  true  engagement 
of  the  parties  at  the  time  of  the  execution,  the  act  does  not  destroy  the 
legal  efficacy  of  the  note,  and  recovery  may  be  had  upon  it  when  re- 
stored. See  Rogers  v.  Shaw,  supra;  Kouniz  v.  Kennedy,  G.S  Pa.  St. 
187,  and  Horst  v.  Wagner,  supra.  We  come  the  more  readily  to  this 
conclusion  in  view  of  our  statute,  which  makes  it  incumbent  upon  the 
party  producing  a  writing  a[)|)('ariiig  to  have  been  altered  after  its 
execution,  in  a  part  material  to  the  question  in  dispulc,  io  account 
for  the  alteration  before  he  will  be  permitted  to  give  it  in  evidence. 
He  may  explain  the  alteration  by  showing  that  it  was  made  by  an- 
other without  his  concurrence,  or  was  made  with  the  conscut  of  the 
parties  affected  l)y  it,  or  otherwise  |)roperly  or  innoieutly  made. 
(Hill's  Ann.  Laws  Or.  §  788.) 

Now,  it  is  perfectly  apparent  that  Mis.  Wallacu  was  not  iiii|KlliMl 
by  any  fraudulent  motive  in  making  fhc  change  in  the  dale  of  ilic 
note  sued  upon.  It  is  also  just  as  a[)parcnt  that  she  was  acting  under 
an  honest  misapprehension  of  her  right  to  nuike  the  c-hange  to  corre- 
spond with  wliat  she  supposed  to  be  the  agreement  with  Tice  and  Her- 
rall  to  loan  them  $2,000  for  one  year,  and  that,  in  order  to  make  the 
contract  conform  to  what  she  understood  the  agreement  to  be  —  that 
is,  to  loan  the  money  for  a  full  year  —  she  made  the  change,  intending 
it  for  the  benefit  of  the  iimkers.  It  was  of  no  benefit  to  her,  but.  on 
the  contrary,  of)enited  as  a  real  detriment  ;  of  small  proportions  it  may 
be,  but  it  was  actual  and  patent.     If  it  were  adjudged  that  for  such 


614  DISCllAKCU':  OF   IXSTUUMENT.  [aUT.    IX. 

an  act,  prompted  solely  by  the  purest  motives,  yet  involving  a  misap- 
prehension of  the  ri^'ht  and  autliorily  to  do  the  act,  the  suitor  sliould 
he  turned  away  remediless,  the  result  would  be  an  ohvious  and  palpable 
failure  of  justice  in  a  great  majority  it"  not  in  every  instance. 

The  remaining  question,  touching  the  jurisdiction  of  a  court  of 
equity  to  entertain  the  suit,  is  not  entirely  free  from  doubt.  But  as 
the  act  which  it  is  clainu'd  avoids  the  instrument  was  done  under  mis- 
take and  misapprehension,  and  the  suit  involves  a  discovery  which  is 
in  some  degree  necessary  to  show  the  agreement  and  the  mistake,  the 
jurisdiction  ought  to  he  sustained.  Such  is  the  exact  ruling  of  Leivis 
V.  Schenck-,  supra.  See,  also,  Nirkerson  v.  Swetf,  135  Mass.  514.  The 
decree  of  the  court  below  will  therefore  be  affirmed.* 


§205  McKEEHAN,  THE  NEGOTIABLE  INSTRUMENTS  LAW. 
[41  Am.  Law  Reg.,  N.  S.,  pp.  580^582.] 

The  criticism  of  this  section  [N.  Y.,  §  205]  ®  is  contained  in  a  note 
published  subsequent  to  the  articles  in  the  Harvard  Law  Review  and 
is  based  upon  the  case  of  Jeffrey  v.  Eosenfeld,  ^  decided  by  the  Su- 
preme Court  of  Massachusetts  in  September,  1901. 

8  "  We  concede  and  affirm  as  a  !eji;al  proposition  that  the  payee  or  holder  of 
a  promissory  note  has  no  right  or  authority,  without  the  consent  of  the  mal<er 
or  malcers  thereof,  to  make  any  material  alteration  of  the  note  for  the  pur- 
pose of  correcting  any  mistake  that  may  have  been  made  in  the  execution 
thereof,  unless  it  is  shown  that  the  alteration  or  change  is  made  to  correct  the 
note  so  as  to  make  it  conform  to  what  all  of  the  parties  thereto  agreed  or 
intended  it  should  have  been.  An  alteration  for  such  purpose  and  to  such 
extent  the  great  weight  of  authf)rities  sanction,  and  hold  tliat  it  may  be  made 
without  destroying  the  legal  effect  of  the  note  or  instrument.  "  Jordan,  J.,  in 
Osborn  v.  Ball,  160  Ind.  1.53,  159,  where  recovery  was  allowed  on  the  note 
itself. 

Contra,  Merritt  v.  Dewey,  218  111.  599,  where  Scott,  J.,  at  p.  G05,  said: 
"  One  party  to  a  written  instrument  which  does  not  speak  the  actual  contract 
of  the  parties  does  not  have  the  right  to  alter  the  instrument  to  make  it  ac- 
cord therewith.  If  the  right  to  so  make  such  an  alteration  existed,  the  juris- 
diction and  power  of  a  court  of  chancery  to  reform  written  contracts  which 
inaccurately  state  the  undertakings  of  the  parties  would  be  entirely  use- 
less." —  C. 

9  Section  64  of  the  English  Bills  of  Exchange  Act  reads: 

"  Where  a  bill  or  acceptance  is  materially  altered  without  the  assent  of  all 
parties  liable  on  the  bill,  the  bill  is  avoided,  except  as  against  a  party  who 
has  himself  made,  authorized,  or  assented  to  the  alteration,  and  subsequent 
indorsers. 

"  Provided,  that  where  a  bill  has  been  materially  altered,  but  the  alteration 
is  not  apparent,  and  tlic  bill  is  in  iTie  hands  of  a  holder  in  due  course,  such 
holder  may  avail  himself  of  the  bill  as  if  it  had  not  been  altered,  and  may 
enforce  payment  of  it  according  to  its  original  tenour." 

1  179   Mass.   506. 


I.    3.]  ALTEEATION.  615 

At  the  common  law,  the  material  alteration  of  a  negotiable  instru- 
ment without  the  assent  of  all  parties  liable  thereon  avoided  the  in- 
strument except  as  against  a  party  who  made,  authorized  or  assented 
to  the  alteration,  and  subsequent  indorsers.  The  rule  applied  to  an 
alteration  made  by  a  stranger  as  well  as  to  an  alteration  made  by  a 
party  to  the  instrument.  Section  64  of  the  English  act  perpetuates 
the  common  law  rule  with  the  exception  of  a  proviso  inserted  for  the 
benefit  of  a  holder  in  due  course,  under  which  he  may  enforce,  accord- 
ing to  its  original  tenor,  a  bill  which  has  been  materially  altered,  if 
the  alteration  is  not  apparent.  The  proviso,  however,  does  not  concern 
us  in  this  discussion. 

The  American  courts  early  changed  the  common  law  rule  to  the 
extent  of  holding  that  an  alteration  made  by  a  stranger  was  a  mere 
spoliation  or  trespass,  and  that  the  holder  could  still  enforce  the  in- 
strument in  its  original  form.  Now  section  124  of  the  American  act 
is  practically  the  same  as  section  64  of  the  English  act.  Therefore, 
says  Professor  Ames,  we  are  in  this  dilemma:  "Either  the  English 
and  American  sections,  although  expressed  in  the  same  terms,  must 
be  interpreted  differently,  or  else  the  American  law  is  changed,  and, 
as  it  seems  to  the  writer,  for  the  worse.  To  avoid  tbe  second  horn  of 
the  dilemma  involves  great  straining,  not  to  say  perversion,  of  simple 
English  words." 

How  one  can  see  any  ambiguity  in  section  121  [N.  Y.,  §  205]  is  a 
mystery.  It  reads:  "When  a  negotiable  instrument  is  materially 
altered  *  *  *  it  is  avoided,"  etc.  An  alteration  made  by  a 
stranger  is  not  excepted,  and  certainly  it  is  none  the  less  an  alteration 
because  made  by  a  stranger.  To  say  that  such  an  alteration  is  not 
covered  by  section  121  would  be,  as  Pi-ofossor  .Ames  says,  "a  ^roat 
straining,  not  to  say  perversion,  of  simple  English  words."  .Tudg' 
Brewster  agrees  with  the  critic  on  this  point.  'IMie  only  person  who  has 
ever  suggested  a  doubt  as  to  tbe  meaning  of  this  section  is  Mr.  .Tnstice 
Morton,  who  wrote  the  opinion  in  Jeffrey  v.  Rosenfeld.  siiprn.  In  that 
case,  a  note  secured  by  a  mortgage  was  altered,  though  by  wlioin  did  not 
appear.  On  a  bill  in  e(jnity  to  restrain  the  foreclosure  of  the  niorlifau'e, 
the  court  sustained  the  holder's  right  to  foreclose  without  interpicting 
section  124  of  the  code,  though  Justice  Morton,  in  an  ohiirr  (licliim 
of  some  length,  remarked  that  the  >|uestion  of  its  interpretation  was 
one  that  rieserved  serious  consideration.  After  referring  to  the  author- 
ities in  this  country  which  decided  that  a  material  alteration  made  by  a 
stranger  will  not  avoid  the  instrument,  he  adds:  "  If  woujil  seem  not 
unreasonable  to  su[tpose  that  it  was  th»!  intention  of  the  franiers  of 
the  American  act  that  section  121  should  be  construed  according  to 
the  law  of  this  country  rather  than  that  of  England."  As  a  gen(>rality, 
that  remark  is  profoundly  true  and  applies  to  all  the  sections  of  the 
new  act.  They  should  be  construed  nccordiri!/  to  .American  law  rntlier 
than  English  law.     As  aj»{)licable  to  the  particular  point  under  dig- 


616  DISCIIAUCH  OV   IMSTKUMKNT.  [aUT.    IX. 

cussion,  liowover,  the  ivinark  i.-i  of  small  valuo.  Tf  the  kmguage  of 
seetion  \'ii  is  clear  and  unmistakable,  it  shoulil  he  given  its  plain 
meaning.  To  construe  it  according  to  American  law  does  not  mean 
to  knock  it  down  simply  because  it  changes  American  law  somewhat. 
The  learned  judge  points  out  no  ambiguity  in  tlie  language  of  this 
section.  His  sole  reason  for  doubling  its  very  ])lain  meaning  is  that 
it  changes  the  law.  As  a  matter  of  fact,  we  learn  from  Judge  Brew- 
ster that  it  was  intended  to  change  me  law ;  that  Mr.  Crawford  re- 
ported to  the  conference  in  1S!)()  in  fa-or  of  adopting  the  common 
law  rule  as  to  alterations  by  a  stranger,  in  order  that  the  law  of  the 
two  countries  might  be  uniform  on  this  important  point,  and  in  order 
that  the  benefit  of  written  evidence  might  be  preserved.  This  view 
was  approved  by  the  conference,  and  section  124  was  inserted  to  restore 
the  English  rule. 

Professor  Ames  thinks  that  the  change  is  for  the  worse,  though  he 
vouchsafes  no  reasons.  Under  such  circumstances,  the  profession  can- 
not be  blamed  for  accepting  without  question  the  judgment  of  the 
learned  and  experienced  experts  who  drafted  the  new  act.  But  at  all 
events  there  is  no  ambiguity  in  this  section.  Its  meaning  is  unmis- 
takable. 

§  205         NATIONAL  EXCHANGE  BANK  v.  LESTER. 
194  New  Vokk,  4G1.  —  1909. 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  third  judicial  department,  entered  May  16,  1907,  affirm- 
ing a  judgment  in  favor  of  plaintiff  entered  upon  a  verdict  and  an 
order  denying  a  motion  for  a  new  trial. 

The  defendant  was  sued  as  the  accommodation  indorser  upon  a 
note  for  $375  made  by  one  Frank  L.  Fanciier  and  accjuired  by  the 
plaintiff  bank  before  maturity  in  the  regular  course  of  its  business. 

The  defense  was  that  the  note  as  originally  made  and  indorsed  was 
for  $75  only;  that  the  maker  thereafter,  without  the  knowledge  or 
consent  of  the  indorser,  altered  the  note  by  inserting  in  the  body 
thereof  the  words  "  Three  hundred  "  immediately  in  front  of  the 
words  "  Seventy-five  "  and  the  figure  "  3  "  immediately  in  front  of  the 
figures  "  75,"  thereby  making  the  instrument  apparently  a  note  for 
$375  instead  of  $75 ;  and  that  the  maker  thereafter  caused  the  note  as 
thus  altered  to  be  discounted  by  the  plaintiff  bank.  The  answer  prayed 
judgment  that  the  complaint  be  dismissed  except  as  to  the  amount 
of  the  note  before  alteration,  together  with  interest  and  protest  fees, 
to  wit,  $78.fi6.  The  defendant  also  served  an  ofl'er  to  allow  the  plain- 
tiff to  take  judgment  for  that  amount. 

Upon  the  trial  the  court  charged  the  jurv  that  if  the  note  indorsed 
by  the  defendant  was  in  fact  a  note  for  $375  on  its  face,  the  plaintiff 
was  entitled  to  recover  that  amount  and  interest. 


I.   3. J  ALTEIJATION.  617 

Tlic  trial  judge  further  charged  the  jury  that  if  they  found  that 
there  were  spaces  upon  the  note  "  so  carelessly  and  negligently  left  by 
this  indorser,  Mr.  Lester,  that  a  person  having  custody  of  the  note 
might  run  in  a  figure  3  and  the  words  '  Three  hundred  '  so  as  not  to 
occasion  in  the  mind  of  the  indorser  [evidently  meaning  indorsee] 
any  inquiry  into  its  validity,"  they  might  find  that  the  indorser  con- 
ducted himself  carelessly  and  negligently  in  the  premises  and  thus 
invited  the  liability  which  the  face  of  the  note  called  for  when 
presented  to  the  bank. 

The  defendant  duly  excepted  to  that  part  of  the  charge  to  the  effect 
that  if  the  defendant  was  negligent  in  leaving  blank  spaces,  the  jury 
must  find  a  verdict  for  the  plaintiff  for  the  full  amount  of  the  note 
as  it  stood.  The  court  then  reiterated  the  proposition,  saying  that  "  if 
the  jury  find  that  the  defendant  was  careless  and  negligent  in  leaving 
vacant  spaces  for  the  words  and  figures,  such  carelessness  and  negli- 
gence on  his  part  would  still  make  him  liable  for  the  note;"  and  to 
this  the  defendant  also  excepted. 

The  jury  found  for  the  plaintiff  in  the  sum  of  $375,  with  interest. 
The  judgment  entered  upon  the  verdict  has  been  unanimously  af- 
firmed by  the  Appellate  Division. 

WiLLARD  Barti.ktt,  J.  —  As  this  case  went  to  the  jury,  they  might 
well  have  found  that  the  note  in  suit  was  a  note  for  only  seventy-five 
dollars  wlien  originally  prepared  by  the  maker  and  indorsed  at 
his  instance  by  the  defendant,  and  that  it  had  subsequently  been 
altered  to  a  note  for  three  hundred  and  seventy-five  dollars  when  dis- 
counted by  the  plaintiff  })ank.  They  were  instructed  in  substance, 
however,  that  the  indorser  was  liable  for  the  amount  of  the  note  as 
raised  by  the  alteration,  if  he  had  been  careless  and  negligent  in  plac- 
ing his  name  upon  the  instrument  while  there  were  spaces  thereon 
which  permitted  the  insertion  of  the  words  and  figure  whereby  it  was 
transmuted  from  a  note  for  seventy-five  dollars  into  a  note  for  three 
luindred  and  seventy-five  dollars.  Conceding  that  the  contract  which 
he  actually  signed  bound  him  only  to  pay  the  stnallcr  amount,  the  jury 
were  permitted  to  find  that  in  consequence  of  his  negligcTicc  in  the 
respect  indicated  it  had  become  a  contract  which  boiinil  him  to  pay 
the  larger  amount  to  a  subsequent  innocent  holder  of  the  paper. 

In  Rup[)ort  of  the  correctness  of  this  ruling,  the  learned  counsel  for 
the  respondent  asserts  the  doctrine  that  "a  party  to  a  note  who  puts 
his  name  to  it  in  any  capacity  of  liability,  when  it  contains  blanks  un- 
canceled facilitating  an  alteration  raising  the  amount,  is  liable  for 
the  face  of  th(>  note  as  raiserl  to  an  innocent  holder  for  value;"  and 
he  declares  that  this  doctrine  has  been  approved  and  apparently 
adopted  in  Alabanin,  California,  Colorado,  Illinois,  Kansas,  Kentucky, 
Louisiana,  Michigan,  Missouri,  Nebraska  and  Pennsylvania. 

In  considering  his  prof)osition,  it  i«  imjKirtant  to  bear  in  mind 
a  radical  distinction  which  exists  between  two  classes  of  notes  to  which 


61S  DISCIIAIJGK   Ol'    INSria'.MKNT.  [ART.    IX. 

tlie  adjudicated  oases  relate :  ( 1 )  Those  notes  in  whicli  obvious  blanks 
are  left  at  tlie  time  when  they  are  made  or  indorsed,  of  such  a  charac- 
ter as  manifestly  to  indii'ate  that  the  instruments  are  incomphjte  until 
such  blanks  shall  he  lillcd  up;  and  (l*)  those  notes  which  are  appar- 
ently complete,  and  which  can  t)e  regarded  as  containing  blanks  only 
bei-ause  the  written  matter  docs  not  so  fully  occupy  the  entire  paper 
as  to  preclude  the  insertion  of  additional  words  or  figures  or  both.  It 
is  a  note  of  the  latter  class  that  we  have  to  deal  with  here.  One  who 
signs  or  indorses  a  note  of  the  first  class  has  been  held  liable  to  bona 
fide  holders  thereof,  in  some  of  the  cases  cited  by  the  respondent,  ac- 
cording to  the  terms  of  the  note  after  the  blanks  have  been  filled,  on 
the  doctrine  of  iwpUed  aufJioriti/,  while  in  other  cases,  relating  to  notes 
of  the  second  class,  the  liability  of  the  maker  or  indorser  for  the 
amount  of  the  note  as  increased  by  filling  up  the  unoccupied  spaces 
therein,  is  placed  upon  the  doctrine  of  negligence  or  estoppel  by 
negligence. 

The  cases  cited  by  respondent  in  which  parties  to  commercial  paper 
executed  by  tliem  while  obvious  blanks  remained  unfilled  thereon  have 
been  held  liable  upon  the  instrument  as  completed  by  filling  out  such 
blanks  on  the  ground  of  implied  authority,  require  no  further 
consideration  here,  as  there  is  no  suggestion  that  there  was  any  blank 
of  this  character  upon  the  note  in  suit.  These  cases  are  Wiriier  & 
Loeb  V.  Pool  (104  Ala.  580;)  Statton  v.  Stone  (61  Pac.  Rep.  481,  Col- 
orado) ;  Cason  v.  Grant  Co.  Deposit  Banh  (97  Ky.  487),  and  ^Vcirlman 
V.  Symes  (120  Mich.  657).  There  were  obvious  blanks  also  in  the 
notes  under  consideration  in  Visiter  v.  Webster  (8  Cal.  100)  and  Loiv- 
den  V.  ^.  C.  Nat.  Banl-  (38  Kan.  533),  and  the  decision  in  each  of 
these  cases  appears  to  have  proceeded  upon  the  doctrine  of  implied 
authority  rather  than  negligence. 

It  must  frankly  be  conceded,  however,  that  the  respondent  finds  sup- 
port for  the  doctrine  which  it  asserts  in  the  case  at  bar  in  the  de- 
cisions of  Pennsylvania,  Illinois  and  Missouri,  so  far  as  the  maker  of 
commercial  paper  is  concerned,  and  in  those  of  Kentucky  and  Louis- 
iana, in  respect  to  the  liability  of  a  party  who  has  indorsed  or  be- 
come surety  on  a  note  in  which  there  were  spaces  (not  obvious  blanks) 
that  permitted  fraudulent  insertions  enlarging  the  amount,  {(iar- 
rard  v.  IJaddan,  67  Pa.  St.  82;  Yocum  v.  Smith,  63  111.  321 ;  Scotland 
Co.  Nat.  Bank  v.  O'Connel,  23  Mo.  App.  165;  Ilaclett  v.  First  Nat. 
Banl-  of  Louisville,  114  Ky.  103;  Isnard  v.  Torres  c{-  Marqnez,  10  La. 
Ann.  103.) 

In  Garrard  v.  JJaddan  (supra)  a  space  was  left  between  the  words 
"one  hundred"  and  the  word  "dollars"  in  which  "fifty"  had  been 
inserted  after  the  maker  had  signed  and  delivered  it;  and  the  court 
held  the  maker  answerable  to  a  bona  fide  holder  for  the  full  face  of 
the  note  as  altered  on  the  ground  of  the  negligence  of  the  maker  in 
leaving  the  space  in  the  note  which  was  thus  filled  up  f^fter  execution. 


I.    3.]  ALTERATION.  619 

"  We  think  this  rule  is  necessary,"  said  Chief  Justice  Thompson,  "  to 
facilitate  the  circulation  of  commercial  paper  and  at  the  same  time 
increase  the  care  of  drawers  and  acceptors  of  such  paper,  and  also  of 
bankers,  brokers  and  others  in  taking  it."  It  is  a  little  difficult  to  see 
how  the  rule  tends  to  make  bona  fide  purchasers  more  careful,  as  this 
last  observation  suggests. 

The  case  of  Yocum  v.  Smith  (supra)  held  the  maker  liable  upon  a 
note  which  had  been  raised  after  execution  from  one  hundred  dollars  to 
one  hundred  and  twenty  dollars,  the  words  "  and  twenty  "  having 
been  inserted  in  a  space  left  between  the  word  "  hundred  "  and  the 
word  "dollars."  The  court  said  that  the  maker  had  acted  with  un- 
pardonable negligence  in  signing  the  note  and  loading  a  blank  which 
could  so  easily  be  filled:  that  he  had  thus  placed  it  in  the  power  of 
another  to  do  an  injury  and  that  he  must,  therefore,  suffer  the  result- 
ing loss.  This  decision  undoubtedly  sustains  the  position  of  the  re- 
spondent, although  there  was  another  element  of  negligence  in  that 
case  which  is  not  present  here.  It  appeared  that  the  maker  there  was 
informed  by  letter  by  the  purchaser,  very  soon  after  the  date  of  the 
note,  that  he  had  bought  it  and  of  its  date  and  amount;  yet  he  made 
no  objection  as  to  the  amount  until  nearly  a  year  later. 

In  Scotland  Co.  Xat.  Hank  v.  O'Connel  (supra)  the  defendants 
executed  and  delivered  a  note  for  $100  to  one  Smith,  the  body  of  which 
was  in  his  handwriting,  in  a  condition  which  enabled  him  to  add  the 
words  "  thirty-five  "  after  "  one  hundred  "  in  the  written  part  and  put 
the  figures  "$135"  at  the  head  of  the  note  in  the  space  where  the 
amount  is  usually  indicated  by  figures.  The  St.  Louis  Court  of  Ap- 
peals hold  that  the  dffcndnnts  were  liable  for  $13.')  because  they  had 
delivered  the  note  to  Smith,  who  was  their  co-worker,  "  in  such  a  con- 
dition as  to  enable  him  to  fill  bl.ink  spaces  without  in  any  manner 
changing  the  appearance  of  the  note  as  a  genuine  instrument." 

The  cases  th\is  far  discussed  were  all  of  them  actions  aixainst  the 
makers  of  the  raised  paper.  The  same  rule,  however,  was  applied 
against  an  indorscr  in  Isnnrd  v.  Torres  tf-  Marqnez  (supra)  by  the  Su- 
preme Court  of  Ixiuisiana  under  the  following  circumstances:  Marquez 
indorsed  a  note  for  $ir)0  for  the  accommodntiori  of  Torres.  The 
amount  was  raised  to  $l,ir)0  iuid  purchased  by  the  [iljiinfitf  in  irrxxl 
faith  as  a  note  for  that  sum.  'I'lie  report  states  that  there  was  testi- 
mony of  experienced  persons  to  the  effect  that  if  at  the  time  of  the 
indorsement  the  word  onze  (for  eleven,  the  note  being  iti  French) 
and  the  adflitional  figure  before  ITiO  were  not  there  "the  note  would 
have  exhibited  bhinks  which  at  least  with  regard  to  the  written  [)art 
were  unusual  and  cajculnfcd  to  attract  attention  and  would  Iiave 
rendered  the  note  unsalable  in  the  market."  In  this  opinion,  ny>on 
inspection  of  the  note,  the  court  expressed  its  full  concurrence.  Tb? 
indorscr  wns  held  liable  for  the  amount  of  the  note  as  raised  on  th'^ 
ground  that  he  had  not  exercised  the  proper  caution,     To  the  same 


620  DISCHAIUiK   OK    I  NSIUU  M  KNT.  |  ART.    IX. 

effect  is  naclcctt  v.  First  Xat.  Initik  of  Louisville  (supra),  where  it  was 
held  that  a  surety  who  had  signed  a  note  in  which  were  written  the 
words  "  five  hundred  ""  with  spaces  hel'ore  and  after  them,  whii'h  tli» 
maker  had  tilled  up  by  writing  "  twenty  "  l)erore  aiul  "  fifty  "  after 
them,  thereby  making  a  note  for  $2,550,  was  liable  thereon  to  a  pur- 
chaser in  good  faith.  Tn  this  case  the  attention  of  the  Kentucky  Court 
of  Appeals  was  called  to  the  fact  that  the  great  weight  of  authority 
was  the  other  way,  l)ut  in  view  of  the  fact  that  tlie  rule  had  been  so 
established  in  Kentucky  for  a  quarter  of  a  century  the  court  deter 
mined  to  adhere  to  it.  in  observance  of  the  principle  of  stare  decisis. 

This  court  is  not  thus  constrained.  The  question  involved  in  th(^ 
present  appeal  has  not  been  authoritatively  decided  in  this  state  and 
we  are  at  liberty  to  adopt  that  view  of  the  law  which  =;eems  to  us  most 
consonant  with  sound  reason  and  best  supported  by  well  considered 
adjudications  in  other  jurisdictions. 

The  outcome  of  tliese  adjudications  is  accurately  set  fortli.  us  t 
Beems  to  me,  by  Mr.  Randolph  in  his  treatise  on  the  Law  of  Com- 
mercial Paper  as  follows: 

"  Where  negotiable  paper  has  been  executed  with  the  amount  blank, 
it  is  no  defense  against  a  bona  fide  holder  for  value  for  the  maker  to 
show  that  his  authority  has  been  exceeded  in  filling  such  blank,  and  -i 
srreater  amount  written  than  was  intended.  'J'his  was  also  once  held 
to  be  the  rule  where  no  blank  had  been  actually  left,  but  tlie  maker 
had  negligently  left  a  space  either  before  or  after  the  written  amount, 
which  made  it  easier  for  a  holder  fraudulently  to  enlarge  the  sum  flint 
written.  Tt  has  now,  however,  become  in  America  an  established  rule 
that  if  the  instrument  was  complete  without  blanks  at  the  time  of  it- 
delivery,  the  fraudulent  increase  of  the  amount  by  taking  advantage 
of  a  space  left  without  such  intention  *  *  *  will  constitute  a 
material  alteration  and  operate  to  discharge  the  maker."  (1  Randolph 
on  Commercial  Paper,  §  1f^7.) 

The  rule  thus  stated  is  sustained  by  the  decisions  of  the  courts 
of  last  resort  in  Massachusetts,  Michigan,  New  Hampshire,  Towa, 
Maryland,  Mississippi,  Arkansas  and  South  Dakota.  In  my  judgment 
it  rests  on  a  sounder  basis  than  the  opposite  doctrine  and  accords  liet- 
ter  with  such  adjudications  of  this  court  as  bear  more  or  less  directly 
on  the  question  involved. 

The  leading  case  sustaining  this  view  is  Greenfield  ■'Savings  Rank 
V.  Stowell  (123  Mass.  196),  in  which  the  opinion  was  written  l)y  Chief 
Justice  Gray,  afterward  an  Associate  Justice  of  the  Supreme  Court  of 
the  United  States.  The  discussion  is  careful  and  exhaustive,  reviewing 
all  the  important  cases  in  England  and  America  bearing  upon  the  sub- 
ject which  had  been  decided  up  to  that  time  (1877),  including  that  of 
the  Supreme  Court  of  Pennsylvania  in  Garrard  v.  TJnddan  (supra), 
which  was  the  principal  autliority  the  other  way.  T  shall  not  under- 
take to  review  the  same  authorities  here  or  paraphrase  the  opinion  of 


r.    3.]  ALTERATION.  621 

Chief  Justice  Gray,  which  deals  with  them  in  such  a  manner  as  fully 
to  justify  his  rejection  of  the  doctrine  that  the  makers  of  a  promissory 
note  apparently  complete  when  they  sign  it  are  liable  for  an  amount  to 
which  it  may  subsequently  be  raised,  without  their  knowledge  or  con- 
sent on  the  ground  that  they  were  negligent  in  permitting  spaces  to 
remain  thereon  in  which  the  figures  and  words  which  effected  the  in- 
crease could  be  inserted.  In  support  of  his  conclusion,  however,  he 
quotes  some  passages  from  the  opinion  of  Christiancy,  J.,  in  Holmes 
V.  Trumper  (22  Mich.  427)  which  will  bear  repetition  as  suggestive 
of  some  of  the  reasons  why  the  forgery  of  a  promissory  note  should  not 
be  held  to  create  a  contract,  which  the  party  sought  to  be  charged 
never  consciously  made  himself  or  authorized  anybody  else  to  make  in 
his  behalf.  Speaking  of  the  alleged  negligence  in  leaving  spaces  on 
the  note,  Mr.  Justice  Christiancy  said :  "  The  negligence,  if  such  it 
can  be  called,  is  of  the  same  kind  as  might  be  claimed  if  any  man,  in 
signing  a  contract,  were  to  place  his  name  far  enough  below  the 
instrument  to  permit  another  line  to  be  written  above  his  name  in 
apparent  harmony  with  tiie  rest  of  the  instrument  j  *  *  *  "When- 
ever a  party  in  good  faith  signs  a  complete  promissory  note,  however 
awkwardly  drawn,  he  should,  we  think,  be  equally  protected  from  its 
alteration  by  forgery  in  whatever  mode  it  may  be  accomplished;  and 
unless,  perhaps,  when  it  has  been  committed  by  some  one  in  whom 
he  has  authorized  others  to  place  confidence  as  acting  for  him,  he  has 
quite  as  good  a  right  to  rest  upon  the  presumption  that  it  will  not 
be  criminally  altered,  as  any  person  has  to  take  the  paper  on  the  pre- 
sumption that  it  has  not  been  ;  and  the  parties  taking  such  paper 
must  be  considered  as  taking  it  upon  their  own  risk,  so  far  as  the 
question  of  forgery  is  concerned,  and  as  trusting  to  the  character  and 
credit  of  those  from  whom  they  receive  it,  and  of  the  intermediate 
holflers." 

While  a  general  reference  to  the  cases  cited  and  reviewed  by  Chief 
Justice  Gray  in  Greenfield  Savings  Bank  v.  Stowell  (supra)  will 
suffice,  there  are  some  later  decisions  to  which  attention  may  be  called. 
In  Knnxville  Nat.  Bank  v.  Clark  (T)!  Iowa,  264)  will  be  found  a 
strong  and  well-reasoned  opinion  against  holding  a  parly  to  a  note 
which  has  been  fraudulently  raised,  after  it  left  his  hands,  lial)le  for 
negligence,  because  when  he  executed  the  instrument  there  were  spaces 
left  tliereon  (not  being  obvious  blanks  designed  to  be  filled)  which 
would  yx'rmit  of  forgery.  The  trial  court  had  rendered  judgment 
against  tho  mnkor  for  tin-  amount  of  the  note  as  rai.sed  from  $10  to 
$110  on  a  finding  of  negligence  in  leaving  a  space  before  tho  word 
"ten"  and  the  figures  "10."  "On  this  ground,"  said  the  Supreme 
Court  of  Iowa,  "  the  court  proceeded  and  the  derision  is  based  on  the 
reasoning  of  the  civil  lawyers.  But  could  it  be  anticipated  that  such 
negligence  would  car.se  another  to  commit  a  crime,  and  can  it  he  said 
a  person  is  negligent  who  does  not  anticipate  and  provide  against  the 


r>v'<?  DlSi'llAlKiK   Ol-   INSTRUMENT.  [ART.    IX. 

tliousaiul  ways  throiiijjli  or  \)\  wliicli  criiiu'  is  comiiiiltod  ?  Is  it,  not 
ro(]uiring  of  tlio  ordinarv  husinoss  man  iimic  (liliuciicc  than  can  he 
maintained  on  principle,  or  is  practiealtic,  if  lie  is  re<|uire(l  lo  proteet 
and  guard  liis  business  transactions  so  (hat  lie  cannot  he  held  liahle 
for  the  criminal  acts  of  another.  Tf  so.  why  should  not  the  negligence 
of  the  owner  of  goods  which  are  stolen  excuse  the  hntia  fide  ])ur- 
chaser?"  And  referring  to  the  argument  that  such  a  measure  of 
liability  is  re(|uire(l  to  promote  the  free  inttTchauge  of  commercial 
paper  (a  view  which  sccius  to  have  been  influential  in  (he  IV'iin- 
sylvania  case  of  ilarranl  v.  Iladdan)  the  court  well  said:  "At  the 
present  day  negotiable  pa])er  is  not  ordinarily  freely  received  from 
unknown  persons.  Forgeries,  however,  are  not  confined  to  such.  But 
the  neeessities  of  trade  and  commerce  do  not  require  the  law  to  be 
so  construed  as  to  compel  a  person  to  perform  a  contract  he  never 
made  and  which  it  is  proposed  to  fasten  on  him  because  some  one  has 
committed  a  forgery  or  other  crime." 

In  Burrows  v.  Klunk  (70  Md.  451)  the  Maryland  Court  of  Appeals 
emphasizes  the  distinction  between  a  note  in  blank  as  to  the  amount, 
when  signed  and  delivered  to  another  for  use,  and  a  note  complete  on 
its  face  when  signed  and  delivered,  in  which  has  been  written  the  sum 
payable,  the  date,  time  of  payment  and  name  of  the  payee.  "  Tn  such 
case,"  it  is  held,  "there  can  be  no  inference  that  the  defendant  author- 
ized any  one  to  increase  the  amount,  simply  because  blank  spaces  \vere 
left  in  which  there  was  room  enough  to  insert  a  larger  sum." 

No  one  questions  the  proposition  that  where  a  party  to  commercial 
paper  intrusts  it  to  another  with  a  blank  thereon  designed  to  be  filled 
up  with  the  amount  such  party  is  liable  to  a  bona  fide  holder  of  the 
instrument  for  the  amount  filled  in,  though  it  be  larger  than  was 
stipulated  with  tlie  person  to  whom  immediate  delivery  was  made. 
(Van  Duzer  v.  Howe,  21  N.  Y.  531.)  So,  also,  a  note  executed  with 
a  blank  therein  for  a  statement  of  the  place  of  payment  is  not  avoided 
in  the  hands  of  a  bona  fide  holder  for  value  by  the  insertion  in  the 
blank  of  a  place  different  from  that  agreed  upon  by  the  original  parties. 
(Redlich  v.  Doll,  54  X.  Y.  234.)  But  where  there  is  no  blank  for 
that  purpose  when  the  note  is  indorsed,  the  insertion  of  an  obligation 
to  pay  interest  is  a  material  alteration  which  invalidates  the  instrument 
as  against  the  indorser.  (McGrath  v.  ClarJc,  56  N.  Y.  31.)  Tn  the 
case  last  cited  the  note  when  indorsed  ended  with  the  word  "  at," 
followed  by  a  space  in  whicli  the  maker,  after  indorsement,  inserted  a 
place  of  payment,  adding  the  words  "with  interest;"  but  no  sug- 
gestion appears  to  have  been  made  that  because  the  space  left  was  large 
enough  to  allow  the  insertion  of  these  words,  the  indorser  was  negligent 
and  could  be  charged  with  the  amount  of  the  note,  including  the 
interest,  on  that  ground.  On  the  contrary,  as  the  law  then  stood,  he 
was  relieved  of  all  liability  whatever  as  the  effect  of  the  unauthorized 
alteration.     Now,  however,  under  the  Negotiable  Instruments  Law 


I.    3.]  ALTERATION.  623 

(§  205)   he  would  be  liable  on  the  paper  according  to  its  original 
tenor. 

To  sustain  the  judgment  in  the  case  at  bar  in  view  of  the  instruc- 
tions under  which  the  issues  were  submitted  to  the  jury,  we  must  hold 
that  the  indorser  of  a  promissory  note,  the  amount  of  which  has  been 
fraudulently  raised  after  indorsement,  by  means  of  a  forgery,  is  liable 
upon  the  instrument  in  the  hands  of  a  bona  fide  holder,  for  the  in- 
creased amount,  because  of  negligence  in  indorsing  the  same  when 
there  were  spaces  thereon  which  rendered  the  forgery  easy,  though 
the  note  was  complete  in  form.  To  do  this  would  be  to  create  a  i 
contract  through  the  agency  of  negligence;  for  the  action  is  not  in/ 
tort  for  daiiiairis.  luif  upon  llic  contnut  ns  cxjin'sscd  In  flm  note.  Rut 
apart  from  anv  (jiicstiim  as  to  tlie  form  in  which  the  indorser  is 
sought  to  be  charged,  I  am  of  opinion  that  no  liability  on  the  part 
of  the  indorser  for  the  amount  of  such  a  note  as  raised  can  be  predi- 
cated simply  upon  the  fact  that  such  spaces  existed  thereon.  This 
conclusion  I  base  upon  the  authorities  to  that  effect  which  I  have 
already  discussed  and  upon  what  seem  to  me  to  be  considerations  of 
sound  reason  independent  of  judicial  authority.  An  averment  of 
negligence  necessarily  imports  the  existence  of  a  duty.  What  duty 
to  subsequent  holders  of  n  })roinissory  note  is  imposed  by  the  law 
upon  a  person  who  is  requested  to  indorse  the  paper  for  the  accommo- 
dation of  the  maker  and  who  complies  with  such  request?  It  is  a 
complete  instrument  in  all  respects  —  as  to  date,  name  of  payee,  time 
and  place  of  payment  and  amount.  There  are,  it  is  true,  spaces  on 
the  face  of  the  instrument  in  which  it  is  possible  to  insert  words  and 
figures  which  will  enlarge  the  amount  and  still  leave  the  note  ap- 
parently a  genuine  instrument  —  in  other  words,  there  is  room  for 
forgery.  On  what  theory  is  the  indorser  negligent  because  he  places 
hie  name  on  the  paper  without  first  seeing  to  it  that  these  spaces  are 
80  occupied  by  cross  lines  or  otherwise  as  to  render  forgery  less 
feasible?  It  can  only  be  on  the  theory  that  he  is  i)ound  to  assume 
that  those  to  whom  he  delivers  Ihe  pnyier  or  into  whose  hands  it  may 
conie  will  be  likely  to  commit  a  ciinic  if  if  is  comparatively  easy  to  do 
fio.  I  deny  that  there  is  any  such  presumption  in  the  law.  Tt  would 
be  a  stigma  and  reflection  upon  the  characier  of  the  mc^rcantile  com- 
munity and  constitute  an  intolerable  reproach  of  which  they  might  well 
complain  as  without  justification  in  practical  experience  or  the  con- 
duct of  business.  That  there  are  miscreants  who  will  forge  com- 
mercial paper  by  raising  the  amount  originally  stated  in  the  instru- 
ment is  too  true  and  is  evidenced  by  the  cases  in  the  law  reports  to 
which  we  have  Imd  occasion  to  refer;  but  that  such  misconduct  is 
the  rule,  or  is  so  general  as  to  justify  the  presumption  that  it  is 
to  be  expected  and  that  business  men  must  govern  themselves  accord- 
ingly, has  never  yet  been  asserted  in  this  state,  and  T  am  not  willing 
to  sanction  any  such  proposition  either  directly  or  by  implication.    On 


634  DISCHARGE  OF   INSTRUMENT.  [ART.    IX. 

the  contrary,  the  presumption  is  that  men  will  do  right  rather  than 
wrong.  (See  Ih-odish  y.  Hliss,  35  \i.  32(5.)  As  was  said  by  Judge 
Cullen  in  CrUfni  v.  Chcmual  Nat.  Bank-,  (171  N.  Y.  21!i,  221),  it  is 
not  the  law  that  the  drawer  of  a  oheck  is  bound  so  to  prepare  it  that 
nobody  else  can  suceessfully  (ainjKT  with  it.  Neither  is  it  the  law 
that  the  indorser  of  a  promissory  note  complete  on  its  face  may  be 
made  liable  for  the  consequences  of  a  forgery  thereof  simply  because 
there  were  spaces  thereon  which  rendered  the  forgery  easier  than  would 
otherwise  have  been  the  case. 

1  think  the  judgment  of  the  Appellate  Division  should  be  reversed 
and  a  new  trial  granted,  with  costs  to  abide  the  event. 

Cullen,  Ch.  J.,  Gray,  Haight,  Werner,  Hiscock  and  Chase, 
J  J.,  concur.  ,  ''■•  -^  i 


,^ 


.Judgpietjt  reversed,  etc. 


§  205  NOLL  V.  SMITH.  ' 

64  Indiana,  511.—  1878. 

Action  against  maker  by  indorsee.  Defense,  that  the  notes  had 
when  executed  a  condition  annexed  that  they  were  not  to  be  paid 
unless  defendant  sold  machines  equal  to  the  amount  of  the  notes, 
and  that  the  notes  had  been  altered  by  cutting  off  the  portion  contain- 
ing the  condition.     Judgment  for  plaintiff. 

NiBLACK,  J.  [After  stating  the  facts.]  — We  understand  the  gen- 
eral rule  to  be  that  the  removal  or  detachment  of  a  material  con- 
dition annexed  to,  or  forming  a  part  ot,  a  negotiable  note,  without 
the  knowledge  or  consent  of  the  maker,  will  ordinarily  be  a  sufficient 
defence  to  such  note,  even  in  the  hands  of  an  innocent  holder,  and 
especially  when  such  removal  or  detachment  is  made  under  circum- 
stances which  put  the  purchaser  of  the  note  fairly  upon  his  inquiry 
as  to  the  altered  condition  of  the  note,  and  this  we  construed  to  be 
the  doctrine  of  the  case  of  Cochran  v.  Neheher  (48  Tnd.  459),  cited 
and  discussed  by  the  appellant;  but  that,  when  the  note  and  con- 
dition are  negligently  so  executed  by  the  maker  that  the  condition 
may  easily  be  removed,  without  in  any  manner  mutilating  or  defacing 
the  note,  and  the  note  is  thus,  without  objection,  put  in  circulation 
in  that  form,  the  maker  cannot  be  heard  to  deny  his  liability  to 
pay  the  note  in  the  hands  of  an  innocent  holder,  notwithstanding 
the  condition  may  have  been  detached  from  it  before  such  innocent 
holder  became  the  owner  of  it.  Such  was,  in  substance,  the  decision 
of  this  court  in  the  case  of  Cornell  v.  Neheker  (58  Ind.  425).  See, 
also  Woolen  v.  Ulrich  (64  Ind.  120),  approving  and  following  that 
case. 

2  This  case  is  reported  with  notes  in  21  L.  N.  S.  402,  and  in  16  A.  &  E,  Ann, 
Cm.  770.  — C. 


I.  3.] 


ALTEfiATION,  625 


Upon  tlie  authority  of  these  last  named  cases,  the  judgment  in 
his    case  will  have  to  be  attirmed. 

The  judgment  is  atfirmed,  with  costs.' 


§  205   Brown  v.  Reed,   79   Pa.   St.   370.  — 1875.     The  original 
instrument  was  as  follows  : 

North  East  April,  3d,  1873. 

Six  months  after  date  I  promise  to  pay  to  J.  B.  Smith  or  bearer   fifty    dollars   when    I   sell    by 

order    Two     Hundred    and     Fifty                       Dollars  worth  of  Hay  and  Harvest  Grinders, 

lor     value     received,      with     legal     interest,      without  appeal,  and  also  without 

defalcation  or  stay  of  execution 

T.  H.  Brown.     Agent  for  Hay  and  Harvest  Grinders. 


3  Such  an  alteration  is  material  and  will  prevent  recovery  by  bona  fide  hold- 
ers. Scofield  V.  Ford,  56  Iowa,  370;  ^Vait  v.  Pomeroy,  20  Mich,  425;  Benedict 
V.  Cowden,  49  N.  Y.  396;  Gerrish  v.  Glines,  56  N.  H.  9;  Stephens  v.  Dams,  85 
Tenn.  271.  Megligtnce  of  the  maker  may,  however,  estop  him  from  setting  up 
the  alteration.  Harvey  v.  Smith,  55  111.  224;  Heibel  v.  Vauyhan.  69  111.  257; 
Fhelan  v.  Moss,  67  Pa.  St.  59;  Zimmerman  v.  Rote,  85  Pa.  St.  188.  — H. 

(Under  §  205  of  the  Negotiable  Instruments  Law.  the  holder  in  due  course 
is,  of  course,  permitted  to  recover  on  the  instrument  "  according  to  its  original 
tenor."  See  Bothell  v.  Schweitzer,  120  N.  VV.  (Neb.)  1129.  A  note  to  this  case 
in  22  L.  N.  S.  263,  .says  in  part:  "Prior  to  the  adoption  of  the  uniform 
Negotiable  Instruments  Law,  which  permits  a  bona  fide  holder  not  a  party  to 
the  alteration  of  the  instrument  to  recover  according  to  its  original  tenor, 
it  seems  that  the  detachment  of  a  paper  originally  attached  to  a  bill  or  note, 
and  modifying  the  terms  thereof,  either  had  the  effect  to  render  the  instrument 
void,  even  in  the  hands  of  a  subsequent  bona  fide  holder,  and  prevent  any 
recovery  thereon,  or  to  entitle  such  a  bona  fide  holder  to  recover  according  to 
the  tenor  of  the  bill  or  note,  and  without  reference  to  the  conditions  in  the 
detached  paper.  In  other  words,  the  courts  did  not  adopt  the  middle  ground 
contemplated  by  the  provision  of  the  Negotiable  Instruments  Law  already 
referred  to.  In  some  of  the  cases  holding  that  there  could  be  no  recovery  at 
all,  for  the  reason  that  the  detachment  of  the  paper  constituted  a  material 
alteration  avoiding  the  bill  or  note  even  in  the  hands  of  a  bona  fide  holder, 
the  conditions  contained  in  the  detached  paper  would  themselves  have  prevented 
a  recovery,  so  that  the  result  was  the  same  as  if  the  court  had  been  of  the 
opinion  that  the  bona  fidr  holder  took  the  instrument  subject  to  the  conditions 
in  the  detached  paf.er.  This  fact,  however,  can  .scarcely  limit  the  effect  of  the 
express  language  putting  the  decisions  on  the  other  ground.  A  reference  to 
the  case  note  to  Sationul  Exch.  Rank  v.  Lester,  21  L.  K.  A.  ( N.  S. )  402,  as 
to  the  duty  of  the  indorser,  maker,  or  surety  of  the  commercial  pafKjr  to  see 
that  spaces  are  filled  so  as  to  prevent  raising,  discloses  the  same  tendency  on 
the  part  of  the  courts,  prior  to  the  adoption  of  the  .N'egotialde  Instruments 
Law,  either  to  permit  a  recovery  according  to  tlif  tenor  of  the  instrument  as 
altered,  or  to  deny  a  recf)very  even  iiccording  to  the  original  tenor.  There  Ih 
some  conflict  among  the  courts  as  to  the  efTect  of  the  removal  of  such  a  paper 
upon  the  rights  of  a  stibsequfnt  bona  fide  holder,  some  holding  that  it  viliales 
the  instrument  even  in  the  hands  of  a  bona  fidr  holilrr.  while  others  allow 
a  recovery.  Doubtless  the  facts  with  respect  to  negligence  will  dissipate 
some,  though  not  all,  of  the  a[i[)arent  conflict  among  the  cases  on  this  |(oint." 
See  also  the  note  on  "  Instruments  s«)  executed  that  a  portion  thereof  may  be 
detached  or  altered,"  in  11  Am.  St.  Hep.  317.  —  C] 
NBOOT.  rNBTRITMKNTB  —  40 


6'^(j  DlbCllAKUE  Ot'  liNSTliUiMKNT.  [ART.    IX. 

The  instruniont  olTorcHl  in  evideiuo  was  the  left  hand  portion  of 
the  above,  wliiili  bore  the  inclorseiiu'nt  "J.  B.  Smith."  The  })aper 
luul  lii'i'ii  (lit  in  two  without  Brown's  knowledge,  riaintiff  was  a 
holder  ill  iluf  louise  of  {\\v  iie<;()tiable  portion.  Defendant  offered 
to  prove  ihr  alli'iatitm,  and  1  he  olVcr  was  rejected. 

Held:  '*  Whether  thi'ie  was  ne^li^ente  in  the  maker  was  ejeariy 
a  question  of  I'ai't  for  tlie  juiT.  Tlie  line  of  deiiiareation  between 
the  twd  parts  might  have  been  so  clear  and  disliiul  and  given  the 
instrument  so  unusual  an  appearance  as  ought  to  have  arrested  the 
attention  of  any  |)iu(lrnt  man.  IJiit  it  may  have  been  otherwise.  If 
there  was  no  negligence  in  the  maker,  the  good  faitli  and  absence  of 
negligence  on  the  part  of  the  holder  cannot  avail  him.  The  altera- 
tion was  a  forgery,  and  there  was  nothing  to  estop  the  maker  from 
alleging  and  proving  it.  *  *  .-c  \\'^,  think  then  that  the  evidence 
offered  by  the  defendant  below  should  have  been  received."  * 


II.  Discharge  of  party  secondarily  liable. 

§  201  Mccormick  v.  shea. 

50  Miscellaneous    (N.   Y.   Svt.   ("t.,  App.   T.)    592.  — 1906. 

Appeal  by  the  plaintiff  from  a  judgment  for  the  defendant  and 
also  from  an  order  denying  plaintiff's  motion  for  a  new  trial. 

GiLDERSLEEVE,  J.  —  The  action  is  on  a  promissory  note  against  the 
defendant,  Thomas  J.  Shea,  as  maker,  and  defendant,  Annie  A.  Shea, 
as  indorser.  Said  I'homas  J.  Shea,  the  maker,  does  not  defend  the 
action.  There  is  a  very  sharp  conflict  of  evidence  as  to  the  facts,  and 
the  jury  found  for  the  defendant.  Plaintiff  appeals.  It  is  conceded 
that,  before  maturity,  the  indorsement  of  said  Annie  A.  Shea  was 
canceled.  This  was  done  by  a  representative  of  defendant's  attorney 
who  scratched  out  the  indorser's  name  in  the  presence  of  plaintiff. 
The  parties  were  negotiating  with  respect  to  claims  of  each  against 
the  other,  and  it  is  the  contention  of  defendant  that  as  a  part  of 
a  compromise  plaintiff  consented  to  the  cancellation  of  said  indorse- 
ment. Plaintiff,  on  the  other  hand,  claims  he  never  authorized  such 
cancellation  and  protested  against  the  same.  Tie  further  claims 
that  there  was  no  consideration  for  such  cancellation.  Even  so,  if 
he  did,  in  point  of  fact,  authorize  and  agree  to  this  cancellation,  the 
indorser  was  released,  as  a  person  secondarily  liable  on  a  negotiable 
instrument  is  discharged  "by  the  intentional  cancellation  of  his  sig- 
nature by  the  holder."  Neg.  Inst.  Law,  §  201 ;  Larlnn  v.  Harden- 
hrook,  90  X.  Y.  333;   Schwartzman  v.  Fofit,  94  App.  Div.  474.     The 

*  See  the  preceding  note  as  to  the  effect  of  the  Negotiable  Instruments  Law. 
—  C. 


II.]  DISCHARGE    OF    SECONDARY    PARTY.  62? 

fact  that  the  d'ossing  out  of  the  indorser's  luuiie  was  made  not  by 
the  plaintiJf  personally,  but  by  defendant's  representative  in  his 
presence,  was  a  fact  which  the  jury  might  have  considered  in  deter- 
mining whetlier  the  phiintiff's  or  the  defendant's  version  of  tlie  facts 
was  the  correct  one.  QMiey  believed  the  defendant's  version.  It  is  not 
sufficient  for  the  purpose  of  a  reversal,  on  the  ground  that  the  result 
is  against  the  weight  of  evidence,  that  the  Appellate  Court  may  have 
reached  a  different  conclusion  upon  the  facts  than  that  arrived  at 
by  the  jurv,  if  there  is  sufficient  evidence  to  support  the  verdict.  In 
order  to  justify  a  reversal  it  must  clearly  appenr  that  the  fair  ]ire- 
ponderance  of  proof  is  really  on  tlie  side  of  the  defeated  party.  {Lorenz 
v.  JarJi-son,  SS  Hun.  -iO'i ;  CHiiIdh  v.  Frciir,  107  A])p.  Div.  571.)  In 
the  case  at  t)ar,  thci-c  is  considerable  evidence,  which,  if  believed, 
justifies  the  verdict.  This  evidence  the  jury  were  at  liberty  to  believe, 
and  the  Appellate  Court  does  not  feel  warranted  in  setting  aside  the 
verdict.  The  learned  counsel  for  the  appellant  urges  that  the  court 
erroneously  charged  as  follows:  "Whenever  any  signature  on  a  note 
appears  to  have  been  canceled,  the  burden  of  proof  lies  ujjon  the  party 
who  alleges  the  eancellnt ion  was  made  under  mistake  or  without 
authority;  and,  thereFore,  the  })laintilf  in  this  case  has  the  burden  of 
proof  to  establish  that  fact."  There  was  no  error  here.  The  Nego- 
tiable Instruments  Law,  section  204,  provides  that:  "A  cancellation 
made  unintentionally,  oi-  under  a  mistake,  or  without  the  authority  of 
the  holder,  is  iimperal  ixc  :  Iml  where  an  instrument,  oi'  any  signature 
thereon,  appears  to  have  been  canceled,  the  burden  of  proof  lies  on  the 
party  who  alleges  that  the  cancellation  was  nuide  unintentioiuilly.  or 
under  a  mistake,  or  without  authority."  In  the  ease  at  bar,  tlu^  siir- 
nature  of  the  iiulorser  appeared  to  have  been  canceled,  and  plainlilT 
claimed  it  was  canceled  without  authority.  Th(>  bnideii,  therefore, 
was  on  him  to  show  that  it  was  so  canceled  without  authority.  There 
are  no  other  exceptions  that  require  discussion. 

The  judgment  and   order  appealed    from    must   be   alTirmed,   with 
costs. 


§201  JFA' KIN'S  r.  MACK  l-^XZIE. 

r,     IlI-IK    (AN  ADA.    Q.     H.    .')lt.  —   1S49. 

.T\Mrs  Mf'KKVZlK  made  n  note  payable  to  .Tosepli  Pierson  or  order, 
which  [Mcrson  in(lf)rsed  ;  and  after  him,  John  .lames  McKeir/ie 
(defendant  )  indorsed  to  I'roby,  who  has  since  dieil  leaving  said 
Joseph   Pierson  one  of  bis  executors. 

Pierson  is  now,  as  Proby's  executor,  plaiidifT  in  an  action  against 
defendant  McKenzie.  I'lea,  that  Pierson  is  liable  over  to  defetulant 
in  case  defendatd  should  be  obliged  to  pay.     Demurrer  lo  plea. 

KoiJiNsoN,  C.  J.,  delivered  the  judgment  of  the  court.     *     *     * 


628  DISCIIAHCJI.;   OF   INSTKUMICNT.  [ART.    IX. 

The  plea  does  uot  take  the  exeejition,  tliat  l*ieison  is  discharged 
by  being  made  exeeutor  by  Troby.  It  would  seem  to  be  quite  clear, 
that  if  I'ierson  were  the  maker,  the  debt  would  be  discliarged,  for 
it  would,  as  to  the  creditors,  be  regarded  as  assets  in  his  hands,  as 
executor,  and  so  there  could  be  no  remedy  against  (his  indoi-ser.'' 

We  cannot  hold  the  efTect  to  be  different,  bei-ause  Pierson,  instead 
of  being  maker  of  the  note,  is  an  indorser,  but  ])rior  to  this  defend- 
ant's indorsement.  The  effect  is  the  same  as  if  Pierson  had  paid  the 
debt  to  the  executors,  or  had  been  released  witliout  paynusnt,  after 
which  there  could  be  no  remedy  against  any  subsequent  indorser. 

As  we  see  this  to  he  the  state  of  facts  on  the  record,  we  must  give 
judgment  on  demurrer  for  the  defendant;  for  the  objection  is  of 
that  nature,  that  it  goes  to  the  very  right  of  action  and  cannot  be 
overlooked  by  us.  (4  Scott's  N.  R.  287 ;  .3  Esp.,  c.  46;  2  B.  &  P.  62; 
9  B.  &  C.  130;  4  M.  &  Ry.  22;  Co.  Lit.  264  (b),  note  209;  1  Wil. 
46;  2  Bl.  Rep.  1236;  4  T.  R.  825;  2  Showers,  481;  Story,  Prom. 
Notes. ) 

Per  Curiam.  —  Judgment  for  defendant  on  demurrer.^ 


5  Discharge  by  Operation  of  Law.  —  A  transfer  to  acceptor  or  maker  as 
executor  of  holder  extinguishes  the  paper.  Freakley  v.  Fox,  9  B.  &  C.  130.  To 
the  wife  of  the  acceptor  or  maker  at  common  law.  Abbott  v.  Winchester.  105 
Mass.  115.  Or,  after  the  marriage  of  a  woman  wiio  has  previously,  while  single, 
issued  negotiable  paper,  a  transfer  to  the  husband.  Chapman  v.  Kellogg,  102 
Mass.  246. 

It  seems  that  negotiable  paper  is  not  extinguished  by  a  discharge  in  bank- 
ruptcy or  the  running  of  the  statute  of  limitations,  but  is  revived  by  a  new 
promise  so  that  a  subsequent  transferee  is  entitled  to  enforce  it.  Way  v. 
Sperry,  6  Cush.    (Mass.)   238,  citing  cases  contra. 

So  a  debt  barred  by  law  is  a  sufficient  consideration  for  a  subsequent  bill  oi 
note  given  for  its  payment.  Wi.iHzenus  v.  O'Fallon,  01  Mo.  184;  Giddings  v. 
Gidditigs,  51  V^t.  227;  Stafford  v.  Bacon.  25  Wend.  (N.  V.)  384;  Mull  v.  Van 
Trees,  50  C"al.  547;  In  re  Merriman,  44  Conn.  587. 

A  statutory  bar  to  the  enforcement  of  the  considii'ation  is  not  a  bar  to  the 
enforcement  of  the  bill  or  note,  e.  g.,  the  statute  of  frauds.  Jones  v.  Jones,  6 
M.  &  W.  84;  Edgerton  v.  Edgerton,  8  Conn.  G;  Paul  v.  fitackhouse,  3S  Pa.  St. 
302.  Contra:  Hooker  v.  Knah,  20  Wis.  511  ;  Combs  v.  Baicman,  10  Barb.  (N. 
Y.)   573   (semble).     Cf.  Raubitschck  v.  Blank,  80  N.  Y.  479.  —  H. 

«  Any  voluntary  act,  or  perhaps  omission,  of  the  holder  which  discharges  a 
prior  party  (principal)  will  discharge  a  subsequent  party  (surety).  Allow- 
ing statute  of  limitations  to  run  in  favor  of  principal  or  prior  party. 
Auchampaugh  v.  Schmidt,  70  Iowa,  G42;  Bridges  v.  Blake.  lOG  Ind.  332; 
Shutts  V.  Fingar,  100  N.  Y.  539.  Contra:  Viilars  v.  Palmer,  07  111.  204; 
Bull  V.  Coe,  77  Cal.  54;  Banks  v.  State,  62  Md.  88;  Moore  v.  Gray,  26  Oh. 
St.  525.  Bringing  an  action  against  prior  party  resulting  in  judgment  for, 
and  consequent  discharge  of,  such  prior  party.  Ames  v.  Maclay,  14  Iowa, 
281;  Baker  v.  Merriam,  97  Ind.  539;  State  v.  Coste,  30  Mo.  437.  But  a 
discharge  of  a  prior  party  by  mere  operation  of  law  will  not  discharge  the 
surety.  Discharge  in  bankruptcy.  Phillips  v.  Wade,  66  Ala.  53 ;  Lackey  v. 
Bteere,  121  111.  598;  Post  v.  Losey,  111  Ind.  74;  Cochrane  v.  Gushing,  124 
Mass.  219;  Linn  v.  Tlamilton.  34  X.  J.  L.  305:  TInll  v.  Fowler,  6  Hill  (N.  Y.) 
830.     Discharge  by  war.     Bean  v.  Chapman,  62  Ala.  58.  —  H. 


li]  DISCHARGE   OF   SECONDAHY    PARTY.  629 

§  201  JOSLYN  V.  EASTMAN. 

46  Vermont.  25S.  —  1873. 

Action  on  a  note  of  which  Hall  was  maker  and  defendant  surety. 
Hall's  administrator  had  tendered  payment  to  plaintiff,  which  had 
been  refused.    Judgment  for  defendant. 

The  opinion  of  the  court  was  delivered  by  — 

RoYCE,  J.  *  *  *  The  important  question  is,  whether  the  de- 
fendant can  avail  himself  of  the  benefit  of  the  tender  which  the  jury 
have  found  was  made  to  the  plaintiff.  The  obligation  of  the  surety 
being  accessory  to  that  of  the  principal,  the  surety  could  not  be  called 
upon  as  long  as  the  principal  had  done  all  that  could  be  legally  re- 
quired of  him  in  the  performance  of  the  contract.  The  tender  which 
the  jury  have  found  was  made,  was  legally  sufficient,  and  would  have 
been  available  as  a  defense  in  any  suit  the  plaintiff  might  have  insti- 
tuted seeking  a  recovery  out  of  the  estate  of  Hall,  and  we  think  it  is 
equally  available  to  the  defendant.  When  a  debtor  tenders  payment 
of  the  debt  for  which  the  surety  is  obligated,  and  the  creditor  declines 
to  receive  it,  he  thereby  discharges  the  surety.  The  judgment  of  the 
county  court  is  affirmed.  ^ 


g  201  EOCKA^TLLE  BAXK  v.  HOLT. 

58  Connecticut,  520. —  1890. 

Action  against  the  defendant  a?  indorser  of  sundry  notes  and  bills 
of  exchange;  l)rought  to  the  Superior  Court  in  Tolland  county,  and 
tried  to  the  court  before  Torrance,  J.  Facts  found  and  judgment 
rendered  for  the  plaintiff,  and  appeal  by  the  defendant.  The  ca.se  is 
fully  stated  in  the  opinion. 

Avdpkw.s,  C.  J.  —  'I'he  L.  V>.  Smith  Rubber  Conipany,  a  corporation 
doing  business  at  Sctauket,  Xew  York,  being  in(lei)ted  to  the  defend- 
ant, gave  him  three  promissory  notes,  and  accefded  three  bills  of  ex- 
change, representing  such  indebtedness  and  aggregating  in  the  whole 
something  more  than  five  thou.sand  dollars.  All  of  the  notes  and  bills 
were  payable  to  the  order  of  the  flefendant,  were  by  him  indorsed, 
and  at  his  requ<'st  were  <liseounted  for  his  benefit  by  the  plaintiff. 
Shortly  thereafter  the  Rubber  Company  failed.  That  failure  com- 
pelled the  defendant  to  go  into  insolvency.  The  plaintiff  jiresented 
its  elaim  against  his  insolvent  estate  and  received  a  dividen<1  thereon. 
The  defendant  having  sinee  that  time  acquired  other  property,  the 
plaintiff  brought  this  suit  and  attached  such  other  property.    Since  the 

T  Accord:  F!rari>  v.  Van  Dusm.  2H  Mirh.  ^H}  :  ftpurnmn  v.  Smilha.  114  Tnd. 
463.     Contra:   Clark  v.  tixcklcr,  04   N.   V.  231.  — H. 


630  lilSlHAlttiK  OF   1N8TKL.M1;NT.  [aut.   IX. 

briiifjing  of  this  suit  tlie  plaint  ill",  in  toininon  with  nearly  all  the 
iTeilitors  of  the  L.  1>.  Smith  K'nlihci'  (.'Dinjjan}',  including  the  defend- 
ant, signed  an  agreenienl  uliiih  is  fully  st't  out  in  the  finding,  but 
wliieh  it  is  not  necessary  hvw  to  icpi-at.  l<\)r  the  purposes  of  the  pres- 
ent discussion  it  is  sutruicnt  to  say  that  that  agreement  provided, 
among  various  other  things,  tliat  the  i  retlitors  of  the  rubber  company 
siiouKl  assign  their  claims  to  certain  ])('i'sons  called  a  reorganizing 
committee,  and  that  this  comiiiittci'  should  pi'oceed  to  reorganize  the 
company  and  should  issue  to  each  of  the  several  creditors  in  payment 
for  their  respective  claims  the  stock  of  the  reorganized  com|)any, 
which  the  i-reditors  agreed  to  accept.  When  the  ])laintiff  signed  the 
agreement  it  added  to  its  signature:  —  "reserving  all  rights  against 
R.  G.  Holt,  or  against  his  estate,  or  assignee  for  the  honedt  of  his 
creditors."  These  words  did  not  appear  in  the  body  of  the  instru- 
ment. 

The  defendant  insists  that  by  signing  the  agreement  the  plaintifT 
assigned  all  its  idaims  against  the  L.  B.  Smith  Hubher  ('om])any  to 
the  reorganizing  committee,  and  that  as  he  is  liable  to  tlic  plaintiflf 
only  as  a  surety  for  that  company  the  assignment  of  the  claim  against 
the  prinei})al  debtor  discharges  him. 

That  an  unqualified  release  of  a  principal  debtor  will  be  a  dis- 
charge also  of  the  surety  is  admittedly  good  law.  The  plaintilT,  bow- 
ever,  claims  that  by  the  reservation  appended  to  its  signature  it  is 
not  affected  by  that  rule.  The  defendant  cites  two  cases,  either  of 
which  by  its  terms  fully  supports  bis  contention.  But  the  authority 
of  each  of  these  cases  is  greatly  weakened,  if  not  entirely  overturned, 
by  later  decisions  in  tbe  same  jurisdiction.  Webb  v.  Uetvitt  (3  Kay 
&  Johnson,  -!3S),  is  substantially  overruled  by  Green  v.  Wijnn  (L.  R.  7 
Eq.  Cas.  31,  and  L.  TJ.  4  Cb.  Appeals,  204),  and  Farmers'  Banl-  v. 
Blair  (44  Barbour,  fill),  by  Morgan  v.  SwUJi  (70  N.  Y.  545)  ;  Colvo 
V.  Davies  (73  N.  Y.  211)  ;"  Nat.  Bank  v.  Bigler  (83  N.  Y.  51),  and 
Shutts  V.  Fingar  (100  N.  Y.  530.) 

It  is  stated  in  De  Colyar  on  Principal  and  Surety  (  IIH),  that  such 
a  reservation  as  was  made  by  the  plaintiff  ))revents  there  being  any 
discbarge  of  the  surety,  and  gives  as  authority:  (Krarsleij  v.  Cole. 
16  Mees.  &  Wels.  128;"  WyJce  v.  Rogers,  1  De  G.  M.  &  G.  409;  Boaler 
V.  Mayor,  19  C.  B.  N.  S.  76,  84;  On-en  v.  no7nan,  4  IT.  L.  Cases,  997; 
and  Close  v.  Close,  4  De  G.  M.  &  G.  176.  See,  also,  Tohey  v.  Ellis, 
114  ^fass.  120;  Kemvorthy  v.  Savycr,  125  Id.  28;  Bunk  v.  Linrherger, 
83  X.  Car.  454;  Morse  v.' Huntington,  40  Yt.  493;  Uagey  v.  Uill'.  75 
Penn.  St.  108;  Mueller  v.  Dobsrhueiz,  89  Til  176.)  The  weight  of 
autbority  seems  to  us  to  bo  strongly  adverse  to  tbe  defendant's  claim. 

There  is  anotber  view  of  tbe  case  which  makes  it  clear  that  tbe  de- 
fendant is  not  entitled  to  a  discbarge  by  reason  of  tbe  plaintiff's  feign- 
ing tbe  agreement.     Whenever  a  creditor  gives  time  to,  or  makes  a 


n.]  DISCHARGE    OF    SECONDARY    PARTY.  631 

new  contratt  with  the  principal  debtor,  of  whicli  new  contract  the 
surety  has  knowledge  and  to  which  he  assents,  he  is  not  thereby  dis- 
charged. {Adants  v.  IVa?/,  3'^  Conn.  160;  Codies  v.  Estes,  31  Vt.  653; 
Smith  V.  Winter,  4  Mees.  &  Wels.  454.)  The  composition  agreement 
was  beneficial  to  all  the  creditors  of  the  L.  B.  Smith  Rubber  Company, 
provided  all  entered  into  it.  The  defendant  and  his  trustee  in  insolv- 
ency signed  it  before  the  plaintiff  did.  It  was  obviously  for  the  ad- 
vantage of  each  that  the  other  should  sign.  Without  some  such  ar- 
rangement neither  could  ever  hope  for  any  payment  from  that  com- 
pany. With  such  an  arrangement  there  was  a  cliance  that  they  might 
both  be  paid  in  full.  The  plaintiff  signed  with  the  knowledge  that 
the  defendant  and  his  trustee  had  previously  signed.  A  composition 
deed  implies  not  only  an  agreement  of  the  debtor  with  each  of  his 
creditors,  but  also  an  arrangement  by  each  creditor  with  each  of  the, 
others.  The  signing  of  such  a  deed  by  any  creditor  is  in  some  meas- 
ure a  request  to  all  the  others  to  sign  also.  The  circumstances  of  this 
case  show  pretty  clearly  that  the  defendant  knew  of  and  assented  to 
the  act  of  the  plaintiff  in  signing  the  agreement. 

There  is  no  error  in  the  judgment  complained  of. 

In  this  opinion  the  other  judges  concurred.  * 


§  201  CONTINENTAL  LIFE  INSURANCE  CO.  v.  BARBER. 
50  Connecticut,  567.  —  18S3. 

Carpenter,  J.  —  This  is  an  action  against  the  executors  of  the 
estate  of  the  late  Gardner  P.  Barber,  deceased,  who,  when  in  life,  in- 
dorsed a  note  for  $8,000.  The  Superior  Court  found  the  facts  and 
rendered  judgment  for  the  plaintiff.  The  defendants  appealed.  The 
reconl  present^  three  (piostions. 

1.  Was  the  indorser  discharged  by  the  act  of  the  j)laintiff?  The 
note  fell  due  July  20th,  1874.    On  the  22d  of  October,  187 1,  the  maker 

8  Onp  who  takos  a  bill  as  a  holder  in  due  ooursp.  and  afterwards  learns 
that  the  drawer  is  the  prinei|i;ii  and  the  aeeomniodation  aceeptor  tlie  surety, 
may  nevertlieless  release  the  drawer  without  tlierehy  dischar;,M"H  the  ac- 
ceptor. Fmtum  V.  Pncnck,  5  Taunt.  19'2;  I'nrnrrrs',  etc..  Rk.  v.  lUithbonr, 
26  Vt.  10;  lloirnni  Co.  v.  UV/r/inion.  (i  Hosw.  ( N.  Y.)  280;  Stephrm  v. 
Mononijahrln  Hank.  SS  Pa.  St.  l.')7;  DivrrKy  v.  Moor.  22  111.  .3.10.  Contra: 
Ewin  V.  Laumstrr.  fi  B.  &  S.  571;  Lnrjf  v.  Lofton.  20  Tnd.  .324;  Cnnnitinn 
Bank  v.  Coumbe.  47  Mioh.  358;  If  all  v.  Capilnl  Hank.  71  C;a.  715;  flhrlton  v. 
Hiiril.  7   K.   T.  40.1;    Weslrrrrlt  v.   Frrrh.  S.T   N.  J.   Kq.  451. 

But  if  there  are  two  joint  and  several  makers  of  a  note.  and.  after  learning 
that  one  is  surety  for  the  other,  tlie  holder  releases  or  jjives  time  to  the  prin- 
cipal, the  surety  is  disehareed.  fluhhartl  v.  Curnry.  04  N.  Y.  457;  Harris  v. 
BrookH,  21  Pick.  Ht5 ;  Whiirhuusr  v.  Hannnn.  42  X.  H.  51;  Flynn  v.  Mudd,  27 
III.  323.     See  2   Daniel   on   Neg.   In.nt.,   §§    1322-1.338.  —  II. 


632  DiSCUAUciK  1)1.'    INiSl'UUMKNT.  [aHT.    IX. 

paid  $-1,000,  which  was  duly  indorst'd  on  tlie  note.  In  Doceinber,  fol- 
lowing, boing  urged  to  pay  the  balance,  and  not  being  al)le  to  do  so, 
ho  executed  another  note  for  the  sum  of  $!,0()0,  jiayable  to  the  order 
of  the  plaintitT,  on  demand,  with  interest  semi-annually,  and  (,'.\ecuted 
a  mortgage  of  certain  real  estate  to  secure  the  payment  thereof;  and, 
having  caused  the  same  to  be  recorded,  delivered  it  with  the  note  to  the 
plaintiff,  without  the  knowledge  of  Barber.  The  plaintiff  accepted 
the  note  and  mortgage  as  additional  security,  but  not  in  payment  or 
satisfaction  of  the  original  note  or  any  part  thereof. 

The  claim  is  that  the  legal  effect  of  accepting  the  note  and  mort- 
gage was  to  give  time  to  the  maker  of  the  note  for  $8,000,  and  so  dis- 
charge the  indorser. 

The  law  is  well  settled,  hardly  requiring  repetition,  much  less  the 
citation  of  authorities,  that  in  order  to  discharge  the  indorser  by  giv- 
ing time  to  the  maker  there  must  be  a  contract  to  that  effect,  express 
or  implied ;  that  is,  tiie  holder  must  have  put  it  out  of  his  power  for 
the  time  being  to  proceed  against  the  maker.  The  indorser  cannot  be 
deprived  of  the  right,  even  for  a  short  time,  to  pay  the  holder  and  pro- 
ceed forthwith  against  the  maker  for  his  indemnity.  The  holder  may 
not,  during  the  time  for  which  he  has  agreed  to  extend  credit,  bring 
a  suit,  for  that  would  be  a  breach  of  his  contract.  He  may  not  ac- 
cept payment  from  the  indorser  and  tliereby  subject  the  maker  to  an 
immediate  suit  by  the  indorser,  for  that  would  violate,  if  not  the  letter, 
certainly  the  spirit  of  liis  contract.  Hence  such  a  contract  operates  to 
discharge  the  indorser. 

But  here  is  no  express  contract,  and  we  think  none  can  be  implied. 
rt  is  expressly  found  that  the  second  note  was  taken  as  additional 
security  for  the  balance  due  on  the  original  note  and  not  in  satisfac- 
tion of  it  nor  as  a  substitute  for  it.  Both  notes  were  liable  to  be  sued 
at  any  time,  the  one  being  overdue  and  the  other  on  demand.  Of 
course,  the  indorser  could  have  paid  the  first  note  and  could  at  once 
have  brought  a  suit  against  the  maker.  He  was  also  entitled  to  the  ad- 
ditional security,  and  could  at  once  have  brought  a  suit  on  that  note, 
and  could  also  have  proceeded  to  foreclose  the  mortgage.  Instead  of 
being  prejudiced  by  the  transaction,  it  was,  in  theory  at  least,  a  benefit 
to  him. 

The  only  features  of  tlie  transaction  which  give  any  color  to  the 
defendant's  claim  are  the  facts  that  the  collateral  note,  although  on 
demand,  was  on  interest  payable  semi-annually,  and  was  secured  by 
a  mortgage;  and  it  is  urged  with  considerable  force  that  these  circum- 
stances indicate  an  understanding  between  the  parties  that  that  note 
was  to  run  at  least  six  months.  They  certainly  indicate  that  the 
parties  contemplated  that  it  might  run  six  months,  but  that  possi- 
bility does  not  change  the  character  of  the  note  and  convert  it  from  a 
note  payable  on  demand  to  a  note  payable  on  time.     It  was  still  a 


II.]  DISCHARGE   OF    SECONDARY    PARTY.  633 

note  due  presently,  and  might  be  sued  at  onetj  by  the  payee,  and  the 
indorser  of  the  prior  note  might  at  any  moment  have  placed  himself 
in  a  position  to  sue  it. 

The  supposed  analogy  to  notes  ordinarily  taken  by  savings  banks, 
insurance  companies,  etc.,  does  not  hold  good.  The  object  in  those 
cases  is  to  loan  money,  to  make  investments ;  the  object  here  was  to 
give  additional  security  to  a  loan  previously  made  and  long  since  over- 
due, and  which,  we  may  add,  was  of  a  doubtful  character.  Tn  the 
former  cases  the  payee  contemplates  a  present  loan  of  money  to  con- 
tinue for  an  indefinite  time  in  the  future ;  in  the  latter  he  is  endeavor- 
ing to  collect  a  loan  previously  made.  It  may  be  a  breach  of 
fair  dealing  to  attempt  to  collect  a  note  of  the  former  de- 
scription at  once,  but  it  by  no  means  follows  that  it  would  be  such  a 
breach  to  attempt  to  collect  one  of  the  latter  description.  Moreover, 
the  very  object  of  making  a  note  payable  on  demand  is  that  the  holder 
may  collect  it  at  any  time  if  he  sees  good  reason  for  doing  so;  and, 
legally  speaking,  he  is  the  sole  judge  of  the  sufficiency  of  the  reason  ; 
and  that  applies  to  the  notes  referred  to  as  well  as  to  the  note  in  this 
case;  so  that  the  analogy,  even  if  it  exists,  or  so  far  as  it  does  exist, 
does  not  avail  the  defendants.    *     *    * 

There  is  no  error  in  the  judgment  of  the  court  below.  ® 


§  201  BRICK  V.  FREEHOLD  NATIONAL  BANK. 

37  New  Jersey  Law,  307.  —  1875. 
The  opinion  of  the  court  was  delivered  by 


Dalrimple,  J.  —  The  defendant  in  this  case  is  sued  as  indorser  of 
a  promissory  note.  The  defense  is,  that  the  plaintiffs,  the  holders  of 
the  note,  received  from  the  maker  a  conveyance  of  certain  property 
as  collateral  security  for  the  payment  of  the  note,  and  that  because  of 
their  failure  to  soil  the  collaterals  and  appropriate  the  proceeds  of  the 
sale  to  the  lifpiidation  of  llic  debt,  couplci]  with  llic  fact  that  the  prop- 
erty held   as  eolhiicral,   bad   somcwlint    (Irprccintcil    in    viiliic,   bclwccii 


•The  aprppmpnt  for  delay  must  be  binding  upon  the  linldor  in  r)r(kT  to 
operate  as  a  diseharpe  of  the  indorser.  Mrhrworr.  v.  I'mnvU,  12  Wheat. 
(U.  S.)  554;  Hmith  v.  Erunn,  77  N.  Y.  Am-,  Cary  v.  White,  52  N.  V.  13S. 
The  takinp  of  a  n<"\v  note  or  bond  paynble  at  a  future  day  is  oon^trtiod  as 
BiifTirient  evidenee  of  a  bindinp  aprecnuTit  to  suspend  the  enforcement  of  (he 
nriprinal  oblipation  nnfil  the  maturity  of  the  new  obligation.  English  v. 
Dnrlry,  2  Hosanq.  &  V.  (il -.  Uuhhnnl  v.  (lurnry,  f>4  N.  Y.  ■l.')7 :  Siihrurrk  v. 
Anchor  Bank.  Ill  Pa.  St.  187;  IhnviUnn  v.  Prouty,  .'iO  Wis.  ri92.  l?nt  a 
reservation  of  rights  npainst  the  surety  is  efTeetive.  Tnhry  v.  EUis,  114  Mass. 
120;  llnqry  v.  ftill,  75  Pa.  St.  lOH;  Huprr  v.  lilnkr,  148  Til.  4fi5 ;  Hnhirr  v. 
fjorinfj.  fi  f'nsh.  (Mass.)  537;  NatinnnI  linvk  v.  fiiylrr,  83  N.  Y.  51.  Kx- 
tension  to  the  maker  of  time  to  answer  in  an  action  broiight  by  the  holder, 
is  not  an  extension  of  time  of  paynu-nt.  Grrman- American  Bank  v.  Ninyara, 
etc.,  Co.,    13    App.   Div.    (N.   Y.)    450. —  R. 


634  DlSCllAKGK   or    INSIUUMKNT.  |  ART.    IX, 

the  tiiiio  of  tho  maturity  of  the  iioto  and  the  ('0111111011001110111  of  the 
suit,  tho  right  of  action  as  against  the  (Icrtiidant,  who  is  an  accommo- 
dation indorscr,  is  lost.  Tliis  i)ro|)i)sition  cannot  he  maintained.  Tt 
is  well  settled  that  mere  delay  hy  the  creditor  to  sue  the  principal 
debtor  will  not  discharge  the  surety,  for  the  obvious  reason  that  the 
surety  may  at  any  time  discharge  his  obligation  to  the  creditor,  and 
thus  made  the  principal  his  debtor.  The  same  rule  holds  when  col- 
laterals are  ])ledged  hy  the  principal  debtor.  The  surety  may  at  any 
time  after  the  del)t  becomes  due  and  owing,  discharge  it  and  take  the 
collaterals.  The  law  implies  no  contract  on  the  part  of  the  creditor 
to  proceed  on  the  collaterals  before  he  can  sue  the  surety.  Nor  are 
the  rights  of  the  parties  affected  by  the  fact  that  the  collaterals  have 
depreciated  between  the  time  of  the  maturity  of  tiie  debt,  for  pay- 
ment of  which  they  were  pledged,  and  the  commencement  of  suit 
against  the  surety.  These  principles  are  recognized  as  sound  law  by 
the  Court  of  Appeals  of  New  York,  in  the  well-considered  case  of 
Schroeppell  v.  Shaw,  reported  in  3  Comstock,  446,  5  Barb.  580.   *   *   * 

Rule  to  show  cause  should  be  discharged.  ^ 


§  201  WOLSTENHOLME  v.  SMITH. 

34  Utah,  300.—  1008. 

Action  on  promissory  note  payable  to  the  order  of  Joseph  P.  Me- 
geath  and  signed  by  Grant  H.  Smith  and  J.  E.  Darmer,  the  defendants 
in  this  action.  The  note  was  indorsed  to  James  Megeath,  and  this  ac- 
tion is  brought  by  his  administrator. 

Straup,  j.  *  *  *  The  defendant  Darmer,  answering  the  com- 
plaint, alleged  that  his  co-defendant,  Smith,  was  the  principal  debtor; 
that  he  (Darmer)  received  no  part  of  the  loan  or  consideration  for 
which  the  note  was  given,  and  that  he  signed  it  only  as  surety,  which 
facts  were  known  to  both  Joseph  P.  and  James  Megeatli  when  tlie  note 
was  executed;  that  by  a  binding  agreement  Smith,  and  the  holder  of 
the  note,  extended  the  time  of  payment  to  October,  1902,  without  his 
knowledge  or  consent;  that  no  demand  was  made  upon  him  for  pay- 
ment until  more  than  four  years  after  the  note  became  due ;  and 
that,  by  reason  of  the  extension  of  time  and  of  the  delay  in  payment, 
he  was  prevented  from  protecting  and  securing  himself.     The  court 

1  If  a  secured  creditor  part  with  the  securities,  the  surety  is  discharged. 
2  Daniel   on  Nep.   Inst.,   §   1311. 

In  New  York  tho  doctrine  prevails  that  a  surety  may  call  on  the  creditor 
to  proceed  promptly  against  the  principal,  and  failure  to  do  so  will  dis- 
charge the  surety  to  the  extent  of  the  loss  sufforrd  by  the  delay.  Pnin  v. 
Packard,  13  Johns.  174;  .AVirrowb  v.  Hale,  90  N.  Y.  326,  320.  But  the  doc- 
trine does  not  extend  to  indorsers  for  value.  Trimble  v.  Thorne,  16  Johns. 
152;   'Nevccomb  v.  Hale,  supra.  —  H. 


II.]  DISCHARGE    OF    SKCONDAKY    PARTY.  635 

found  the  facts  substantially  as  alleged  in  the  answer,  but  as  conclu- 
sions of  law  found  that  the  defendant  Darmer  was  a  maker  and  pri- 
marily liable  on  the  note,  and  therefore  rendered  judgment  against 
him.     From  this  judgment  the  defendant  Darmer  has  appealed. 

There  is  no  doubt  that  under  the  de(,'isions  of  this  court  prior  to 
the  enactment  of  chapter  83,  p.  122,  Laws  1899,  relating  to  negotiable 
instruments,  the  facts  alleged  in  the  answer  and  found  liy  the  court 
constituted  a  defense,  and  discharged  Darmer.  It  was  the  law  gen- 
erally in  this  country  that  a  binding  agreement  between  the  principal 
and  holder  of  a  negotiable  instrument,  whereby  the  time  of  its  pay- 
ment was  extended,  relieved  the  surety,  though  he  apparently  signed 
as  maker,  if  the  holder  had  knowledge  or  notice  that  he  was  in  fact 
a  surety.  It  is,  however,  contended  by  the  respondent  that  the  hvw 
in  this  respect  has  been  changed  by  the  act  in  question.  On  the  other 
hand,  the  appellant  contends  that  it  has  not  been  changed,  and  that 
the  law  in  this  regard  is  now  as  it  was  before  the  euactment.  We 
cannot  agree  with  the  appellant  in  this  contention.  The  Xegotiable 
Instruments  Law  enacted  in  1899  is  like  that  of  the  Bills  of  Exchange 
Act  of  1882  of  England,  and  of  the  Xegotial)le  Instruments  Law  of 
New  York,  adopted  in  1897,  and  of  about  19  other  states. 
The  particular  sections  pertinent  to  the  question  are: 
[Quoting  §§  29,  fiO,  03,  119,  120  and  192  of  the  Utah  statute.]  • 
By  subdivision  G  of  section  120^  it  will  be  seen  that  a  person  sec- 
ondarily liable  on  the  instrument  is  discharged  by  an  ngreemont  bind- 
ing on  the  holder  to  extend  the  time  of  paymoni.  If,  tlierofore,  the 
appellant  was  only  secondarily  and  not  prinmrily  linblc  ow  Ihc  instru- 
ment, he  is  discharged.  Otherwise  not,  unless  the  instrument  was  dis- 
charged. Section  192*  makes  a  person  primarily  lial)le  on  the  instru- 
ment who  by  the  terms  of  the  instrument  is  absolutely  re(|uired  to 
pay  it.  And  by  section  29  ^  an  accommodation  party  in  fact  is  liable 
on  the  instrument  to  the  holder,  notwithstanding  such  holder  at  tiie 
time  of  the  taking  of  the  instrument  knew  him  to  be  only  an  accom- 
modation party.  Messrs.  Eaton  &  Ciill)ert,  autliors  of  a  recent  work 
on  negotiable  paper,  in  considering  the  Negotiable  insliiinieiits  Law 
in  question,  say  in  section  ]2:)r:  "  Tiie  statute  oidy  provides  for  the 
discharge  by  an  extension  of  time  f)f  a  person  secondarily  liable  on 
the  instrument.  By  the  terms  of  the  statute  a  ])erson  is  primarily 
liable  who  by  the  terms  of  tiie  instrument  is  absolutely  recpiired  to  ]tay 
the  same.  All  others  arc  secondarily  liable.  An  accommodation  maker 
or  acceptor  is  absolutely  liable  on  the  instrument  to  a  holder  for  value, 
notwithstanding  such  holder  at  the  time  f)f  taking  the  instrument 
knew  him  to  be  only  an  accommodation  party.     It  would  seem  to  fol- 

2  \.   v.,  §§   5.5,   no,   11.1,  200,  201.  nn<I   3.  —  C. 

»x.  Y.,  §  201.  — r. 

4N.   Y..  §  .1.  —  C. 

BN.   Y.,  §   55. —  C. 


♦».'?(»  DISClIAIiCK   OF    INSTUUMKNT.  [ART.    IX. 

low  that  the  statute  has  disposed  of  the  contlii't  of  autliority  upon  this 
question  by  holdintj  the  aeeoinnioihition  aeeeptor  or  maker  to  his  ap- 
parent eiio:a>;enient  as  a  prineipal  debtor,  and  making  him  liable,  not- 
withstanding an  indulgence  given  to  the  endorser  or  drawer  for  whose 
benefit  he  beeame  a  party  to  the  instrument." 

The  same  question  raised  here  was  eonsidered  in  the  ease  of  Cellers 
V.  Meacliem,  4!)  Or.  186,*  and  the  conelusLon  was  there  reached  that, 
under  the  new  law,  an  aecommodation  maker  was  primarily  liable,  not- 
withstanding any  knowledge  the  holder  of  the  instrument  might  have 
had  as  to  his  relationship  with  the  principal.  To  the  same  effect  are 
the  cases  of  Vanderford  v.  Farmers'  &  Mechanics'  Nat.  Bank,  105 
Md.  164,^  and  National  Citizens'  Bank  v.  Toplitz,  81  App.  Div.  503. * 


« This  case  is  reported  in  13  A.  &  E.  Ann.  Cas.  997,  with  note  entitled, 
"  Discharge  of  accommodation  joint  maker  by  extension  of  time  to  co-maker." 
See  ne.xt  note.  —  C. 

T  This  case  is  reported  in  10  L.  N.  S.  129,  with  note  entitled  "  Effect  under 
Negotiable  Instruments  T^aw  of  extension  of  time  to  principal,  to  relea.se 
one  who,  on  tlie  face  of  the  instrument,  is  y)rimarily  liable,  but  who  is  in 
fact  a  surety." 

For  notes  on  Cellars  v.  Meachem,  49  Or.  186,  and  Vanderford  v.  Farmers', 
etc..  Bank,  105  Md.  104,  see  7  Col.  Law.  Rev.  432,  5  Mich.  Law  Rev.  G83, 
and  12  Law  Notes,  122.  Referring  to  these  two  decisions,  a  note  in  47  Am. 
Law  Reg.,  N.  8.,  at  page  343,  says:  "Not  the  least  interesting  thing  about 
these  decisions  is  the  fact  that  such  an  interpretation  was  foreseen  and 
warned  against  by  Mr.  Ames  in  his  famous  controversy  with  Brewster  when 
the  act  was  passed.  He  says,  ('Comments  and  Criticisms  upon  the  Nego- 
tiable Instruments  Law,  14  Harvard  Law  Review,  241'),  with  reference  to 
section  120  sub-sections  .5  and  6  fN.  Y.,  §  2011  that  'another  .sub-section 
should  be  added,  to  the  effect  that  an  accommodation  acceptor  or  maker, 
although  the  party  primarily  liable  on  the  instrument,  will  be  discharged 
if  the  holder,  with  knowledge  of  the  accommodation,  releases,  or  by  a  valid 
agreement  undertakes  to  give  time  to  the  accommodated  drawer  or  in- 
dorser.'  And  he  adds:  '  The  authorities  are  almost  unanimous  on  this  point 
also,  although  in  a  few  jurisdictions  the  accommodation  party  must  resort 
to  equity  for  his  relief.'  The  failure  to  add  the  sub-section  recommended  t)y 
him  rendered  possible,  and  perhaps  inevitable,  the  conclusion  reached  i'l 
these  1907  decisions.  I  say,  '  perhaps  inevitable.'  for  a  possible  way  out 
has  been  indicated  by  Mr.  Thomas  A.  Street  in  a  brief  note  on  these  same 
cases  in  the  eleventh  volume  of  Law  Notes,  page  105.  He  criticizes  the 
decisions  in  unmistakable  terms,  and  points  out  the  introduction  of  clan-e 
4  in  section  119  fN.  Y.,  §  200] — 'by  any  other  act  which  will  dischnrg<> 
a  simple  contract  for  the  payment  of  money.'  —  contemplated  the  arising  of 
situations  unprovided  for  by  a  definite  section  of  the  statute,  and  rendered 
possible  their  decision  upon  common  law  principles.  This,  he  says,  is  such 
a  situation.  .  .  .  Mr.  Street  ends  his  article  with  a  short  but  cogent 
invective  against  what  he  calls  smooth  but  dangerous  defining  clau.ses  (of 
the  nature  of  section  192  [N.  Y..  §  3]),  in  all  uniform  codes,  which  clog 
the  free  play  of  judicial  interpretation.  Certainly  if  such  a  clause  permits 
a  construction  contrary  to  the  design  of  the  draughtsmen  (see  address  of 
A.  M.  Eaton  —  Reports  of  American  Bar  .Association  for  1907  —  page  1164) 
and  subversive  of  a  fundamental  and  generally  accepted  rule  of  the  common 
law,   the  moral    is  not  without   its   point."  —  C. 

*  Affirmed  expressly  on  other  grounds  in   178  N.  Y.  464.  —  C. 


n.]  DISCHARGE    OF   SECOXDABT    PABTY.  637 

These  cases  are  criticized  by  the  appellant.  He  contends  that  the  pro- 
visions of  subdivision  4  of  section  119/  which  provide  that  a  negotiable 
instrument  is  discharged  "  by  any  other  act  which  will  discharge  a  sim- 
ple contract  for  the  payment  of  money,"  was  disregarded.  He  urges 
that  a  contract  of  suretyship  is  a  simple  contract,  and  the  making  of 
a  binding  agreement  for  an  extension  of  time  to  the  principal  debtor 
has  long  been  held  to  be  an  "  act  "  sufficient  to  discharge  the  contract 
of  the  suret}',  and  hence  the  facts  alleged  in  the  answer  and  found 
by  the  court  were  clearly  a  defense  which  is  included  in  the  general 
language  of  subdivision  4  of  section  119.'  To  reach  such  a  conclu- 
sion one  must  assume  that  the  appellant  was  not  primarily,  but  sec- 
ondarily, liable  on  the  instrument  —  the  very  thing  to  be  decided  — 
and  the  law  that  a  person  signing  a  negotiable  instrument  is  not  bound 
by  his  apparent  obligation,  but  by  his  obligation  in  fact,  has  not  been 
changed.  Under  the  new  law  the  appellant's  apparent  engagement 
as  a  maker  and  principal  debtor  is  his  real  and  actual  engagement. 
He  signed  the  note  as  a  maker.  By  the  terms  of  the  instrument,  he 
is  absolutely  required  to  pay  it.  The  statute  in  such  case  makes  him 
an  actual  principal  and  renders  him  primarily  liable,  though  in  fact 
he  received,  with  the  knowledge  of  the  holder,  no  part  of  the  considera- 
tion, and  only  signed  the  note  for  the  purpose  of  lending  his  name  to 
another.  Having  signed  the  note  as  an  apparent  maker  and  principal 
debtor,  he  cannot  thereafter  be  heard  to  assert  the  contrary  so  as  to 
affect  his  liability  on  the  instrument.  Section  119  deals,  not  with  the 
discharge  of  parties,  but  with  the  discharge  of  the  instrument.  Of 
course,  if  the  instrument  is  discharged,  all  parties  are  discharged, 
whether  primarily  or  secondarily  liable.  If  it  was  meant  that  a 
binding  agreement  to  extend  the  time  of  payment  should  discharge  a 
person,  whether  primarily  or  secondarily  liable,  and  is  included,  as  is 
contended,  in  the  general  language  of  subdivision  4  of  section  119, 
then  there  was  no  occasion  to  insert  the  provision  in  section  120  mak- 
ing it  a  ground  of  discharge  as  to  a  person  secondarily  liable.  Rein? 
so  inserted  strongly  indicates  that  it  was  the  intention  to  make  it  a 
ground  to  discharge  a  person  only  secondarily  liable,  and  not  a  per- 
son primarily  liable.  While  an  agreement  binding  on  the  holder  to  ex- 
tend the  time  of  payment  was  generally  held  sufficient  to  discharge  a 
surety,  yet  it  did  not  discharge  the  instrument,  nor  the  principal 
debtor.  It  was  not  such  an  act  as  will  discliarge  the  instrument  itself 
within  the  meaning  of  subdivision  4  of  section  119. 

Being  of  the  opinion  that  the  appellant  is  primarily  liable  on  the 
instrument,  and  that  the  facts  alleged  in  the  answer  and  found  by 
the  court  do  not  con.<«titute  a  di.=c)iarge  of  the  instrument,  it  follows 


•  N.    Y..    <5    20O.  —  r. 

•  This  is  thp  same  rontpntion  a«  wns  mncjc  by  Prnfpssor  Street  in  hi--^  article 
in  11  Law  Notes,  105.     See  note  7,  ante.  —  C. 


638  DISCHARGE  OF    1  NSTHU  M  KNT.  |  ART.    IX. 

that  the  judgment  of  tlic  court  below  must  be  allirnied,  with  costs.    It 
is  so  ordered. 

McCarty,  C.  J.,  and  Fhick,  J.,  concur.^ 


-■  111  ;ulditi(in  to  tlir  cases  cili-ti  in  tlio  principal  caao,  see  also  tlie  following 
cases  in  accmti :  Hradlcy  IJngin.  d-  Mfg.  Co.  v.  Ilcyburn,  56  Wash.  628;  and 
Kichartis  v.  Market  Exch.  Nat.  Bk.,  81  Oh.  St.  348  (criticized  at  length  in 
8  Ohio  Law   Reporter,  25-80). 

In   liichanis   v.    Market   Exch.    Rank,   supra,   the   additional    argument   was 
made  that  tlie  extension  of  time  worked  a  material  alteration   in  the  instru- 
ment, thus  discharging  the  defendant.     On   tliis  proposition,  Spear,  J.,  said: 
"The  question   thus   made   is:      Does  the  extension   work   a  'material   altera- 
tion' in  the  instrument?     The  argument  in  support  of  the  claim  that  it  does 
is   rested   upon   the   proposition   laid   down   by   Brandt   on   Suretyship   as   fol- 
lows:     'Any    agreement    between    the    creditor    and    i)rincipal    which    varies 
essentially  the  terms  of  the  contract  by   which  the  surety   is  bound   without 
the   consent  of  the   surety   will    release   him    from    responsibility.'      We   think 
this    does    not    satisfy    the    requirements    of    the    sections    above    quoted.       It 
does   not   imply   an   alteration   of  the   instrument.      It   is   but   a   statement   of 
the  equitable   rule  hereinbefore   stated   and   considered.      It  must   be   borne   in 
mind,   as   an   absolute   controlling  condition,   that   it   is   the    instrument   itself 
which  the  foregoing  sections  of  the  statute  treat  of,  not  the  contract  which 
the  instrument  is  intended  to  evidence.     This,  it  seems  to  us,  is  .so  manifest 
on    tlie   face   of   the   printed   word   that   it   cannot   be   more   clearly    shown    by 
comment,  and  hardly  needs  authority  in  its  support.     Nevertheless  the  ques- 
tion  has   been   considered   by   text-writers   and   passed   upon   in   a   number   of 
adjudicated  cases.     See   I  Bouvier,  Law  Dictionary,  153,  under  title    '  Altera- 
tion,' and  authorities  there  cited;   also  2  t'yc.  of  PI.  &  Pr.   142,  under   head 
of    'Alteration    of    Instruments,'    and    authorities    there    cited;    also    2    Am.    & 
Eng.  Ency.  of  Law,   184,  under  same  head,  and  authorities.     Again,  if  these 
sections  were  intended  to  apply  to  a  condition  other  than  a  physical   altera- 
tion of  the  instrument,  we  would  expect  to  find  the  provisions  under  section 
3175J,    [N.    Y.,    §    200]    where    the    subject    of    discharge    of    instruments    is 
specially    treated,    and    we    would    not    expect    to    find    it   elsewhere    repeated. 
We   should   be   slow  to   ascribe   careless   and   needless   tautology   to   the   law- 
making body." 

But  in  Northern  State  Bank  of  Grand  Forks  v.  Bellamy,  125  N.  W.  ( N. 
Dak.)  888  (April,  1910),  it  was  held  that  the  defendant,  who  had  signed  a 
note  as  an  absolute  guarantor  of  payment  of  the  same,  and  not  ,as  a  surety, 
was  released  from  liability  on  the  note  by  the  act  of  the  plaintiff  in  extend- 
ing the  time  of  payment  to  the  principal  debtor  without  the  knowledge  or 
consent  of  the  defendant.  It  was  conceded  that  this  was  the  rule  prior  to 
the  Negotiable  Instruments  Law.  As  to  the  efTect  of  this  enactment.  Ells- 
worth, J.,  said:  "The  terms  'primary  and  secondary,'  when  they  apply  to 
the  parties  to  an  obligation,  '  refer  to  the  remedy  provided  by  law  for  en- 
forcing the  obligation,  rather  than  to  the  character  and  limits  of  the  obliga- 
tion itself.'  Kilton  v.  Prov.  Tool  Co.,  22  R.  I.  605.  Therefore,  howev«'r  closely 
analogous  may  be  the  ultimate  liability  upon  the  instrument  of  surety  and 
guarantor,  the  clear  distinction  in  the  character  of  their  respective  contracts, 
and  the  procedure  by  which  their  obligations  must  be  enforced,  operates  to 
place  these  parties  in  difTerent  classes  of  the  persons  liable  as  defined  by  the 
new  law  of  negotiable  instruments.  The  purpose  in  making  a  classification 
not  provided  by  the  former  law  would  seem  to  be  to  strengthen  the  credit  of 
negotiable    paper    by    protecting    the    holder    against    a    claim    that    persona 


'"•]  PAYMENT    BY    SECONDARY    PARTY.  639 

m.  Payment  by  party  secondarily  liable. 

§  202  GARDNER  v.  MAYiYARD. 

7  Allen    (Mass.)   456.  —  1863. 

Contract  against  the  acceptor  of  a  draft  for  $1,000,  drawn  by 
Sandford  C.  Gardner,  in  favor  of  J.  &  C.  Levy  &  Co.,  upon  the  de- 
fendant.    The  draft  Mas  duly  indorsed  and  accepted. 

At  the  trial  in  the  Superior  Court,  before  Allen,  C.  J.,  it  appeared 
that  the  draft  was  protested  for  non-payment,  and  returned  to  Levy 
&  Co.,  and  was  afterwards  returned  to  the  drawer,  who  assigned  it  by 
bill  of  sale  to  the  plaintiff,  with  the  indorsement  of  Levy  &  Co.  remain- 
ing uncancelled.  A  witness  testified  that  he  saw  the  draft  indorsed 
by  one  of  the  firm  of  Levy  &.  Co.,  and  did  not  see  any  money  paid  at 
that  time. 

Upon  these  facts,  the  chief  justice  directed  a  verdict  for  the  de- 
fendant, which  was  accordingly  rendered  ;  and  the  plaintiff  alleged  ex- 
ceptions. 

Metcalf,  J.  —  These  exceptions  must  be  overruled  and  judgment 
rendered  on  the  verdict  for  the  defendant,  upon  the  authority  of  Beck 
V.  Rohley,  1  IL  Bl.  89,  n.  That  case  and  this  are  alike  in  all  par- 
ticulars. In  both,  the  bill  was  made  payable,  not  to  the  drawer's  own 
order,  but  to  a  third  party,  who  indorsed  it,  was  accepted  by  the 
drawee,  but  afterwards  was  dishonored  by  his  refusing  to  pay  it,  and 
was  taken  up  from  the  indorser  by  the  drawer,  with  the  indorser's 
name  remaining  uncancelled.  In  that  case  it  was  decided  that  the 
bill  was  not  negotiable,  and  that  the  drawer  could  not  reissue  it.  And 
that  decision  has  never  been  overruled  or  denied,  but  is  cited  as  estab- 
lished law  in  all  the  books  that  treat  of  bills  of  exchange.  (See,  1 
Staph.  N.  P.  86,3 ;  Story  on  Bills,  §  223 ;  Guild  v.  Eaqer,  17  Mass.  615 ; 
Opinion  of  Patteson,  J.,  in  Williams  v.  Jnivra,  1.5  Ad.  k  El.  N.  S.  505.) 
The  doctrine  of  that  decision  is,  that  a  bill  of  exchange  cannot  be  in- 
dorsed or  negotiated,  after  it  has  once  been  paid,  if  such  indorsement 
or  negotiation  would  make  any  of  the  parties  liable,  who  would  other- 
wise be  discharged.     (Bayley  on  Bills,  6th  ed.  166,  167:  Chit.,  Hills, 


directly  and  absolutely  liable  by  the  terms  of  the  instrument  had  in  fact 
sipned,  not  as  joint  makers,  but  in  some  other  papneity.  As  the  law  now 
stands,  theso  fjiH-Htions  of  primary  and  serondary  liability  are  to  be  resolved 
only  upon  the  faee  of  the  instrument.  All  [if-rsons  by  its  terms  nbsolutciv 
required  to  pay  the  same  may  bf  heM  as  primarily  liable;  all  others,  second- 
arily. When  a  party  on  si^ninp  clearly  indicates  upon  the  in^^trument  the 
capacity  in  which  he  is  willinp  to  be  bounil,  the  holder  in  acce[»tinn  it  cannot 
mi«apprehend  its  true  rjuality.  for  he  then  knows  that  the  party  may  be  held 
in  that  capacity  and  no  other.  .Appellant  sicned  as  puarantor.  and.  as  in 
that  capacity  he  was  secondarily  liable  upon  the  instrument,  he  was  released, 
a-s  under  the  former  law.  by  an  extension  of  time  \n  the  [irincipal  debtor  with- 
out his  assent.  .As  afTeetinp  him  the  principle  poverninp  the  relation  of  JKiMer 
(ind  guarantor  under   the  former   law   is  unchanpcd."  —  ('. 


640  DISCHA1!(JK   OF    INSTKUMENT.  |  ART.    IX. 

]2tli  Am.  0(1.  254,  255.)  As  tlic  lirst  indorser  of  a  bill  is  liable  to 
every  subsequent  bona  fide  holder,  although  the  bill  be  fraudulently 
eireulatod,  it  follows  that  if  he  loaves  his  name  tlioroon,  after  ho  is 
entitled  to  a  iliseliargo,  ho  exposes  himself  to  liability  to  such  holder. 
Therefore  the  bill  is  held  not  to  be  negotiable  in  such  case. 

This  rule  of  law  applies  only  to  cases  in  which  the  negotiation  of 
a  bill  by  the  drawer,  after  he  has  taken  it  up  on  its  being  returned 
to  him  dishonored,  would  expose  a  discharged  party  to  a  new  lia- 
bility. See  (^illoir  v.  Lawrence,  3  M.  &  S.  95 ;  Ihihhard  v.  Jackson, 
4  Bing.  390;  Bayley,  Chit.,  and  17  Mass.  vhi  supra;  Mead  v.  Small, 
2  Greenl.  207.) 

Exceptions  overruled.  * 


§  202  BLENN  v.  LYFORD. 

70  Maine,  149.  —  1879. 

Appleton,  C.  J.  —  This  is  an  action  of  assumpsit  on  the  following 
note :  — 

St.  Albans,  Me.,  Dec.  2,  1871. 
Seven  months  from  date,  value  received,  I   promise  to  pay  M.  E.  Rice,  or 
order,  three  hufldred  dollars,  at  any  bank  in  Bangor. 

H.  H.   Lyfobd. 
fThe  note  was  indorsed  in  blank]   M.  E.  Rice. 

[The  following  words  were  also  on  the  back  of  the  note,  erased  with  ink 
but  legible] :    Holden  without  demand  or  notice.     M.  E.  Rice. 

Granting  the  presumption  that  the  plaintiff  is  a  bona  fide  holder 
for  value  of  the  note  before  maturity,  that  presumption  may  be  over- 
come by  proof. 

It  appears  from  the  testimony  that  the  note  was  indorsed  to  one 
Richardson,  for  value,  in  the  April  following  its  date;  that  it  was  not 
paid  at  maturity,  and  that  about  three  months  after  its  dishonor  he 
delivered  it  to  Rice,  the  payee. 

The  plaintiff  then  received  the  note  in  suit,  when  overdue.  The 
note  remaining  unpaid  after  maturity  was  dishonored,  and  it  was  the 
duty  of  the  indorsee  to  make  inquiries  concerning  it.  If  he  takes  it, 
though  he  gave  a  full  consideration  for  it,  he  does  so  on  the  credit  of 
the  indorser.  He  holds  the  note  subject  to  all  equities  with  which  it 
may  be  incumbered.  As  the  plaintiff  is  the  indorsee  of  a  dishonored 
note,  it  was  competent  for  the  defendant  to  show  that  it  was  an  ac- 
commodation note,  and  that  it  had  been  paid  by  the  party  for  whose 
accommoflation  it  was  given. 

That  the  note  was  for  the  accommodation  of  the  payee  is  abund- 
antly shown  by  his  receipt  of  the  date  of  February  22,  1872,  as  well 
as  by  the  testimony  offered  and  excluded. 

•  Accord:    Price  v.  Sharp,  2  Ired.  Law    (N.  C.)    417.  — H. 


III.]  PAYMENT    BY    SECONDARY    PARTY.  641 

The  note  being  for  the  accommodation  of  Rice,  it  was  his  duty  to 
pay  it.  The  note  being  found  after  dishonor  in  the  hands  of  the  one 
bound  to  pay  it,  the  presumption  is  that  he  paid  it.  (2  Par.  N.  &  B. 
220.)  It  was  competent  to  show  that  in  fact  he  paid  it,  but  the  an- 
swer to  an  inquiry  whether  the  note  was  paid  by  Rice  was  e.xcluded. 
This  was  erroneous. 

Assuming  the  note  to  have  been  paid  by  Rice,  it  was  the  same  as  if 
paid  by  the  maker.  It  was  paid  by  the  party  whose  duty  it  was  to  pay 
it.  The  purpose  for  which  it  was  given  has  been  accomplished.  The 
negotiability  of  a  note  ceases  after  its  payment  by  the  party  who 
should  rightfully  pay  it.  "  Xow  it  cannot  be  denied,  "  says  Dennian, 
C.  J.,  in  Lazarus  v.  Cowie  (43  E.  C.  L.  819),  "  that  if  a  bill  be  paid 
when  due  by  the  person  ultimately  liable  on  it,  it  has  done  its  work, 
and  is  no  longer  a  negotiable  instrument.  *  *  *  But  the  drawer 
of  an  accommodation  bill  is  in  the  same  situation  as  the  acceptor  of  a 
bill  for  value ;  he  is  the  person  ultimately  liable,  and  his  payment  dis- 
charges the  bill  altogether." 

Rice,  when  he  took  up  the  note  in  suit,  had  no  right  of  action 
against  the  maker,  and  could  not  transfer  to  the  plaintiff  any  better 
right  after  maturity  than  he  had.  (Edwd.  B.  &  N.  564;  Fish  v. 
French,  15  Gray,  520  ;  Tncher  v.  Smith,  4  Maine,  415.) 

In  the  cases  cited  by  the  plaintiff  there  are  most  important  differ- 
ences from  the  one  under  consideration.  In  Banl-  v.  Crein  (60  >[.  Y. 
85),  the  plaintiffs  were  the  indorsees  of  the  note  for  value  and  before 
maturity,  and  were  consequently  to  be  protected.  In  Thompson  v. 
Shepard  (12  Met.  311),  it  was  held  that  the  indorsee  of  a  note,  who 
receives  it  for  value  from  the  second  indorser,  after  it  has  been  dis- 
honored by  the  maker,  can  recover  thereon  against  the  maker,  althoufrh 
he  knew  when  he  received  it  that  as  between  the  maker  and  ^\r^\  in- 
dorser it  was  an  accommodation  note.  But  this  is  upon  the  principle 
aflBrmed  by  the  court  in  Woodman  v.  Churchill  (52  Maine,  58),  that 
where  the  first  indorsee  of  a  promissory  note  acquires  a  right  of  action 
against  the  maker,  by  being  a  hnna  fide  purchaser,  without  notice  and 
before  maturity,  he  can  transfer  a  good  title  as  well  after  as  before  the 
note  becomes  due. 


Exceptions  sustained. 


Action  to  stand  for  trial. 


IV.  Payment  for  honor. 

Srk  Akt.  .XV.  post.  py.    707-708. 


♦Accord:    Merrill  v.   First   N.   B.,  94  Cal.   59;    Cottrell  v.    Waikins,   89    Va. 
801.   -IT. 

NEOOT.    INSTItUMENTM     -  41 


ARTICLE  X. 

Bills  OF  ExcHANciK:     Form  and  Intehpretation. 

I.  Form. 

1.  Formal  Requisites  Generally, 

§210  See  Article  II.     Ante,  pp.  34-161. 


2.  The  Drawee  or  Drawees. 
(a)  Mxist  he  certain. 
§210  See  Article  II.     Ante,  pp.  148-150. 

{h)  May  be  joint,  hut  not  alternative  or  successive. 
§  212       TOMBECKBEE  BANK  i-.  DUMELL  &  LYMAN". 

[Reported  herein  at  p.  687.]  ^ 


§  212  JACKSON  V.  HUDSON. 

2  Campbell,  447.  —  ISIO. 

This  was  an  action  against  the  defendant  as  acceptor  of  a  bill  of 
exchange,  which  was  drawn  and  accepted  in  the  following  form : 

London,   30th    December,    1809. 
Two  months  after  date,  pay  to  my  order   157i.,  for  value  received. 

F.  Jackson. 
To  Mr.  I.  Trying 
Accepted,  I.  Irving 
Accepted,  Jos.  Hudson,  payable  at  Mr.  Hudson's,  132  Oxford  street. 

The  first  count  of  the  declaration  stated,  that  the  bill  was  directed 
to  Irving ;  the  second  took  no  notice  of  there  being  any  drawee ;  and 
both  averred  that  the  defendant  accepted  it,  "  according  to  the  usage 
and  custom  of  merchants." 

Garrow  for  the  plaintiff  stated,  and  undertook  to  prove,  that  the 
plaintiff  having  dealings  with  Irving  concerning  the  sale  of  goods, 

1  .An  acceptance  by  some  one  or  more  of  several  drawees,  but  not  by  all,  is  a 
qualified   acceptance.     See  Neg.   Inst.   L.,   §   229,  subsec.   5.  —  H. 

[642] 


I.]  FORM.  643 

refused  to  sell  him  any  more,  unless  the  defendant  would  become  his 
surety;  that  the  defendant  agreed  to  this;  that  goods  to  the  value  of 
157/.  were  in  consequence  sold  by  the  plaintiff  to  Irving;  that  the  bill 
in  question  was  drawn  for  the  price  of  them,  and  that  the  defendant 
with  a  knowledge  of  all  these  facts,  had  put  his  name  upon  the  bill  as 
acceptor.  He  must,  therefore,  be  considered  as  having  accepted  the 
bill  jointly  with  Irving;  and  as  he  had  not  pleaded  in  abatement,  he 
was  separately  liable  in  the  present  action. 

Lord  Ellenborough.  —  If  you  had  declared,  that  in  consideration 
of  the  plaintiff  selling  the  goods  to  Irving,  the  defendant  undertook 
that  the  bill  should  be  paid,  you  might  have  fixed  him  by  this  evidence. 
But  I  know  of  no  custom  or  usage  of  merchants,  according  to  which, 
if  a  bill  be  drawn  upon  one  man,  it  may  be  accepted  by  two.  The  ac- 
ceptance of  the  defendant  is  contrary  to  the  usage  and  custom  of 
merchants.  A  bill  must  be  accepted  by  the  drawee,  or,  failing  him,  by 
some  one  for  the  honor  of  the  drawer.  There  cannot  be  a  series  of 
acceptors.  ' 

The  defendant's  undertaking  is  clearly  collateral,  and  ought  to  have 
been  declared  upon  as  such. 

Plaintiff  nonsuited. 


§  212  Anon.  12  Mod.  447  (1701).  A  bill  of  exchange  was  directed 
to  A,  or,  in  his  absence,  to  B,  and  began  thus :  "  Gentlemen,  Pray 
pay.  "  The  bill  was  tendered  to  A,  who  promised  to  pay  it  as  soon  as 
he  could  sell  such  goods;  and  in  an  action  against  him  for  nonpay- 
ment, the  declaration  was  of  a  bill  directed  to  him  without  any  notice 
of  B,  and  Holt  held  it  well.  ^ 


3.  Referee  in  Case  of  Need. 

§215    fllTTTY  ON  T.ILLS  OF  KXClIAXr.K,  ETC.,  p.  188. 

WrrKN  thf  drawfr  lias  niiv  !if>pr('li('nsi()n  tli:it  tlir  drawee  will  oithor 
not  accept,  or  not  pay  the  bill,  he  may.  as  a  matter  of  precaution,  to 
prevent  the  expenses  and  inconvcnicnres  resulting  from  a  return  of 
the  hill,  require  the  holder  in  sn<h  an  ovcnt.  to  apply  to  a  third  person, 

2  There  Rpems  to  be  no  direct  authority  upon  this  proposition  of  the  Neg. 
Inst.  T/..  §  212.  In  the  cnse  at)ovo  hut  one  drawee  is  named  and  the  con- 
clusion is  that  no  other  person  enn  accept.  Of  course  successive  "  drawees  in 
ca«e  of  ;ieod  "   may   he   nnmed    in   the  hill.      Nep.   Tn't.   T...   §   21.'i.  —  Tl. 

*  Tn  this  case  R.  may  have  heen  a  "drawee  in  case  of  need;  "  if  not.  it  is 
contrary  to  the  statutory  rule.  A  note  cannot  he  made  payahle  hy  two 
makers  in  the  alternative.     Frrrin  v.   Boml,  4   B.  A    .Md.  P)79.  —  II. 


€44  uiLLs  OF  ExriiANQE.  [art,  X. 

named  in  the  bill  for  tliat  purpose.  This  requisition  is  intimated  by 
writing  in  tlie  eorner  of  the  bill,  under  the  drawee's  address,  tliese 

words,  "  Au  besoin  chez  Messrs.  ,  at , "  or,  in  other  words, 

"  In  case  of  need  apply  to  Messrs. ,  at . "     This,  in  effect, 

points  out  one  or  more  persons  whom  the  drawer  is  desirous,  in  case 
of  refusal  or  failure  by  the  drawee,  to  become  parties  to  the  bill,  in  the 
nature  of  an  acceptor  or  payer  for  honor;  and  is  valid  and  usual  on  the 
Continent,  though  we  have  just  seen  that  there  cannot  be  a  series  of 
acceptors.  (1  Pardess.  851,  394,  437-8;  Jackson  v.  Hiuhon,  2  Campb. 
447.)  The  holder  is  bound  to  apply  to  the  parties  so  addressed,*  (1 
Pardess.  438),  and  who  may  accept  and  pay  without  previous  protest, 
in  which  respect  he  differs  from  an  acceptor  supra  protest  (1  Pardess. 
438)  ;  and  the  party  so  paying  has  a  right  to  sue  the  drawer  for  the 
amount.  (1  Pardess.  438.)  It  should  seem,  however,  that  the  intro- 
duction of  these  words  rather  imports  an  apprehension  that  the  bill 
will  not  be  regularly  accepted  or  paid,  and  therefore  tends  to  diminish 
the  credit  which  might  otherwise  be  attached  to  the  bill  without  such 
desire  being  expressed.^ 


n.  Interpretation. 

1.  Bill  Not  an  Assignment  of  Funds. 

§  211  HOLBROOK  v.  PAYNE. 

151    Massachusetts,   383.— 1890. 

Plaintiff  by  "trustee  process"  attached  funds  in  the  hands  of 
the  town  of  Winchester  belonging  to  defendant.  Alexis  Cutting 
intervened  as  claimant  of  the  funds. 

The  town  owed  defendant  $217.27  on  an  account  stated.  Defendant 
gave  Cutting  this  order:  "Winchester,  July  12th,  '88.  Town  of 
Winchester.  Pay  to  the  order  of  A.  Cutting  ninety  and  thirty-two 
hundredths  dollars,  value  received,  and  charge  the  same  to  account  of 
H.  B.  Payne."  He  gave  similar  orders  amounting  to  $65.27  to  four 
other  persons,  who  also  appear  as  claimants.  The  orders  were  all  left 
with  the  selectmen  of  the  town,  where  they  continued  to  remain,  but 
were  never  formally  accepted. 

Holmes,  J.  —  The  defendant  in  this  action  has  been  defaulted,  and 
the  question  before  us  is  whether  the  plaintiff  or  the  claimant  Cutting 


*  This  seems  to  have  been  so  before  the  enactment  of  the  Bills  of  FCxrhange 
Act,  §  15,  and  the  Nof?.  Inst.  L.,  §  215.  Soe  Chalmors,  Bills  of  Exrtiiii?e  Act 
(5th   Pfl.)    pp.   38-39.  — TT. 

5  There  is  little  Enfflish  or  Amprican  authority  upon  the  "  referee  in  case  of 
need."  See  Leonard  v.  Wilson,  4  Tyrwh.  415;  In  re  Leeds  Banking  Co.,  L.  R. 
1    Eq.    1— H. 


n.]  INTERPRETATION.  645 

is  entitled  to  a  certain  part  of  tlie  debt  due  from  the  trustee  to  the 
defendant. 

There  is  no  doubt  that  an  order  for  a  specific  fund,  identified  by 
the  order  itself,  may  be  a  good  assignment.  (Kingman  v.  Perl-ins, 
105  Mass.  111).  We  assume  in  favor  of  the  claimant  that  an  equitable 
assignment  to  him  of  a  part  of  the  debt  would  be  good  as  between 
him  and  the  plaintiff  upon  trustee  process.  {Dana  v.  Third  National 
Bank,  13  Allen,  445,  447;  James  v.  Newton,  142  Mass.  ;}(;(),  374.) 
Our  difficulty  is  to  discover  any  ground  for  saying  that  the  instru- 
ment relied  upon  constituted  such  an  assignment. 

On  its  face,  the  order  given  to  the  claimant  by  the  defendant  does 
not  refer  to  a  particular  fund  or  debt,  but  is  an  ordinary  negotiable 
draft,  or  unaccepted  bill  of  exchange,  drawn  upon  the  town  on  the 
general  credit  of  the  drawer.  An  indorsement  of  the  instrument  by 
the  claimant  would  have  given  the  indorsee  a  right  of  action  in  his 
own  name  against  the  drawer,  if  the  draft  should  be  dishonored.  "Rut 
the  fact  that  the  order  is  a  negotiable  instrument  on  its  face  shows 
that  it  is  not  drawn  against  a  particular  fund.  If  it  were  drawn 
against  a  particular  fund,  it  would  not  be  negotiable.'  (Wheeler  v. 
Sonfher,  4  Cush.  606,  607;  Uarriman  v.  Sanhorn,  4.3  N".  H.  12S.) 

The  case  is  stronger  for  holding  a  check  upon  a  bank  to  be  an  as- 
signment, than  it  is  for  holding  an  ordinary  draft  to  be  so.  A  check 
is  supposed  to  be  drawn  against  a  fund  deposited,  for  which,  to  be 
sure,  the  bank  is  no  more  than  a  debtor;  but  a  debtor  on  the  implied 
term  that  the  creditor  has  a  right  to  split  up  the  debt  at  will,  and  to 
require  part  payments  in  such  amounts,  at  such  times,  and  to  such 
persons  as  he  choo-ses.  In  general,  the  creditor  has  no  riglit  to  draw 
above  the  amount  of  his  deposit,  and  would  be  guilty  of  a  fraud  if  he 
obtained  money  or  goods  for  a  check  knowingly  so  drawn.  Yet  the 
weight  of  authority  is  that  a  clipck  is  not  an  assignment  either  at  law 
or  in  equity.  ^  (liullard  v.  Randall,  1  Cray,  605;  Dana  v.  Tliird  Na- 
tional Bank,  13  Allen,  445,  447;  Attorney-General  v.  Cmitincntal  Life 
Ins.  Co.,  71  N.  Y.  325 ;  First  National  Bank  of  Mount  .Joy  v.  Gish,  72 
Penn.  St.  13;  Hopkinson  v.  Forstcr.  L.  T?.  1!)  Eq.  74;  Srhroeder  v. 
Central  Bank  of  London.  21  W.  R.  710.  S(H'  Larlrdc  Bank  v.  Srlniler, 
120  TT.  S.  511,  514.) 

A  fortiori,  the  same  rule  must  hold  good  of  an  f)r(linnry  dnift  unac- 
cepted, which  does  not  import  the  oxisfoncc  of  a  dcltt  from  llic  dnnvcr 
to  the  drawer,  but  leaves  the  matter  of  I  be  drawee's  reimbursement 
to  such  private  arranficments  as  may  exist  between  the  drawer  and 
himself.  And  so  are  the  decisions:  (Whitney  v.  Fliot  Nat.  Bank, 
137  Mass.  351,  355,  356;  National  Errhanye  Bank  v.  .MrLnan.  73 
Maine,  498,  511 ;  Bank  of  Commerce  v.  Bogy,  44  Mo.  13.     Sec  f^rst 

«Rpp  Neg.  Inst.   h..  fi   22.  —  H. 
T.Sw   N.".    In-t.    I...   §    .TJ.-).  —  TI. 


fill)  nil.I.S    OK    KXCllANCiK.  [aUT.    X. 

Nat.  Bank  of  Canton   v.   Diihiujiw  South wcslern  Railway,  52  Iowa, 
37S.) 

There  is  no  extrinsic  fact  in  the  present  case  whicli  >,nvt's  the  doeu- 
nieiit  a  (litFerent  effect  from  that  which  results  rrorii  its  tenor,  if  it  he 
possihle  that  its  elfect  shouhi  he  varied  hy  paroh  (See  Whitney  v. 
Eliot  Nat.  Bank;  supra;  (Iriffin  v.  Weatherby,  L.  R.  3  Q.  B.  753,  759; 
Fir.tt  Nat.  Bank  of  Canton  v.  Dubuque  ^Southwestern  Railway,  52 
Iowa,  37S.)  The  defendant  had  done  work  for  the  town,  and  his  only 
riijht  to  draw  was  in  respect  of  the  price  of  liis  work.  If  we  assninc 
this  fact  to  have  heen  known  to  all  parties  concerned,  still  it  only 
shows  that  the  town  was  known  to  have  means  of  indemnifying  itself  if 
it  saw  fit  to  pay.  It  does  not  enlarge  the  meaning  of  the  draft  be- 
yond that  which  it  bears  on  its  face,  of  a  general  request  to  the  town  to 
pay.  Even  a  reference  to  a  fund  out  of  which  a  drawee  may  indemnify 
himself  will  not  take  away  the  negotiable  character  of  the  draft.**  We 
may  remark  that  the  concluding  words  of  the  draft  in  question  are 
"  charge  to  account  of."  In  some  of  the  others,  they  are  "  charge  to 
the  account  of,"  which  is  slightly  more  specific.  But  we  do  not  see 
any  sound  distinction  in  favor  of  the  latter.  If  the  town  had  ac- 
cepted the  order,  having  power  to  do  so,  it  would  have  become  liable 
on  a  direct  and  absolute  contract  to  the  claimant,  very  likely  having 
a  right  to  withhold  an  equal  amount  of  its  debt  to  the  defendant.  But 
mere  retention  of  the  draft  was  not  acceptance.®  (Overman  v.  IIo- 
hohen  City  Bank,  2  Vroom,  563.) 

Trustee  charged.    Judgment  for  plaintiff.^ 


2.  Inland  and  Foreign  Bills. 

§  213  YALE  V.  WARD. 

30  Texas,  17.—  18G7. 

The  bill  on  which  suit  was  brought  was  in  these  words,  with  the 
indorsement  of  "  Henderson,  Terry  &  Co.,"  across  the  face  of  the 
note : — 

8  Neg.  Inst.  L.,  §  22;  ante,  pp.  50-54.  —  H. 

9  See  Nef,'.  Inst.  L.,  §  225.  —  H. 

1  As  to  whether  a  bill  is  an  assiirnment  tliere  has  hicii  ii  coiifliet  of  au- 
thority, especially  where  the  bill  is  drawn  for  the  whole  of  the  fiirui.  Sec  1 
Daniel  on  Nep.  Inst..  §§  15-23;  2  Am.  &  Eng.  Encye.  L.  (2nd  ed.),  pp.  1062- 
1004.  That  a  bill  drawn  for  the  whole  of  a  fund  is  not  an  assignment,  see 
f^hnnd  v.  Du  liuisson.  18  Eq.  Cas.  283;  First  N.  B.  v.  Dubuque  fl.  R.  R..  52 
Iowa.  378;  Rush  v.  Footr.  58  Miss.  5;  Bank  v.  Brjfiy.  44  Mo.  15.  But  an 
order  for  a  payment  of  a  particular,  specified  debt  in  full,  is  an  assitrnment. 
Lewis  V.  Bank.  30  Minn.  135;  Brady  v.  Chadbourne,  68  Minn.  117;  Moore  v. 
Davis,  57  Mich.  255.  —  H. 


II.  J  INTERPIM-TATION.  C  i7 

$307.78.  New  Orle.vns.  2d  May.  ISGl. 

On  the  12th  day  of  December,  after  date,  pay  to  the  order  of  C.  Yale,  Jr.  & 
Co.,  $307.78,  value  received,  and  charge  the  same  to  account  of 

Matt.  Wabd. 
To  Messrs.  Henderson,  Terry  &  Co. 

To  it  was  attached  the  usual  formal  protest,  dated  "  United  States 
of  America,  State  of  Louisiana,"  by  a  "  notary  of  the  parish  of  New 
Orleans,  State  of  Louisiana,"  14th  December,  1801. 

Willie,  J.  *  *  *  There  being  no  allegation  to  the  contrary,  we 
must  treat  the  draft  upon  which  this  suit  is  founded  as  a  domestic  bill 
of  exchange.  Neither  the  place  where  the  draft  was  drawn,  nor  where 
it  was  accepted,  is  stated  in  the  petition.  The  instrument  itself,  made 
part  of  the  petition,  purports  to  have  been  drawn  at  New  Orleans ;  but 
there  is  no  averment  that  this  place  is  beyond  the  limits  of  Texas. 
This  court  has  held,  that  it  will  not  take  judicial  notice  of  the  division 
of  other  states  into  towns,  cities,  etc.,  and  that  knowledge  of  the  fact 
that  any  place  is  within  a  different  state  of  the  Union  must  be  derived 
from  the  allegations  of  the  parties  or  the  evidence  contained  in  the  rec- 
ord.    (Andreit's  v.  Hoxie,  5  Tex.  185  ;  4  Tex.  420.) 

The  rights  of  the  parties  to  this  contract,  therefore,  must  be  ascer- 
tained, and  their  liabilities  fixed  according  to  the  law  of  our  own 
state.=    *    *    * 


3.  Bill  TitEATRn  as  Promissory  Note. 
§214  FUNK  r.  BABP.TTT. 

[Reported   herein  at   p.    1 ')().]  i 


2  Accord:  Kearney  v.  Khtfi.  2  P..  &  AM.  HOI  ;  Riqiiin  v.  CnUier.  0  Mo.  ."ifi;^. 
A  hill  drawn  and  dated  in  PhiLTdelpliin.  iinv.iMo  in  London,  hut  r-fti-jilly 
delivered  by  the  drawers  in  London,  is  to  be  treatt-d  us  a  foreiiin  hill  j-i  the 
han<!s  of  a  bona  fide  holder.  Leiniiy  v.  h'alslou.  -JIJ  I';i.  SI.  1.T7.  A  l>ill 
drawn  and  delivered  in  Wiseon-^in.  hut  dated  and  payable  in  Illinois.  1,  an 
inland  hill,  as  between  the  parties.  Strnirlnidqe  v.  liohiusnn,  10  111.  ( ')  (Oil- 
man)   470.  —  H. 

•  "Where  a  party  fninies  his  instrunieiit  in  sneh  a  wav  that  it  is  am- 
biguous whether  it  be  a  bill  of  exchaiif/e  or  a  promissory  note,  the  partv 
holdiii'/  it  is  entitled  to  treat  it  either  as  one  or  the  other,  and  the  plaintifT 
oupht  not  to  be  defeated  by  the  party  who  frnnied  the  instrument  heinj; 
allowed  to  say  that  it  is  a  hill  of  exehansre  "  f  where  such  party  has  had  no 
notice  of  dishonor).  Ktli.i  v.  ftury,  C  H.  4  ('.  4.3.*?.  See  alsf>  fjoyil  v.  Oliver, 
18  Q.  h.  471,  Ihise  v.  Ilu7npas8,  40  Ark.  545;  4  Am.  &  Eng.  Encyc.  Law  (2d 
ed.).   pp.    110-123. —  IL 


ARTICLE  XT. 

Acceptance  of  Bills  of  Exchange. 

I.  Form  and  effect. 

1.  Acceptance  Must  Br  in  Writing  and  Signed  By  Drawee. 

(a)  Writing  and  signature. 

§  220  SPEAR  V.  PRATT. 

2  Hill  (N.  Y.)  582.—  1842. 

Action  against  Pratt  as  acceptor.  Judgment  for  plaintiff.  The 
defendant's  name  was  written  across  the  face  of  the  hill ;  and  the  ques- 
tion was  whether  this  was  such  an  acceptance  as  is  required  hy  statute. 

By  the  Court,  Cowen,  J.  —  Any  words  written  hy  the  drawee  on  a 
bill,  not  putting  a  direct  negative  upon  its  request,  as  "  accepted," 
"  presented,"  "  seen,"  the  day  of  the  month,  or  a  direction  to  a  third 
person  to  pay  it,  is  prima  facie  a  complete  acceptance,  hy  the  law  mer- 
chant. (Bayley  on  Bills,  163,  Am.  ed.  of  1836,  and  the  cases  there 
cited.)  Writing  his  name  across  the  bill,  as  in  this  case,  is  a  still 
clearer  indication  of  intent,  and  a  very  common  mode  of  acceptance. 
This  is  treated  by  the  law  merchant  as  a  written  acceptance  —  a  sign- 
ing by  the  drawee.  "It  may  be,"  says  Chitty,' "  merely  by  writing 
the  name  at  the  bottom  or  across  the  bill;"  and  he  mentions  this  as 
among  the  more  usual  modes  of  acceptance.  (Chitty  on  Bills,  320, 
Am.  ed.  of  1839.) 

It  is  supposed  that  the  rule  has  been  altered  by  1  R.  S.  757  (2d  ed.) 
§  6.  This  requires  the  acceptance  to  be  in  writing,  and  signed  by  the 
acceptor  or  his  agent.  The  acceptance  in  question  was,  as  we  have  seen, 
declared  by  the  law  merchant  to  be  both  a  writing  and  a  signing.  The 
statute  contains  no  declaration  that  it  should  be  considered  less.  An 
indorsement  must  be  in  writing  and  signed  ;  yet  the  name  alone  is 
constantly  holden  to  satisfy  the  requisition.  No  particular  form  of 
expression  is  necessary  in  any  contract.  The  customary  import  of  a 
word,  by  reason  of  its  appearing  in  a  particular  place,  and  standing  in 
a  certain  relation,  is  considered  a  written  expression  of  intent  quite  as 
full  and  effectual  as  if  pains  had  been  taken  to  throw  it  into  the  most 
labored  periphrase.  It  is  said  the  revisers,  in  their  note,  refer  to  the 
French  law  as  the  basis  of  the  legislation  which  they  recommend ;  and 
that  the  French  law  requires  more  than  the  drawee's  name  —  the  word 
accepted,  at  least.  That  may  be  so;  but  it  is  enougli  for  us  to  see  that 
both  the  terms  and  the  spirit  of  the  act  may  he  .'■iitisfied  short  of  that 

[648] 


I.    1.]  FORM    REQUIRED.  «  649 

word,  and  more  in  accordance  with  the  settled  forms  of  commercial  in- 
struments iu  aucilogous  eases.  The  whole  purpose  was  probably  to 
obviate  the  inconveniences  of  the  old  law,  which  gave  effect  to  a  parol 
acceptance. 

New  trial  denied.  ^ 


(b)  Only  the  drawee  can  accept. 

§  220  WALTON  /-.  WILLIAMS. 

44  Alabama,  347.— 1870. 

Action  ajrainst  .Tamos  W.  Walton  as  acceptor  of  a  bill  addressed  to 
James  .1 .  WaJton.  Defendant  offered  to  prove  that  he  signed  as  iii- 
dorser,  but  the  court  excluded  the  evidence.    Judgment  for  plaintiff. 

Saffold,  J.  —  The  only  evidence  that  the  defendant  accepted  the 
bill,  is  his  signature  across  its  face.  It  is  where  the  acceptor's  signa- 
ture is  usually  found,  and  in  the  absence  of  proper  rebutting  testimony 
this  would  be  sufficient  proof  of  the  fact,  if  it  was  directed  to  him,  or 
without  direction  to  anyone.  But  the  name  of  James  J.  Walton  is 
also  found  in  the  position  on  the  bill  usually  occupied  by  the  drawee, 
and  he  must  be  considered  the  drawee  as  well  as  the  drawer. 

Where  a  bill  is  directed  to  a  particular  person,  no  one  bnt  the  person 
to  whom  it  is  directed  can  accept  it,  except  for  honor,  (^fal/  v.  KrlJy 
<£■  Frazier,  27  Ala.  407.)  If  the  defendant  was  an  acceptor,  he  was 
one  supra  protest,  and  his  obligation  was,  that  if  the  bill  was  not  pnid 
by  tbo  drnwoe  upon  duo  propontmont  at  its  maturity,  then  upon  protest 
for  nonpayment,  and  duo  notice  thereof  to  him,  he  won  Id  pay  it.  (Story 
on  Rills  of  Ex.,  §  123;  .3  Wend.  401.) 

There  was  no  proof,  in  this  case,  of  protest  and  notice,  and  for  this 
reason  the  charge  of  the  court  was  erroneous. 

The  plaintitr  was  the  payee.  It  was,  tboroforo,  clearly  competent  to 
show  by  parol  the  intention  of  the  parties,  at  the  time  the  contract  was 


•  By  thp  English  and  Amprican  drcisions  parol  acceptance  of  an  cxistinf^  bill 
is  MifTicicnt.  1  Diiiiicl  on  N<';^'.  Inst,.  §  r)fl4  cl  nrq.;  Svnddrr  v.  Hank,  01  U.  S. 
40(5,  41.3.  In  Enirlnnd,  Hinoo  10  and  20  Virt.,  c.  07,  ilio  arcrptanco  must  ho 
writton  on  tho  bill.  Hills  of  Excbanpc  Act.  §  17,  Hiibscc.  (2).  Tn  the  U.  S. 
whpFP  there  are  statutory  provisions  they  i;<'nernlly  provide  ff)r  an  arceptance 
in  writin}^;  hut  this  n«'fd  not  be  Tij>on  the  bill.  An  acceptance  by  telegraph 
has  been  held  pood,  \orth  Xfrhinnn  Tinnk  v.  flarrrf.suv.  .'il  Ted.  Reji.  lO.S,  noto 
p.  .I."!,  nntr.  See  aNfi  Sji'iuhlitui  v.  A  mhrirs.  48  I'n.  SI.  1  I  1 .  Hut,  l)y  §  'iil. 
of  the  Nep.  Inst.  T,..  the  holder  is  entitled  to  require  the  acceptance  to  Ik? 
written  npon  the  bill;  and  by  §  222  an  extrinsic  acceptance  is  binding  only  in 
favor  of  one  to  whom  it  is  shf>\vn  and  who  takes  the  bill  on  the  f.iitli  tlierenf. 
This  latter  prf)vi>-ion  i"  a  tletmrt'T"  f'om  the  judicial  decisions  iipoi'  this 
point.  {<vnuU1inn  v.  Andrryrn,  48  Pa.  St.  411;  Jonet  v.  Cnuvril  Rluffa  finvfc, 
,34   111,  :<l.'{.  —  Fl. 


650  -  KX^KPTANl'K    OF    IMI.l.S.  |  AKT.    XI. 

eiiterctl  into,  witli  ro<]:anl  to  thoir  several  liahililies  anion;;  lliemselves, 
aiul  tlu'  iflalioii  wliirli  they  wei'i-  to  heai  lo  I  lie  lull  (llniuck  Bank 
at  Mobile  v.  Coleman,  -JO  Ala.  1  10.) 

'I'lie  evideiiee  of  tlie  (U'reiulaiit,  who  was  a  eoiupetent   witness  vinder 
seetion  '-iTOI  of  thi'  IJcn  ised  (ode,  ought  to  have  been  admitted. 

The  judi,niient  is  reversed  and  the  cause  remanded.^ 


§  220  JACKSON  v.  PTTTDSON. 

[h'cpnrtril  herein  at  p.  .] 

(c)   Delivery  Nere.<;sary. 

Ddnavan  v.  Flynn,  IIS  Mass.  5:57.-1875.  Gray,  C.  J.  —  It 
was  rif^htly  held  tliat  the  mere  writin,^  of  the  aeoeptanee  upon  the  bill, 
not  cornniunieated  to  the  drawer  or  holder,  and  the  detention  of  the  bill 
in  the  defendant's  custody,  did  not  bind  him,  or  operate  as  a  payment 
of  his  debt  to  the  drawer,  {('laveii  v.  Dolbin,  Cas.  temp,  llardw.  '^78; 
Jeune  v.  Ward,  2  Stark.  326;  s.  c,  1  B.  &  Aid.  65:^;  Mdson  v.  Harff, 

2  B.  &  Aid.  26 ;  Cox  v.  Troy,  5  B.  &  Aid.  474,  s.  c,  1  Dowi.  &  Ryl.  38 ; 
Overman  v.  Ilohoken  City  Bank,  1  Vroom,  61,  and  2  Vroom,  503.)^ 

2  Accord:  Davis  v.  Clarke,  0  Q.  B.  R.  16;  Fimith  v.  LockriiUje,  8  Rush  (Ky.) 
423.  Tn  Markham  v.  Hazen,  48  Ca.  .')7n,  the  stranger-acceptor  was  lield  as 
guarantor. 

If  a  bill  is  directed  to  an  agent  (A.)  and  accepted  by  liim  in  the  name  of  his 
principal  (X.  Co.,  by  A.),  no  one  is  bonnd;  not  the  ajient,  for  he  has  not 
accepted;  not  the  principal,  for  it  is  not  tlie  drawee.  Walker  v.  Bank,  D  M.  Y. 
682. 

If  a  bill  is  directed  to  a  partnership  (A.  B.  &  Co.)  and  is  accepted  by  one 
partner  in  his  own  name,  it  lias  been  held  that  no  one  is  bound;  not  the  part- 
nership, for  it  has  not  accepted;  not  the  partner,  for  he  is  not  the  drawee. 
Hecnan  v.  .Vasft,  8  Minn.  407.  Contra:  Owen  v.  Van  Vfiter,  20  L.  J.  C.  P.  61. 
Poe  note  p.  306,  ante.  This  is  to  be  distinguished  from  the  case  of  a  bill 
directed  to  two  or  more  drawees  and  accepted  by  one.  See  §  212,  §  229,  sub- 
sec.  5.  —  H. 

3  Acceptance  witl)out  re-delivfry  is  inefTeotive.     Fnund  v.  Importers'   Rank, 

3  Hun  (X.  Y.)  680.  Except  a=!  provided  in  §  22.5.  po.it.  But  =ee  ?  ^mcs' 
Cases  on  Bills  and  Notes,  p.  700.  An  acceptance  once  completed  by  delivery 
is,  in  the  absence  of  fraud  on  the  part  of  the  Iiolder  in  i)rocuring  the  accept- 
ance, irrevocable.  Trent  Tile  Co.  v.  Fort  Drnrborn  .Y.  B.,  54  N.  J.  L.  33,  599; 
Fort  Dearborn  N.  B.  v.  Carter,  152  Mass.  34. —  H. 


1.  2.]  by  separate  instrument,  651 

2.  Acceptance  By  Separate  Instrument. 

§222  FIEST  NATIONAL  BAMv  OF  ATCHISON  v.  COMMER- 
CIAL SAVINGS  BANK. 

74  IvAXSAS,  006.  —  1906. 

Demurrer  to  petition  overruled.  Judgment  for  plaintiff,  and  de- 
fendant brings  error. 

BuRCii,  J.  —  J.  F.  Donald,  having  funds  on  deposit  with  the  First 
National  Bank  of  Atchison,  Kan.,  drew  a  check  upon  it  for  $350,  pay- 
able to  Maria  C.  Donald  or  bearer,  which  he  delivered  to  the  payee. 
The  payee  indorsed  and  delivered  the  check  to  C.  B.  Bennett,  who,  in 
turn,  indorsed  and  delivered  it  to  the  Commercial  Savings  Bank  of 
Adrian,  Mich.  Donald  stopped  payment  of  the  check  before  it  was 
presented  for  payment,  and  the  Michigan  bank  sued  the  Kansas  bank 
for  the  face  of  the  check  and  interest,  claiming  it  had  been  accepted 
in  writing,  and  that  it  had  been  purchased  for  vahie  on  the  faitli  of 
such  acceptance.  The  petition  was  framed  upon  the  theory  that  an 
afceptance  is  disclo.-cd  by  the  following  telegrams: 

"Adrian,  Mich.,  Oct."  15,  IDO.'?.  First  National  Bank,  Atchison, 
Kansas.  Is  J.  F.  Donald's  check  on  you  $350  good  ?  Commercial  Sav- 
ings Bank." 

"  Atchison,  Kas.,  Oct.  15,  1003.  Commercial  Savings  Bank,  Adrian, 
Mich.  J.  F.  Donald's  check  is  good  for  sum  named.  First  National 
Bank." 

Of  course,  there  is  no  dispute  that  the  transaction  is  governed  by 
sections  547  and  5}S,  Cen.  St.  1001,  which  read  as  follows: 

"No  person  within  this  state  shall  be  charged  as  an  acceptor  of  a 
bill  of  exchange,  unless  his  accei)tance  shall  be  in  writing,  signed  by 
himself  or  his  lawful  agent.  * 

"If  such  acceptance  be  written  on  paper  other  than  the  bill,  it  shall 
not  bind  the  acccjitor,  except  in  favor  of  a  person  to  whom  such  ac- 
ceptance shall  liii\('  been  shown,  aiul  who.  in  fnilh  llicrcof,  shall  have 
received  the  bill  for  a  valuable  consideraf if)ii."  ' 

Neither  is  there  any  (lis|)iitr  lliat  llu'  writlm  accc|)tance  contem- 
plated by  the  statute  may  be  mailc  by  telegrams.     (7  Cy<"-  7fi5.) 

The  order  contained  in  a  check  is  for  payment  in  money  instantly 
u[)on  demand.  \o  f»resentat ion  ffir  acceptance  and  no  accef)tance  is 
contemplated,  as  in  the  case  of  an  ordinary  bill  of  exchange.  The  bank 
is  under  no  obligation  to  do  other  than  pay,  and  flic  obligation  to  pay 
runs  to  the  maker,  and  not  to  the  bolder.      If  if   refuse  to  pay  wlien 


•Spp  N.  Y.  Nop.  Tnst.  Lnw.  §  220.  —  f. 
*  See  N.  Y.  Nop.  Ttist.  T.nw.  §  222.  —  C. 


652  ACCEPTANC'K    OF    HILLS.  [AKT.    \I. 

it  has  funds  of  the  maker  in  its  possession  subjt'rt  to  eheek,  thi'  holder 
has  no  ivnieil}  against  the  Inink.     lie  must  look  to  tlie  maker. 

\\  hen  an  ordinal}'  bill  of  exehanye  is  presented  lor  ueeeptance,  the 
drawee  is  under  the  positive  iluly  of  aeeepting  or  refusing  to  aeeept, 
and,  if  aeeeptanee  be  not  plainly  negatived  by  whatever  he  does,  he 
will  be  bound  as  an  aieej)tor,  beeause  aeeeptanee  is  something  eontem- 
plated  by  tiie  bill  itself.  A  retjuest  upon  a  bank  that  it  aeeept  a  cheek 
is  a  request  for  the  i-reation  of  a  legal  relation  between  the  holder  and 
the  bank,  wliolly  without  and  beyond  the  purview  of  the  paper.  If  such 
relation  be  established,  it  imposes  upon  the  bank  a  liability  to  a  party 
to  whom  it  was  not  before  bound  at  all,  and  it  converts  the  privilege 
of  the  bank  to  pay  if  in  funds  into  an  absohite  and  unconditional  duty 
to  pay,  no  matter  what  may  be  the  state  of  the  depositor's  account. 
Any  one  claiming  to  be  the  beneficiary  of  a  contract  of  this  kind  inde- 
pendent of  and  collateral  to  the  check  must  clearly  show  that  the  bank 
intended  to  make  it. 

Neither  law  nor  custom  binds  parties  to  the  use  of  any  set  formula 
in  arranging  an  acceptance.    They  may  choose  their  own  words.     Brev- 
ity is  not  simply  allowable,  it  is  commendable;  but  in  all  cases  there 
must  be  no  doubt  that  an  absolute  promise  to  pay  was  made.     If  the 
transaction  involve  two  writings,  a  proposition  and  a  response,  they 
should  be  construed  together.     The  true  principle  governing  the  in- 
'terpretation  of  communications  like  the  telegrams  l)etvveen  the  parties 
to  this  suit  was  grasped  and  stated  in  the  case  of  Rces  v.  Warrick, 
2  Barn.  &  Aid.  113.     In  that  case  the  drawer  wrote  to  tlie  drawee  as 
follows :    "  Yesterday  we  valued  upon  you,  favor  W.  Johnson  and  Co. 
two  months  for  100  I.  which  please  to  honor."     The  drawee  replied: 
"Your  bill  100  1.  to  W.  Johnson  and  Co.  shall  have  attention."     It 
was  held  by  Abbott,  C.  J.,  tlint,  to  make  a  letter  an  acceptance,  it  ouglit 
to  be  in  terms  which  admit  of  no  doubt;  flint  tlie  phrase  "slinll  have 
attention  "  is  at  least  ambifruous;  that  it  may  mean  the  drawee  would 
e.xamine  and  inquire  into  the  state  of  the  drawer's  account  for  tlie  pur- 
pose of  ascertaining  whether  or  not  the  l)ill  would  be  accepted  ;  and 
that,  unless  the  words  used  import  a  clear  and  unec)uivocal  acceptance, 
no  recovery  may  be  had.    Plolroyd,  J.,  said  :    "  The  very  circumstance 
that  it  has  been  so  often  lamented  that  anything  short  of  a  written  ac- 
ceptance on  the  face  of  the  bill  should  be  held  to  make  a  paity  liat)le 
as  acceptor  shows  the  inconvenience  (hat   arises  from  the  great  un- 
certainty which  is  thereby  introduced.     In  this  case  the  words  con- 
tended to  be  an  acceptance  are  that  the  bill '  shall  meet  attention.'  The 
defendant  docs  not  say,  as  in  Wynne  v.  KaiJiCs,  that  the  bill  '  shall  be 
paid  and  accepted  ; '  but,  in  fact,  only  that  ho  will  attend  to  it.     Con- 
sistently, then,  with  these  words  it  might  depend  on  the  state  of  the  ac- 
count between  them,  whether  he  would  accept  the  bill  or  not." 

Tested  by  this  rule,  the  defendant's  telegram  does  not  oxpress  an 


I.  2.]  BY  SEPARATE  INSTBUMENT.  653 

acceptance.  The  inquiry  indicates  no  clear  intention  to  extract  from 
the  bank  a  new  contract  to  pa}-  independent  of  its  duty  to  Donald.  It 
is  entirely  consistent  with  the  expression  of  a  simple  desire  for  infor- 
mation relatinc:  to  Donald's  standing  at  the  bank.  It  fairly  means : 
"  Is  J.  F.  Donald's  account  with  you  sufficient  to  make  his  check  for 
$350  good  ?  "  The  answer  is  strictly  responsive  to  the  inquiry.  It 
indicates  no  clear  intention  to  make  Donald's  check  good  whenever 
presented  and  whatever  the  condition  of  his  account.  It  is  entirely 
consistent  with  the  simple  purpose  to  state  Donald's  standing  at  the 
bank  on  the  day  of  the  telegram.  It  fairly  means :  "  Donald's  account 
is  now  sufficient  to  meet  a  check  for  the  sum  named."  The  writings 
are  not  equal  to  the  unambiguous  and  unequivocal,  "Will  you  pay?" 
and  "  We  will  pay." 

Other  cases  recognize  the  principle  here  applied.  In  the  case  of 
Kahn,  Jr.  v.  Walton,  46  Ohio  St.  195,  the  inquiry  was:  "Are  M.  A. 
Walton's  checks  for  $2,000  good?"  The  answer  was:  "Yes,  sir." 
The  court,  in  denying  that  an  acceptance  was  disclosed,  said :  "The 
telegraphic  correspondence  between  the  bank  and  Kalin's  agent 
amounted  to  no  more  than  an  assurance  that  valid  checks  to  the  amount 
stated,  drawn  by  Walton,  or  that  might  be  drawn  by  him,  were  then 
good.  No  particular  checks  were  mentioned  in  the  inquiry,  nor  any 
intimation  given  that  the  inquirer  had  received,  or  wns  about  to  re- 
ceive, such  checks:  nor  had  the  bank  any  means  of  identifying  the 
checks  to  which  the  inquiry  related.  Its  telegrams,  therefore,  did  not 
commit  the  bank  to  the  payment  of  any  particular  check.  At  most  it 
was  information  that  Walton  had,  at  its  date,  money  on  deposit  to  the 
amount  stated,  subject  to  check." 

In  the  case  of  Cook  v.  Baldwin,  (120  Mass.  317),  it  was  hold  that 
the  words,  "  T  take  notice  of  the  above,"  written  upon  ii  bill  of  ex- 
change and  signed  by  the  drawee,  do  not  of  Ihcnisclves  necessarily 
import  an  acceptance. 

In  the  case  of  Myers  v.  Ihiion  Nntiovnl  BanJr.  27  III.  Ai)p.  251,  the 
inquiry  was:  "Will  drafts  for  thirty-eight  hnndrcd  dollars,  made  by 
iT.  \l.  Snyder  on  yon,  be  paid  if  presented  Monday?"  The  answer  was: 
"  Drafts  named  are  good  now."     [Held,  no  acceplance.] 

Thosf  authorities  are  sufficient  to  illustrate  the  rule  tliiil  the  drawee 
of  a  bank  check  cannot  be  held  liiible  iif)on  a  claimed  contract  of  ac- 
ceptance external  to  the  bill,  unless  the  language  used  clearly  and  un- 
equivocally import  an  absolute  promise  to  pay. 

The  decision  in  the  case  of  Cnrrrfson  v.  Nnrfh  A  h-Jiisov  Bnnk  (C 
C.)  39  Fv(\.  163,  relied  upon  liy  counsel  for  plainlilT,  was  alTlrnied  by 
the  Circuit  Court  of  Appeals  (51  Fed.  16HI,  upon  the  idenlical  jirin- 
ciple  discussed  above.    The  telegrams  in  that  case  were  as  follows: 

"Will  you  pay  James  Tate's  check  on  vou,  twenty-two  thousand 
dollars?    Answer." 

"James  Tate  is  good.     Send  f)n  your  paiicr." 


654  AccrnANCK  of  iui,i,s.  [art.  xi. 

The  court  said:  '" 'Tlic  iiin'^fioTi  ]>ut  to  tho  bniik  was  wholly  free 
from  ainl>ii;uity.  It  v,;is  (  K  ai .  i'ii'itt  ami  poiiitoil  -'Will  you  pay 
James  'I'ato's  oh.ei  k  on  you  tniMityt  <\o  (housaiul  dollars?  Ariswcir.' 
There  can  he  no  douht  that  it  was  Si  icctcr's  purpose  in  scndinf);  this 
teleszrani  to  asicrtai!!  whether  the  lank  would  hind  itself  to  pay  the 
check  in  case  he  took  it  in  payiuent  foi-  the  cattle  to  be  (hdivered  to 
Tate.  Can  tluMV  In'  aov  douht  t''al  the  liaid<  must  have  understood 
the  purpose  and  mcMiin;;  of  the  (ji-pate'n  t  lius  addressed  to  it?"  |  Held, 
an  acceptanc(\  | 

Tlie  judgment  a'rairi'^t  the  dereiMla't  hank  is  revei-sed,  and  the  cause 
remanded,  with  inslrui'tion  lo  su.  Inii)  its  demuner  to  the  petition.  All 
the  justices  concurring.  ■' 


3.  PiJOMisE  TO  Accept  Must  Bk  in  Writing,  etc. 

§  223  BANK  OF  MICHIGAN  v.  ELY. 

17  Wendeijl   (N.  Y.)    50S.— 1S37. 

Action  of  assumpsit  against  defendant  as  acceptor.  Defendant 
wrote  his  agents:  "If  you  wa)it  more  funds,  you  can  make  drafts 
on  me  payable  at  the  ofhee  of  A.  S.  Marvin  &  Co.,  N.  York,  due  in 
August  next.  *  *  *  1  have  authorized  Mr.  D.  D.  I'atch  to  accept 
these  drafts  for  me."  The  agents  wrote  plaii^tifT  (  o':r:iu:iicating  tlie 
contents  of  defendant's  letter,  and  suhsequenily  lr:'i.sinitted  hills 
drawn  on  defendant,  wliieh  ])laintiir  di.^^counteil  ami  ])assed  to  the 
drawer's  credit.  There  was  no  evidence  that  defendaTit's  letter  was 
ever  shown  to  plaintiff.    Referees'  report  for  defendant. 

By  the  Court,  Nelson,  Cit.  J.  — -It  is  oI)jecte(l  tlial  the  acceptance 
of  the  defendant,  under  the  circumstances  of  tlie  ease,  is  not  witliin 
the  provisions  of  the  Revised  Statutes,  however  ol)li'ratory  it  may  he 
upon  the  principles  of  the  commercial  law.  'i'lu;  piovisions  of  the 
statute,  1  K.  S.  768,  are  as  follows: 

§  6.  No  person  within  this  state  shall  be  charged,  as  an  acceptor 
on  a  bill  of  exchange,  unless  his  acceptance  shall  he  in  writing  signed 
by  himself  or  his  lawful  agent. 

§  7.  If  such  acceptance  he  written  on  a  pajter  other  than  the  hill,  it 
shall  not  hind  the  acceptor  except  in  favor  of  a  person  to  whom  such 
acceptance  shall  have  been  shown,  and  w!io,  on  tlie  faith  thereof,  shall 
have  received  the  bill  for  a  valuable  consi  leration.  ' 

§8.  An  unconditional  promise,  in  writing,  to  accept  a  hill  before 
it  is  drawn,  shall  be  deemed  an  actual  acceptance  in  favor  of  every 


5  This  case  is  reportod  with  iiotrs  in   118  /ni.  P(.  Tlrp.  ,3^0,  and  in  11    A.  <&; 
E.  Ann.  Cas.  281.  — C. 

*  Re-enacted  in  substance  in  Neg.  Inst.  L.,  §  222.  —  H. 


I.    3.]  PROMISE   TO    ACCEPT.  655 

person  wlio,  upon  the  faith  thereof,  shall  have  received  the  bill  for  a 
valuable  consideration.  ^ 

A  brief  recurrence  to  the  law  as  it  stood  in  this  state  before  the 
adoption  of  these  provisions,  will  aid  in  comprehending  their  object 
and  effect.  It  was  settled,  (1)  that  a  parol  promise  to  accept  a  bill 
already  drawn,  was  valid  and  binding,  and  amounted  to  an  actual  ac- 
ceptance; and  (2)  that  a  parol  promise  to  accept  a  future  bill,  or  one 
not  in  existence,  was  not  binding,  unless  the  bill  was  taken  by  the 
holder  upon  the  faith  and  credit  of  such  promise.  If  it  was  so  taken, 
then  it  was  binding  and  amounted  to  an  actual  acceptance  according 
to  some  of  the  cases.  (1  Holt,  181 ;  2  Kent's  Comm.  85 ;  12  Wendell, 
598.)  There  are  other  authorities  which  require  the  promise  to  be 
in  writing.  Now  by  the  Revised  Statutes,  no  person,  within  this  state, 
can  be  charged  as  an  acceptor  of  a  bill,  unless  the  acceptance  be  in 
writing,  signed  by  himself  or  his  agent;  and  if  such  acceptance  be  in 
writing,  but  not  on  the  bill,  still  the  party  is  not  charged,  unless  the 
fact  be  disclosed  to  the  person  taking  it,  and  he  on  the  faith  of  such 
acceptance,  pay  a  valuable  consideration  for  the  same.  The  accept- 
ance here  referred  to  relates  to  a  bill  already  drawn. 

By  §  8,  an  unqualified  promise  in  writing  to  accept  a  bill  to  be  there- 
after drawn,  is  deemed  an  actual  acceptance  in  favor  of  any  one  who, 
upon  the  faith  of  such  promise,  takes  it  for  a  valuable  consideration. 
There  is  some  difference  in  the  phi'aseology  of  §  7  and  §  8,  in  respect 
to  the  circumstances  under  which  the  credit  is  to  ])e  given  to  the  prom- 
ise to  accept.  The  language  of  the  former,  is  "  in  favor  of  a  person  to 
whom  such  acceptance  shall  have  been  shown,  and  who  on  the  faith 
thereof,"  etc.,  whereas,  the  8th  section  contains  only  the  latter  branch 
of  the  sentence ;  the  other  was  in  the  section  as  reported  by  the  re- 
visers, but  was  sul)se(|uent]y  stricken  out.  No  reason  can  be  perceived 
for  a  distinction  in  this  respect  between  the  two  cases,  and  we  do  not 
believe  that  any  was  intended  by  the  legislature;  and  that  the  differ- 
ence in  the  phraseology  is  altogether  accidental.  It  can  be  of  no  pos- 
sible consequence  to  the  acceptr  -s  in  what  mode  the  holder  comes  to  the 
knowledge  of  the  acceptance,  wlietlier  by  insftection  or  liv  oral  com- 
munication; it  is  a  matter  iliat  ciiri  only  concern  Ihc  latter.  If  he  acts 
upon  the  refiresentation  of  a  third  person,  he  incurs  the  risk  of  being 
imposed  u[)on,  as  he  must,  as  to  the  genuineness  of  the  writing  upon  an 
inspection.  The  language,  "shall  have  been  shown,"  means  notliing 
more  than  to  express  the  idea  that  the  holder  must  know  of  the 
acceptance;  this  is,  indeed,  the  only  effect  of  it.  All  this  is 
undoubtedly  im})lied  in  the  next  sentence,  and  the  clause,  therefore, 
might  as  well  have  been  omitted  altogether,  as  it  is  in  the  next 
section. 

In  I'icrsnn  v.  Dinilnp   K'owfier.  !'u]),  the  first  case  in  which  this 


■  Re-enacted  in  Hni.Rf anr*-  in  M<g.  IhhI.  L.,  §  223.  —  H. 


6.'i6  ACCEPTANCE   OF    BILLS.  [ART.    XI. 

doctrino  is  stated,  Lord  Mansfield  remarked :  ''  It  lias  been  truly 
sail!,  as  a  i,vmM-al  rule,  thai  the  mere  answer  of  a  rnereliant  to  the 
drawer  of  a  hill,  saying  he  will  duly  honor  it,  is  no  aeeeptance, 
unless  aeeoni)>anied  with  tirciiinstanees  vvliieh  may  induee  a  third 
person  to  take  the  bill  by  indorsement;  but  if  there  are  any  sueh  eir- 
eumstances  it  may  amount  to  an  aeeeptanee,"  etc.  Tn  Mason  v.  (hint, 
(Doug.  209),  Lord  Manstield  used  language  from  whieh,  probably, 
the  phraseology  of  the  statute  was  taken ;  but  it  is  manifest  he 
intended  to  do  no  more  than  repeat  the  prineiple  he  had  before 
stated  in  Pierson  v.  DunJop.  In  Clark  v.  Cock  (4  East,  57).  this 
very  objection  was  taken  by  Gibbs,  (p.  67),  namely,  that  the  letter, 
itself,  ought  to  have  been  shown,  and  not  merely  the  purport  of  it 
given;  but  it  was  disregarded  by  all  the  judges.  The  communication 
of  the  fact  of  the  promise,  was  deemed  the  material  circumstance. 

Xow  it  must  be  conceded  in  this  case,  that  the  promise  to  accept 
is  in  writing,  and,  in  my  judgment,  it  is  an  unqualified  promise. 
"  If  you  want  more  funds,  you  can  make  draft  on  me,  etc.,  to  the 
amount  of  $10,000."  Who  was  to  determine  whether  more  funds 
were  wanted?  Undoubtedly,  Beach  &  Hudson.  The  question  was 
referred  to  their  sole  discretion;  and  when  decided  and  the  drafts 
drawn,  the  obligation  to  accept  became  imperative.  As  the  discre- 
tion to  draw  was  thus  left  solely  with  them,  the  terms  of  the  letter 
are  equivalent  to  an  absolute  promise  to  accept  wdienever  they  drew 
upon  him  in  the  manner  specified.  It  is  not  for  him  to  set  up  an  abuse 
of  this  discretion  to  avoid  the  obligation,  unless  it  be  brought  home 
to  the  plaintiffs,  of  which  there  is  no  pretence. 

Did  the  plaintiffs  receive  the  bills  upon  the  faith  of  the  defendant's 
promise  to  accept  them,  and  for  a  valuable  consideration?  It  must 
be  conceded,  that  most,  if  not  all,  the  money  now  relied  on  as  the 
consideration  for  these  bills,  was  actually  received  by  the  agents, 
and  therefore  paid  to  them  by  the  bank,  before  the  written  authority 
to  draw,  and  promise  to  accept  was  given;  and  hence,  it  cannot  be 
said,  strictly  speaking,  that  it  was  advarced  upon  the  faith  of  tliis 
promise.  So  much  must  be  admitted.  But  as  we  have  already 
shown,  the  agents  possessed  authority  to  raise  funds  for  the  pur- 
chase of  the  wheat  upon  the  defendant's  paper,  and  in  this  case,  no 
doubt  could  be  entertained  of  his  liability  as  drawer,  if  lie  had  been 
so  charged.  It  is  true,  that  regularly,  the  drafts  should  have  been 
drawn  in  the  name  of  the  principal,  but  Hudson's  practice  was  uni- 
formly otherwise,  and  was  sanctioned  by  the  defendant.  He  cannot 
be  permitted  to  avail  himself  of  that  objection.  It  mar  then  be  con- 
fidently said,  that  the  money  w^hen  taken  from  the  packages  by  Hud- 
son operated  as  a  loan  to.  or  charge  upon,  Ely,  the  principal  :  that 
the  debt  was  his,  and  if  no  drafts  had  been  given  he  would  have 
been  holden  to  discharge  it,  upon  the  plainest  law  applicable  to  the 


I     3.]  PliOMISE    TO    ACCEPT.  657 

relation  o!  piiucipal  and  agent.  Now,  assuming  the  advance  to  liave 
stood  on  this  footing  on  the  18th  January,  when  the  written  authority 
to  draw  the  bill  was  given,  and  the  drafts  in  question  were  subse- 
quently <':;iv:':  i-  iioi  l.c  laldiig  of  them  by  the  plaintiff  for  this 
debt,  a  taking  upon  the  faith  of  the  promise  to  accept  and  for  a 
valuable  (onsideration  ?  A  man's  own  debt  or  account  owing  by 
him  i-  CO!  ■'■•i'  !}  n  ".•■)()'  <  an-i  U'l-ntioii  fur  the  dvnft  of  his  authorized 
agent,  and  there  can  be  no  doubt  of  the  fact  tliat  the  paper  was 
received  on  the  credit  of  the  engagement  of  Ely  to  accept,  or  which 
is  the  same  thing,  in  judgment  of  law,  upon  the  authority  to  draw 
upon  him.  Here,  then,  are  the  three  ingredients  required  by  the 
statute:  1.  A  written  promise  to  accept:  2.  Taking  the  drafts  upon 
the  faith  of  it;  and  '.^.  A  valuable  consideration,  to  wit,  the  debt 
e.xisting  against  the  defendant,  created  by  an  agent  with  full 
authority. 

It  is  to  be  regretted  the  attorney  had  not  inserted  the  common 
counts  in  his  declaration,  and  then  the  question  upon  the  statute 
might  have  been  avoided  ;  the  defendant  would  have  been  charged 
as  drawer  of  the  drafts  in  question. 

Prudence  would,  perhaps,  require  that  the  pleadings  should  be 
amended  in  tliis  particular. 

Motion  to  set  aside  the  report  of  referees  granted ;  costs  to  abide 
the  event." 

•  Sep  also  Exchange  Rank  v.  Fluhbard,  62  Fed.  Rep.  112. 

ViRTi'Ai.  .AccFi'T.\NCKS.  —  ,\n  Unconditional  written  j)roniisp  to  accept  a  bill 
to  be  tliereafter  drawn  is  bindinji  in  favor  of  hoiiiers  in  due  course  wlio  take 
the  bill  upon  tlie  faith  of  the  promise.  Coolidge  v.  Pay.son,  2  Wheat.  (U.  S.) 
60:  1  Daniel  on  Xe-r.  In^t..  §§  5r)l,  5(>n;  4  Am.  &  Enjr.  Encyc  L.  (2d  ed.),  pp. 
2.33-245.  Hut  the  promise  must  be  unconditional.  Mvrrlnints'  Hani:  v.  Oris- 
wold,  72  N.  Y.  472;  Grrmania  N.  ii.  v.  Taaks,  101  N.  ^'.  442;  Hank  v.  Rrrk- 
nagle,  10!)  N.  V.  The  promise  must  be  in  writing:.  ■lolinson  v.  Clark.  39 
N.  Y.  216  ( teletrraphic  promise  sufTicient);  1  Daniel,  g  Sod.  The  promise 
mu=t  deiscribe  tlie  bill  in  unequivocal  terms,  lioycr  v.  Edicards,  4  I'eters 
(U.  S.)  Ill:  Franklin  Hank  v.  Lynch.  52  Md.  270  ( cf.  Flora  First  ;Y.  H.  v. 
Clark.  01  M<i.  400);  Ulslir  Co.  Hank  v.  McFarlan.  5  Hill  (N.  Y.)  432;  3 
Den.  553;  1  Daniel,  §  500,  501.  The  bill  must  follow  the  terms  of  (he  jironi- 
ise.  lAnillry  v.  First  \.  H..  70  Towa,  020;  Hriukman  v.  Hunter.  73  Alo.  172; 
4  Am.  &  Knp.  Kneyc.  L.  (2d  ed.).  p.  243.  The  bill  must  be  drawn  within  a 
reasonable  time  after  the  yivinL'  of  the  promise.  First  N.  H.  v.  Henslcy.  2 
Fed.  H.  000;  1  Daniel.  S  500.  (  f.  ./ohu.<<nn  v.  Clark.  30  N.  Y.  210.  The  bill 
must  Ik-  taken  by  the  holder  upon  the  faith  of  the  promise.  M'Evrrs  v.  Mason, 
10  .Johns.    (\.   Y.)    207:    E.rrhangr  Hank   v.   Ifirr.  OR   Mass.  2S8.  —  H. 

[See  also  Hank  of  Mnrnanton  v.   Hay.   143  N.  C.  320.  —  C] 
NKOOT.   INPTRCMKNTS  — 43 


668  ACCEPTANCE    OF    BILLS.  [aKT.    XL 


4.  Acceptance  by  Refusal  to  Hi:ti'1!\  tiiI':  Bill. 

§225  MATTESON  r.  MOULTON. 

11    1 1  IN-    (X.   V.)    208.  —  1877.  T 

Action  agauist  del'eiulaiit  as  acceptor.     Judgment  for  plaintiff. 

Talcott,  J. — This  is  a  motion  for  a  new  trial  on  a  verdict 
directed  by  the  court  at  the  Cattaraugus  Circuit.  Exceptions  sent  to 
the  General  Term  in  the  first  instance. 

The  action  was  upon  an  inland  bill  of  exchange,  drawn  by  one 
McDonald  on  the  defendant  for  $526.76.  The  bill  was  never  accepted 
by  the  defendant  in  writing,  as  required  by  tlie  statute,  which  pro- 
vides that  no  person  within  this  state  shall  be  charged  as  an  acceptor 
on  a  bill  of  excliangc  unless  his  acceptance  shall  be  in  writing, 
signed  by  himself  or  his  lawful  agent.  (1  IJ.  S.,  2(1.  ed.,  757,  §  6)  ; 
and  unless  he  is  made  liable  as  an  acceptor  under  the  subsequent 
eleventh  section,  he  is  not  liable  upon  the  bill.  The  said  section  11 
is  as  follows : 

"Every  person  upon  whom  a  bill  of  exchange  is  drawn,  and  to 
whom  the  same  is  delivered  for  acceptance,  who  shall  destroy  such 
bill,  or  refuse  witliin  twenty-four  hours  after  such  delivery,  or  within 
such  other  period  as  the  holder  may  allow,  to  return  tlie  lull  accepted 
or  non-accepted  to  the  holder,  shall  be  deemed  to  have  accepted  the 
same." 

The  bill  was  sent  by  a  third  party  with  directions  to  leave  it  at  the 
office  of  the  defendant,  which  was  done,  and,  so  far  as  appears,  no 
demand  of  acceptance  was  ever  made.  The  defendant  did  not  destroy 
the  bill,  for  he  produced  it  on  the  trial.  The  defendant  never  re- 
fused to  return  the  bill ;  in  fact,  he  was  not  directly  required  to 
return  it,  and  no  direct  demand  of  the  bill  was  ever  made  upon 
him.  Two  days  after  the  making  of  the  bill  and  the  delivery  of  it 
to  his  agent  at  his  office,  the  plaintiff  called  at  the  office  and  ascer- 
tained that  the  bill  had  been  left  there,  and  was  informed  by  the 
agent  that  they  were  hard  up  and  would  not  pay  that  day,  but 
received  no  promise  that  the  bill  should  be  paid  at  any  future  day. 
The  plaintiff  went  away  and  left  the  bill  unaccepted  at  the  office  of 
the  defendant.  Two  or  three  days  after  this,  the  plaintiff  met  the 
defendant  at  the  hotel,  in  the  same  place  in  which  the  office  of  the 
defendant,  before  spoken  of,  was  located,  and  had  a  conversation* 
with  the  defendant  about  the  bill,  informing  the  defendant  that  he 
(the  plaintiff)  had  such  a  bill  and  that  it  was  at  defendant's  office. 
The  following  conversation,  as  testified  to  by  the  plnintiff,  then  ensued 
between  the  parties : 

T  Affirmed  79  N.  Y.  627.  —  H. 


1.  4.]  BY  BEFUSAL  TO  RETURN.  659 

"  I  wanted  to  know  whether  he  was  going  to  pay  it  or  not,  and  if 
not,  I  wanted  the  order;  and  he  (the  defendant)  said  he  could  not 
pay  it  then,  but  as  soon  as  he  had  completed  five  miles  of  the  rail- 
road running  into  Jamestown,  he  should  have  the  money.  I  asked 
him  how  long  that  would  be,  and  he  said  ten  days  or  two  weeks.  I 
told  him  it  was  considerable  of  an  amount,  and  I  wanted  to  know 
whether  I  should  get  my  pay  on  it  or  not.  He  said  I  would  get  my  pay 
on  it  inside  of  two  weeks.  I  told  him  I  wanted  my  pay  on  the  order, 
and  he  said  I  would  get  my  pay  on  the  order  as  soon  as  he  completed 
five  miles  of  the  railroad.  Buffalo  city  was  going  to  pay  him,  and 
that  he  would  get  done  inside  of  two  weeks."  This  conversation 
occurred  in  June,  and  it  does  not  appear  that  anything  else  took 
place  between  the  parties  until  the  sixth  day  of  October,  when  they 
again  met,  and  the  plaintiff  asked  the  defendant  about  pay  on  the 
bill,  and  the  defendant  stated  that  "  he  had  been  disappointed  about 
pay,"  The  plaintiff  also  stated  that  the  defendant  never  returned 
the  bill  or  offered  to  return  it. 

We  do  not  think  that  the  evidence  established  a  refusal  to  return 
the  bill,  within  the  eleventh  section  of  the  statute  above  referred  to. 
The  refusal  mentioned  in  the  statute,  as  it  seems  to  us,  refers  to 
something  of  a  tortious  character,  implying  an  unauthorized  con- 
version of  the  bill  by  the  drawee.  In  this  case  it  is  obvious  that  the 
plaintiff  willingly  left  the  bill  in  the  possession  of  the  defendant,  and 
in  no  way  gave  the  defendant  to  understand  that  a  redelivery  of  the 
bill  was  required,  relying  probably  upon  the  expectation  that  it  would 
be  ultimately  paid.  The  attempt  to  charge  the  defendant  with  the 
payment  of  the  bill  upon  the  ground  of  a  promise  is,  as  it  appears  to 
us,  simply  an  attempt  to  charge  the  defendant  with  a  liability  on  the 
bill  upon  a  parol  acceptance.  If  an  action  can  be  maintained  under 
such  circumstances,  the  provisions  of  section  6  of  the  statute  before 
referred  to  would  be  rendered  wholly  nugatory. 

Besides,  as  to  the  promise,  there  was  no  evidence  to  show  that  the 
five  miles  of  railroad,  on  tlie  completion  of  which  the  promise  to 
pay  tbe  bill  was  conditioned,  had  been  completed. 

The  defendant  moved  for  a  nonsuit  on  the  ground:  First.  That 
there  was  no  acceptance  of  the  bill  in  writing.  Second.  That  there 
was  no  demand  of  the  bill  before  suit.  Third.  That  there  was  no 
refusal  to  deliver  the  bill.  Fourth.  That  tlie  plaintiff  had  failed  to 
make  out  a  cause  of  action.  The  court  held  that  the  defendant  was 
liable  because  he  was  indebted  to  McDonald,  the  drawer,  because 
he  had  received  and  retained,  and  declined  to  return  the  bill,  and 
had  promised  to  y»ay  it;  to  which  ruling  nnd  to  the  refusal  of  a 
nonsuit  the  defendant  excepted.  We  think  the  nonsuit  should  have 
been  granted  for  the  reasons  stated  by  the  defendant.     *     *    ♦ 


(><'0  Ar(M'rTAN'(M':  di'  ium.s.  [  aut.  xi. 

'I'lio  Vfrdict  is  set  aside  ;iinl  a  luu    trial  uiiKti'iI,  costs  to  abide  tlie 
eveut." 


WISNER  V.  FIKST  NATIONAL  BANK. 
220  Pennsylvania  State,  21. —  1908. 

Mestrezat,  J.  Samuel  R.  Bullock  drew  six  checks  on  the  de- 
fendant bank  in  favor  of  Charles  W.  Oallaer,  Jr.,  who  deposited  then! 
in  plaintitf  bank  in  New  York  city,  which  credited  them  to  his  account 
in  that  bank.  The  first  check  is  dated  December  27,  1901,  and  the 
last  January  )\,  1905.  The  plaintiff  .sent  tliese  checks  for  collection 
to  the  defendant  bank,  two  of  I  hem  llironijli  the  First  National  Bank 
of  Altoona,  Pa.,  and  the  remaining  four  throu<?li  the  Farmers'  Deposit 
National  Bank  of  Pittsburs^h.  On  the  day  tliey  were  received  the  de- 
fendant bank  handed  the  several  checks  to  a  notary  public  usually  em- 
ployed by  it  for  the  purpose  of  protest,  and  he  held  tiie  checks  without 
protesting  them  or  giving  notice  of  dishonor.  On  January  9,  1905, 
some  days  after  the  checks  hud  been  delivered  to  the  notary,  the  cashier 
of  the  Altoona  bank  went  to  Gallitzin,  obtained  the  checks  from  the 
notary,  took  them  to  the  Gallitzin  bank,  whose  cashier  gave  the  cashier 
of  the  Altoona  bank  a  letter  to  a  notary  public  in  Altoona  inclosing 
five  of  the  Bullock  checks  with  the  request  that  they  be  protested  for 
want  of  sufficient  funds  in  the  Gallitzin  bank  to  pay  them.  One  of 
the  two  checks  sent  by  the  Altoona  bank  to  the  defendant  bank  was 
returned  to  the  former  bank  on  the  same  day.  It  was  conceded  by 
the  plaintiff  on  the  trial  below  that  there  could  be  no  recovery  for  this 
check.  The  other  check  sent  by  the  Altoona  bank  and  the  four  checks 
sent  by  the  Pittsburgh  bank  to  the  defendant  bank  were  not  returned 
by  the  defendant  to  the  collecting  baiiks  for  more  than  two  days  after 
their  delivery  to  the  latter  bank.  With  the  one  exception,  the  Bullock 
checks  were  not  returned  to  the  defendant  bank  by  the  notary  public 
to  whom  they  were  delivered  for  protest  within  24  hours  after  their 
receipt  from  the  transmitting  bank.  The  checks  therefore,  with  the 
one  exception,  were  not  returned  to  the  collecting  banks  within   24 

8  See  also  Holbrook  v.  Payne,  151  Mass.  383,  ante,  p.  644;  Overman  v. 
Eoboken  City  Bank,  31  N.  J.  L.  563;  Colorado  ^\  B.  v.  Boettcher,  5  Colo. 
185;  Jeune  v.  Ward,   1   R.  &  Aid.  653. 

The  drawer  has  twenty-four  hours  in  which  to  decide  whether  to  accept  or 
not,  if  presentment  is  made  before  the  day  of  maturity.  Montgomery  County 
Bank  v.  Albany  City  Bank,  8  Barb.   (N.  Y.)   306;    1  Daniel,  §  492.  —  H. 

[Matteson  v.  Moulton,  11  Ilun  (N.  Y.)  268,  is  followed  in  f>t.  Louis  ,"?.  W. 
Ry.  Co.  V.  Jawps.  7S  .Ark.  4110.  in  con^truingr  a  similar  statutory  enactment 
in  Arkansas.  This  case  is  reported  in  S  A.  &  E.  .Ann.  fas.  611,  with  note 
entitled  "  Retention  of,  or  refusal  to  return,  bill  of  exchange  as  acceptance 
thereof."  —  C] 


I.  4.]  BY  UEFLSAL  TO  RETURN.  66l 

hours  after  tlieir  delivery  to  the  drawee  bank,  the  defendant  in  this 
action. 

This  is  an  action  of  assumpsit  brought  by  the  plaintiff,  the  holder 
of  the  cheeks,  to  recover  the  amount  of  the  checks  on  the  ground  that 
the  drawee  bank,  the  defendant,  had  accepted  the  checks  by  its  refusal 
and  failure  to  return  them  within  24  hours  after  their  receipt,  as  re- 
quired bv  section  137  ^  of  the  Act  of  Assembly  of  May  16,  1901  (P.  L. 
213;  3  Purd.  Dig.  [13th  Ed.]  p.  3250),  known  as  the  "Negotiable 
Instruments  Law."  The  defendant  claims  that  it  is  relieved  from 
liability  on  the  checks  because  it  had  refused  to  accept  them,  and  had 
on  the  day  of  their  receipt  delivered  them  to  a  notary  public  for 
protest  and  dishonor.  The  learned  trial  judge  was  of  the  opinion,  and 
80  instructed  the  jury,  that  the  defendant  had  not  by  its  conduct  "  re- 
lieved itself  from  the  presumption  that  it  had  accepted  these  checks 
by  any  evidence  which  it  had  produced  in  the  case,"  and  that  the 
verdict  should  be  for  the  plaintiff  for  the  amount  of  the  five  checks. 
Subsequently  the  court,  on  motion  of  defendant's  counsel,  entered  judg- 
ment for  tlie  defendant  non  obstante  veredicto  on  the  entire  rei-ord. 
The  learned  court  in  its  opinion  entering  judgment  for  the  defendant 
lield  that  under  the  Negotiable  Instruments  Law  it  was  necessary  for 
the  holder,  in  order  to  recover  against  the  drawee  bank,  to  prove  a  con- 
version of  the  checks,  and  that  the  mere  retention  of  them  for  more 
than  24  hours,  without  a  demand  for  their  return,  is  not  a  refusal 
within  the  meaning  of  the  statute.  The  plaintiff  has  taken  this 
appeal.     *     *     * 

We  come  now  to  the  princiy)al  and  controlling  question  in  the  case, 
and  that  is  whether  the  failure  to  return  the  checks  to  the  holder  or 
the  collecting  bank  within  21  hours  after  their  delivery  to  the  de- 
fendant was  a  refusal  to  return  the  checks  within  the  moaning  of 
section  137  of  the  act;  or  does  the  act  contemplate  a  tortious  refusal 
to  return,  amounting  to  a  conversion  of  the  checks,  as  claimed  by  the 
defendant  and  as  held  by  the  co\irt  below? 

The  drawee  to  whom  a  bill  is  delivered  for  acceptance  is  deemed 
or  taken  to  have  ac(e})ted  it  under  this  section  of  the  act  (a)  where 
he  destroys  it;  (b)  where  he  refuses  within  24  hours  after  delivery 
to  return  tlie  bill  accepted  or  noiiacce[)ted  to  the  holder;  and  (r) 
where  he  refuses  within  such  other  period  as  tlie  holder  may  allow  to 
return  the  bill  accepted  or  nonaccepted  to  the  holder.  When  either  of 
these  conditions  exists,  the  drawee  becomes  an  acceptor  of  tlie  bill, 
and  assumes  liability  as  siich.  An  implied  or  a  verbal  acceptance 
of  a  bill  is  aboli>;lied  by  the  act  and  there  are  now  only  two  modes 
of  accepting  a  bill:  (1)  By  writing,  signed  by  the  drawee,  as  pro- 
vided in  section  132;'  and   (2)   by  a  nonreturn  of  the  bill,  which  is 

•  N.  v..  8  225.  —  C. 
»  N.  Y.,  §  220.  —  C. 


662  ACCKI'TANIK    OF    IJILI-S.  [ART.    XI. 

dt'ilared  by  the  section  uiuler  considoralit)!!  to  he  the  equivajcnt  of  an 
acceptance. 

The  manifest  purpose  in  requiring  the  ])roinpt  return  of  the  bill 
is  in  the  interest  of  and  for  the  i)rotection  of  the  holder.  It  is  im- 
material to  the  drawer  when  the  bill  is  returned,  as  he  is  protected 
by  notice  of  dishonor;  and  hence  this  section  of  the  act  requiring 
prompt  action  in  returning  the  bill  was  obviously  enacted  for  the 
benefit  of  the  holder  of  the  bill.  The  act  declares  in  section  136  ^ 
that  '2i  hours  is  sutVicient  time  for  the  drawee  to  decide  whether  or 
not  he  will  accept  the  bill,  and  the  section  under  consideration,  having 
allowed  this  time,  it  re<iuires  him  to  return  the  bill  accepted  or  non- 
accepted.  If  a  demand  and  rofusnl  are  conditions  precedent  to  an  ac- 
ceptance under  this  section,  then  the  holder  must  not  only  present  the 
bill  for  acce]itance,  hut  he  must  make  a  demand  for  its  acceptance, 
and  await  a  specific  refusal  before  the  drawee  is  deemed  an  acceptor. 
This  would  certainly  not  be  to  the  convenience  or  the  interest  of  the 
holder,  but  in  direct  opposition  to  both.  It  would  afford  the  holder 
Jess  protection,  and  would  in  effect  prevent  the  return  of  the  bill 
^•ithin  2-i  hours;  or  it  would  require  the  holder  in  transmitting  the 
bill  with  instructions  to  present  it  for  acceptance  to  send  at  the  same 
time  a  demand  for  its  acceptance.  It  is  obvious  that  such  demand 
accompanying  a  presentation  of  a  bill  for  acceptance  is  wholly  un- 
necessary, and  certainly  was  not  in  contemplation  of  ilie  legislature 
in  enacting  the  section. 

The  presentation  of  a  bill  for  acceptance  is  a  demand  for  its  accep- 
tance, which,  if  the  bill  is  retained  by  the  drawee,  implies  a  demand 
for  its  return  if  acceptance  is  declined,  in  contemplation  of  the  Xego- 
tiable  Instruments  Law.  The  purpose  of  presenting  a  bill  of  ox- 
change  to  the  drawee  is  to  require  him  to  accept  and  assume  liability 
for  its  payment,  or  to  refuse  its  acceptance,  and  thereby  avoid  lia- 
bility. When  the  bill  is  presented,  action  by  the  drawee  is  therefore 
demanded  of  him,  and  he  cannot  remain  silent  and  inactive  witliont 
incurring  the  statutory  penalty  prescribed  for  such  conduct.  If  he 
is  permitted  to  retain  the  bill,  he  must  return  it  accepted  or  not 
accepted  at  the  expiration  of  2i  hours.  If  he  accepts,  he  is  required 
to  do  so  in  writing,  and  must  rciurn  the  hill.  If  he  refuses,  he  must 
return  the  hill  not  acce])tcd.  If  he  fails  to  do  either  —  return  it 
accepted  or  not  accepted  —  he  is  "  deemed  to  have  accepted  the  bill  " 
under  this  section  of  the  act,  and  is  liable  thereon  to  the  holder.  It 
is  apparent,  we  think,  that  in  the  enactment  of  t1iis  section  of  tlie 
statute  the  legislature  regarded  the  presentation  for  acceptance  as  a 
demand  for  an  acceptance,  which,  when  the  bill  is  retained  by  the 
drawee,  implies  a  demand  for  its  return  within  the  time  specifiod,  and 
that,  therefore,  the  neglect  or  failure  to  return  is  a  refusal  to  return 

»  N.  Y.,  §  224.  —  C. 


I.    4.J  BY  REFUSAL  TO   RETURN.  66^ 

the  bill.  As  said  by  this  court  in  First  National  Bank  of  Northumber- 
land V.  McMichael,  supra,  if  a  bank  does  not  pay  or  accept  a  cheek, 
it  is  bound  to  refuse  it.  And  this  is  more  clearly  disclosed  as  the  true 
interpretation  of  the  word  "  refuses  "  in  this  connection,  when  we 
consider  that  the  consequences  to  tlie  holder  of  the  nonreturn  of  the 
bill  are  the  same  whether  it  follows  a  demand,  additional  to  the  presen- 
tation for  acceptance  and  a  refusal,  or  simply  a  neglect  or  failure  to 
return  after  the  demand  implied  by  its  presentation  for  acceptance. 
If  the  section  has  in  view  the  protection  of  the  liolder  as  it  mani- 
festly has,  then  it  was  evidently  the  intention  of  the  legislature  tliat 
the  nonreturn  of  the  bill  within  the  specified  time,  regardless  of  the 
cause,  will  make  the  drawee  an  acceptor. 

The  law  merchant  discourages  laches  in  parties  to  negotiable  paper, 
and  demands  prompt  action  in  the  performance  of  the  duties  imposed 
upon  them.  It  was  not  the  intention  of  the  legislature  in  the  enact- 
ment of  the  Negotiable  Instruments  Law  to  abolish  this  rule,  and  to 
encourage  delay  or  inaction  in  the  holder  or  drawee  of  such  paper. 
The  intention  of  the  section  in  question  was  to  expedite  action  by 
the  drawee  in  accepting  or  refusing  a  bill  presented  and  retained  by 
him,  and  to  fi.x  a  definite  time,  which  had  previously  been  uncertain, 
in  which  he  should  act  on  the  bill.  He  is  granted  24  hours  after  de- 
livery, and  not  after  a  demand  for  a  return  of  the  bill,  in  which  he 
must  accept  or  decline  to  honor  it.  The  time  for  returning  the  bill 
to  the  holder  does  not  begin  to  run  from  the  demand  for  its  return, 
but  from  the  date  of  its  delivery.  The  drawee  must,  tlierefore,  act 
within  24  hours  from  the  date  of  the  delivery  of  the  bill,  whether 
his  action  be  an  acceptance  or  a  rcfiii^al.  Tlic  ^^oction  gives  no  other 
alternative,  and  makes  no  other  provision  either  for  failure  or  neglect. 
Hence,  action  being  required  of  the  drawee,  and  one  of  the  two  alterna- 
tives being  open  to  him,  if  he  does  not  accept  and  return  the  hill,  it 
will  be  deemed  accepted  if  the  bill  by  his  defanit  remains  in  lui^  hands 
beyond  the  time  limit.  lie  refuses  to  return  the  hill  in  contomnlntion 
of  the  act  when  for  any  canso  within  thf  drawee's  cnntrol  it  is  not 
sent  to  the  holder  in  the  specified  tiinc.  'i'licrc  can  he  no  reason,  and 
we  will  not  assume  that  the  lecrislatnre  intended  to  do  an  nnreasonable 
thing,  why  the  law  should  niake  a  distinction  between  the  nonreturn 
of  the  bill  by  the  refusal  to  return  after  a  sr)eeinc  demand  and  the 
failure  or  neglect  to  return  after  a  demand  implied  by  presentinjr  the 
bill  for  arceptanco.  If  sueh  slK)uld  tie  the  proper  interpretation  of 
the  section  and  a  formal  deiiiarwl  be  neeessary,  then  there  is  no  provi- 
sion in  any  part  of  the  entire  act  iruftosing  a  penaltv  for  the  default 
or  neglect  of  the  drawee  to  return  the  bill,  althou'jh  the  consequences 
of  such  act  on  the  part  of  the  drawee  are  as  prejudicial  to  the  holder 
as  if  a  refusal  to  return  the  bill  had  followed  a  prior  speeifie  demand. 
There  is,  however,  no  such  casus  nniissiis  in  the  act  ;  but  the  enforce- 


664  ACCEPTANCli    OF    HILLS.  [AKT.    XI. 

nient  of  tlio  return  ol'  tlio  bill,  iK'i'i'pU'tl  or  iioiiafccpti-d,  within  tlie 
time  designated,  being  the  primal  object  of  the  smlion,  the  cause  of 
its  detention  is  wholly  immaterial,  and  cannot  afl'ect  the  drawee's 
liability  as  an  ai-coptor. 

The  construction  we  ])lnce  on  section  1157  is  necessary  to  protect  the 
holder  of  checks  and  other  negotiable  paper,  it  furnishes  a  complete 
statutory  remedy  for  any  default  of  the  drawee  in  acting  on  the  paper 
when  retained  by  him,  and  does  no  violence  to  the  hinguat^e  employed 
in  the  section.  It  carries  out  the  obvious  intent  of  the  let^nslative 
mind  in  the  enactment  of  the  section,  and  establishes  a  fixed  and 
certain  rule  to  govern  the  drawee  and  the  holder  in  the  former's 
action  on  negotiable  paper  presented  to  and  retained  by  him. 

Our  interpretation  of  the  statute  coincides  with  the  legislative  con- 
struction placed  upon  a  similar  statute  in  the  state  of  Wisconsin.  In 
enacting  a  Negotiable  Instruments  Law  tlie  legislature  of  that  state 
added  to  a  section  of  it  similar  to  section  137  of  our  act  a  proviso 
"  that  the  mere  retention  of  the  drawee  will  not  amount  to  an  accep- 
tance."' *  The  logical  inference  is  that  the  mere  retention  of  the  bill 
would  be  an  acceptance  within  the  meaning  of  the  language  of  our 
statute  which  contains  no  such  proviso. 

It  is  not  accurate  to  say,  as  suggested  by  the  appellee,  that  under 
the  Negotiable  Instruments  Law  a  bill  can  only  be  accepted  by  writ- 
ing signed  by  the  drawee.  It  is  true  that  verbal  and  implied  accep- 
tances have  been  abolished  by  section  132,  which  provides  tliat  the 
acceptance  must  be  in  writing  and  signed  by  the  drawee.  But  sec- 
tion 137,  involved  in  this  case,  declares  that  the  action  of  tlie  drawee 
in  destroying  a  bill  or  in  not  returning  it,  as  required  by  the  section, 
sliall  be  deemed  an  acceptance  of  it.  A  constructive  acceptance  of  a 
bill  under  this  section  is  as  effective  to  charge  the  drawee  as  an  accep- 
tance in  writing  under  section  132.  Nor  do  the  two  sections  in  any 
way  conflict.  The  former  section  requires  affirmative  action  on  the 
part  of  the  drawee  by  assuming  liability  by  a  writing.  IMie  latter  sec- 
tion declares  his  liability  if  he  destroys  the  bill,  or  if  by  inaction  he 
retain  the  bill  beyond  the  specified  time.  An  acceptance  under  either 
section  obligates  the  drawee  to  pay  the  bill. 

In  the  state  of  New  York  a  Negotiable  Instruments  Law  has  been 
enacted,  and  a  section  similar  to  section  137  of  our  act  is  included 
in  the  statute.  The  Supreme  Court  of  that  state  in  State  Bank  v. 
Weiss,  46  Misc.  Ticp.  93,  has  construed  this  section  of  the  statute  in 
conformity  with  the  meaning  we  have  given  our  own  act.  The  case 
was  decided  in  1004,  and  it  does  not  appear  to  have  been  carried  to  the 
Court  of  Appeals  of  the  state.  Matlesrm  v.  MouHon,  70  N.  Y.  027, 
relied  upon  by  the  court  beloAv  and  the  appellee  here,  was  decided  by 


•The  nrtual    worrHnr  rf  tltis  adfl'tinn   fn  \ho  W'^Tin^in   stntnto   ii  dimply: 
Mere  retention  of  the  bill  is  not  acceptance."  —  C. 


I.  4,]  BY  KEFUSAL  TO  EETUKN.  665 

the  Court  of  Appeals  in  1880,  and  the  syllabus  of  the  case  states  that 
the  court  lield  that  "  refusal  '"  in  the  Xe\v  York  statute  is  "  an  affirma- 
tive act,  or  is  made  up  of  conduct  tantamount  to  one,  [and]  it  is  also 
a  willful  or  wrongful  act."  But  the  facts  of  the  case  did  not  require 
the  court  to  determine  whether  the  failure  or  neglect  to  return  the 
bill  within  24  hours  was  a  refusal  to  return  it  within  the  meaning  of 
the  act.  The  bill  was  sent  to  the  office  of  the  defendant,  who  retained 
it  for  three  or  four  months  with  the  consent  of  the  plaintiff,  and  under 
a  promise  to  pay,  relied  on  by  the  plaintiff.  It  will  therefore  be  ob- 
served that  the  facts  of  the  case  did  not  require  the  court  to  deter- 
mine whether  the  mere  retention  of  a  iiill  of  exchange  for  24  hours 
after  its  delivery  to  the  drawee  would  constitute  an  acceptance.  Again, 
if  the  case  is  still  authority  in  that  state  for  an  interpretation  of  the 
act,  it  is  singular  that  it  is  not  cited  or  referred  to  in  the  very  recent 
case  of  State  Bank  v.  Weiss,  supra,  in  which  the  court  gave  an  inter- 
pretation of  the  same  section  of  the  Xegotiable  Instruments  Law  of 
that  state  diametrically  opposite  to  the  construction  of  the  act  an- 
nounced in  the  JIatteson  case. 

We  are  of  the  opinion  that,  under  section  137  of  the  Xegotiable  In- 
struments Law  of  this  state,  the  failure  or  neglect  of  a  drawee  to  whom 
a  bill  is  dcliv(>red  for  acceptance  to  return  the  bill,  accepted  or  non- 
accepted,  to  the  holder  within  24  hours  after  delivery,  makes  the 
drawee  an  acceptor  of  the  bill.  Tt  therefore  follows  in  the  case  in 
hand  that,  the  defendant  bank  having  failed  to  return  the  five  checks 
to  the  collpcting  bank  within  24  hours  after  their  delivery  to  the 
drawee,  the  latter  must  be  deemed  to  have  accepted  the  checks,  and 
is  therefore  liable  to  the  plaintiff  for  the  amount  of  them. 

The  judgment  von  obstante  veredirfo  in  favor  of  the  defendant  is 
reversed,  and  judgment  is  now  directed  to  be  entered  bv  tlie  court 
below  on  the  verdict  in  favor  of  the  plaintiff  and  against  the  de- 
fendant.' 

»  This  case  in  rrporto<i  in  17  L.  N.  S.  1200,  with  note  rntitlpd,  "  Dotcntion 
of  bill  of  oxrlian;;f  or  clifflN  by  drawpc  as  accojitjuiro." 

A  noto  to  this  case  in  8  ('n\.  Law  Rpv.  Sflfi  (.Tnno.  lOOS).  says:  "More 
rotrntinn  in  rlrarly  not  rffiisal  whon  it  is  the  holder's  dtity  to  demand  its 
rrtiirn.  §  225  NVr.  Inst.  Law  has  been  conHtnicd  as  rcfjuirinf;  a  tortious 
)rfiisal,  .Unltrsnti  v.  MnuUnn,  70  N.  Y.  027.  alTn.  11  Hun  20S ;  Dirkinunn  v. 
Mnrfth  (1894)  57  Mo.  Af»p.  500;  Uji.  Cn.  v.  .fnwrs  (1000)  7fi  Ark.  100.  but 
retention  in  the  faee  of  a  eiistomnry  dealinjj  or  notifieation  that  the  drawee 
shall  return  a  bill,  or  check,  §  321.  would  seem  to  be  a  refnsnl  within  the 
meaninp  of  the  sretion.  Since  banking  nsajre  rrquires  prompt  return  of  the 
cheek  if  payment  is  refuserl,  its  retention  in  the  principal  ruse  should  he  suf- 
ficient to  charpe  the  drawee  a«  arcrptor.  Hut.  while  correct  in  result,  the 
decision  seems  erroneous  in  holdinp  that  a  non-tortir)Us  refusal  will  so  charge 
the   drawer." 

Mr.  Crawford  critici/.e«  the  principal  c;i«e  as  follows:  "  It  i><  difTicult  to 
see  how   the   statute  could   apply   to  such   a   state  of   facts.      It    refers  only   to 


66t)  ACCKl'TANl'li   OF    BILLS.  [ART.    XI. 

5.  Acceptance  of  iNCOMrLETE  or  Dishonored  Hill. 

^  226  IIOPPS  &  CO.  V.  SAVAGE. 

CO  Maryland,  513. —  1888. 

Action  against  defendant  as  acceptor.  Defendant  accepted  the 
draft  before  the  drawer  (Waddy)  signed  it.  The  draft,  payable  "to 
order  of  myself,"  was  then  indorsed  to  plaintiff  by  Waddy.  Plaintiff 
presented  it  to  defendant  who  refused  to  accept  or  pay  it  and  pointed 
out  that  Waddy  had  not  signed  it  as  drawer.  Plaintiff  then  pro- 
cured Waddy's  signature  as  drawer.     Judgment  for  plaintiff. 

Miller,  J.  [after  stating  the  facts]  delivered  the  opinion  of  the 
court.  *  *  *  The  material  facts  are  undisputed.  ITopps  wrote 
the  draft  himself,  accepted  it,  and  then  gave  it  to  Waddy  for  the 

cases  where  the  paper  is  presented  for  acceptance ;  but  where  chocks  are 
remitted  to  tlie  drawee  hank,  the  obvious  purpose  is  to  present  them  for 
payment,  and  not  mere  acceptance.  What  the  liolder  desires  in  such  a  case, 
is  that  the  bank  shall  remit  the  money,  not  that  it  shall  return  the  check 
with  its  acceptance  placed  thereon."     Craw.  Neg.  Inst.  Law,  3rd  ed.,  p.  150. 

An  article  in  25  Banking  Law  .Jour.  638  (August,  1908),  discussing  the 
principal  cnse,  says:  "It  seems  incorrect,  in  a  way,  to  apply  to  chocks  the 
section  which  provides  that  [quoting  §  225.]  A  check  is  not  presented  for 
acceptance,  but  for  immediate  payment;  a  bank  is  not  obliged  to  accept  or 
certify  a  check,  only  to  pay  it,  and  a  chock  cannot  be  protested  for  refusal  to 
■certify,  but  only  for  refusal  to  pay.  The  delivery  for  acceptance  provided  by 
this  section  contemplates  bills  of  exchange  other  than  checks.  But  the  Ne- 
gotiable Instruments  Law  defines  a  check  as  a  bill  of  exchange  drawn  on  a 
bank  payable  on  demand,  and  declares  that,  except  as  otherwise  provided,  the 
provisions  of  the  act  applicable  to  a  bill  of  exchange  payable  on  demand 
apply  to  a  check,  and  the  Supremo  Court  of  Pennsylvania  says  that  there  is 
no  provision  in  the  act  which  makes  the  section  in  question  inapplicablo  to 
bank  checks  presented  for  payment,  and  that  there  is  every  reason  why  the 
section  should  apply."  p.  041. 

Section  137  of  the  Pennsylvania  Negotiable  Instruments  Law  fN.  Y.  §  225] 
was  amended  by  laws  of  Pennsylvania,  1000,  No.  100,  p.  200,  by  adding  the 
following:  "  Provided,  that  the  mere  retention  of  such  bill  by  the  drawee, 
unless  its  return  has  been  demanded,  will  not  amount  to  an  acceptance;  and 
provided  further,  that  the  provisions  of  this  section  shall  not  apply  to 
checks."  Commenting  on  this  amendment,  the  Pennsylvania  Committee  on 
Uniform  State  Laws,  in  its  1000  report  to  the  Pennsylvania  Bar  Association, 
says:  "  As  was  pointed  out  by  the  learned  editor  of  the  Leqal  Fntellipcncer 
(May  7,  1009),  this  act  was  passed  probably  to  overcome  the  effect  of  the 
decision  of  the  Supreme  Court  in  Wisner  v.  Fir.-it  National  Bank.  .  .  . 
While,  of  course,  anything  that  destroys  the  uniformity  of  any  section  of  the 
net,  whether  by  judicial  decision  or  by  statute,  is  to  be  deplored,  it  has  been 
said  in  relation  to  this  particular  act,  by  eminent  authority,  that  in  thus 
ehanging  the  law  as  interpreted  by  the  Supreme  Court,  the  statute  but  follows 
the  weight  of  authority  in  other  states,  so  that  substantial  uniformity  ha* 
not  been  affected."     Report  of  Pa.  Bar  Ass'n  for  1909,  p.  136, 


I.    5]  INCOMPLETE   OR   DISHONORED   BILL.  667 

express  purpose  of  enabling  him  to  raise  money  upon  it.  It  is  true 
it  was  delivered  to  him  before  Waddy  had  signed  it  as  drawer,  but 
there  can  be  no  doubt  as  to  the  fact  that  Hopps  intended  Waddy 
should  sign  and  negotiate  it.  In  such  case  the  law  implies  an  au- 
thority from  Hopps  to  Waddy  to  sign  his  name  as  drawer.  Four 
days  after  its  date,  and  long  before  its  maturity,  Waddy  indorsed 
the  draft  to  Savage,  and  received  from  the  latter  its  full  face  value. 
That  Savage  thereby  became  a  bona  fide  holder  for  value  is  un- 
deniable. Even  if  he  had  then  known  that,  as  between  Hopps  and 
Waddy,  it  was  vrithout  consideration  and  merely  an  accommodation 
bill,  his  position  as  such  liolder  would  not  have  been  affected  by  such 
knowledge.  {Maitland  v.  Ciiizens'  Nat.  Bank  of  Balto.,  40  Md. 
540.) 

It  is  also  true  that  Waddy's  signature  was  not  put  to  the  draft 
until  after  Savage  had  become  the  holder.  In  other  words,  tlie  draft, 
when  indorsed  to  Savage,  was  in  blank  in  respect  to  the  drawer's 
name,  but  this  blank  was  afterwards  filled  up  in  accordance  with 
the  intention  of  the  parties  when  the  bill  was  written  and  accepted. 
We  are  clearly  of  opinion  the  law  authorized  this  to  be  done.  In 
fact  the  authorities  go  to  the  extent  of  holding  that  Savage  would 
have  been  authorized  to  fill  the  blank  by  inserting  his  own  name  as 
drawer.  Sucb  was  the  decision  of  the  Common  Pleas  Division  in 
Harvey  v.  Cane  (34  Law  Times,  N.  S.  64)  ;  and  in  Scard  and  Wife 
V.  Jackson,  reported  in  a  note  to  the  same  case,  it  was  held  that  the 
name  of  the  holder  could  be  tbus  inserted  after  the  maturitv  of  the 
bill.  (See,  also,  Schuliz  v.  Astley,  2  Bing.  K.  C.  514.)  In  the  case 
before  us  the  suit  is  by  a  bona  fide  holder  for  vahic  before  maturity, 
against  the  acceptor,  and  the  drawer's  name  was  signed  in  strict 
accordance  with  the  intention  of  the  parties.  We  hold  that  in  such 
a  case  it  makes  no  difference  whether  the  blank  was  filled  before  or 
after  the  maturity  of  the  draft. 

From  these  views  it  follows  there  was  no  error  of  which  the  appel- 
lant is  entitled  to  eomphiin  in  the  rulings  of  (he  comi  upon  the 
instructions,  and  tiic  judgment  must  be  affirmed. 

Judgment  affirmed. 


S226  STOrKWET.L  v.  BT^.AMF.LE. 

3   Indiana,  42H.  —  ]Hr,2. 

Action  agninst  defendant  as  acceptor  of  a  bill.  Judgment  for 
defendant. 

Plaintiff  offered  to  prove  that  defendant  stated  tliat  he  would 
accept  the  bill,  but  did  not  want  it  generally  known  that  ho  was 
accepting  the  drawer's  bills,  and  would  therefore  write  "  protested  " 


SG.'-i  ACCEPTANCK   OF    HIT.LS.  [AUT.    XI. 

across  the  face,  nhich  lie  did  and  signed  his  name;  that  artcrward 
on  the  same  day  defendant  again  promised  to  pay  the  hill.  Tliis 
evident-e  was  excluded. 

Bi.ArKFOun,  J.  [after  stating  tlie  facts].  We  think  that  tlie  parol 
evidence  offered  by  the  plaintitf  was  admissible,  on  the  ground  that 
it  showed  a  valid  acceptance  of  the  bill  by  the  defendant,  after  he 
liad  written  on  it  the  word  "  Protested." 

Suppose  the  word  "Protested,"  as  written  on  the  bill,  to  mean 
that  the  defendant  refused  to  accept  the  hill,  and  the  holder  so 
understood  that  word;  and  suppose,  also,  that  evidence  of  what  the 
defendant  said,  at  the  time  of  such  refusal,  was  objectionable  as  con- 
tradicting the  word  "  Protested,"  still  the  subsequent  parol  accept- 
ance would  be  good.  We  know  of  no  reason  why  the  drawee  of  a 
bill,  who  has  refused  to  accept  the  same,  may  not  afterwards  accept 
it.  It  frequently  happens  that  a  bill,  after  being  protested  for  non- 
acceptance,  is  accepted  by  a  third  person  supra  protest.  The  fol- 
lowing case  is  cited  by  Mr.  Chitty:  A  foreign  bill  drawn  on  defend- 
ant was  protested  for  non-acceptance,  and  returned,  and  afterward 
defendant  told  the  plaintilf,  "if  the  hill  comes  hack  I  will  pay  it," 
and  this  was  held  a  good  acceptance,  (riiitty  on  Bills,  316,  note  I.) 
It  is  clear,  therefore,  that  the  fact  of  a  bill's  having  been  protested, 
does  not  prevent  its  being  afterwards  accepted   by  the  drawee. 

The  acceptance  is  not  objectionable  merely  because  it  was  by 
parol.  By  the  law  merchant,  a  bill,  whether  foreign  or  inland,  may 
be  accepted  by  parol  as  well  as  by  writing,  (Chitty  on  Bills,  316)  ; 
and  that  is  the  law  here. 

Per  Curiam, —  The  judgment  is  reversed  with  costs.  Cause 
remanded.* 


n.  Kinds  of  acceptances. 

1.  General  Accf.pta-nte. 

§  227        MEYER  &  CO.  v.  DECROIX,  VERLEY  Et  CIE. 
L.  R.,   1891,  Appeal  Casks    (  H.  L.)    .520. 

ArxTON  bv  indorsees  against  acceptors,  upon  the  following  instru- 
ment: * 

*"  A  promise  to  arcppt,  evon  after  a  protest  for  non-aeceptance.  is  bindine: 
anH  a  promise  to  accept  made  after  the  hill  becomes  due  according  to  its  tenor, 
amounts  to  a  promise   to  pay   immediately."     Grant  v.  Shaw,   16  Mass.   341 
(1820).  — H. 
R  In  facsimile  in  59  L.  J.  Q.  B.  539.  —  H. 


II.    1]  GENERAL  ACCEPTANCE.  669 

RouBAix,  Sept.  12th.   18S9. 
No.  501.     £778  4s.  2(7. 

On  Oct.  31st  after  dat*  pay  to  orders  Mr.  L.  Delobbel  Flipo  seven 

hundred  and  seventy-eight  pounds  4s.  2c?.     Value  received. 

L.  Delobbel  Flipo. 
To  Messrs.  H.  Meyer  &  Co.,  Limited. 

London,  Eng. 
[Across  the  face  was  written  and  stamped:] 
In  favor  of  Mr.  L.  Delobbel  Flipo  only. 

No.    28. 
Accepted   payable   at   Alliance   Bank,   London,   for   H.   Meyer  &   Co.,   Limited. 
B.  \LiNNiNG,  Abthub  Manning,  Directors.     Arthur  Manni.ng,  Secretary. 

The  word  "  order  "  in  the  bill  was  struck  out,  but  when  or  by  whom 
did   not  appear. 

Plaintiffs,  bankers  at  Lille,  in  France,  discounted  the  bill  for  Flipo. 
They  did  not  understand  English  and  their  attention  was  not  called 
to  the  form  of  the  acceptance  until  after  the  dishonor  of  tlie  bill  by  the 
Alliance  Bank. 

The  Divisional  Court  (Cave  and  A.  L.  Smith,  JJ.)  held  the  accept- 
ance was  a  qualified  one,  rendering  the  bill  non-negotiable,  and  gave 
judgment  for  defendants.  The  Court  of  Appeal  (Lord  Esher,  M.  I?., 
Lindley  and  Bowen,  L.  JJ.)  reversed  that  decision  and  entered  judg- 
ment for  the  plaintiffs.''    Defendants  appeal. 

Lord  Hkrsciiell.  —  My  Lords,  the  respondents  in  this  case  seek 
to  recover  from  the  apppllants  the  amount  of  a  bill  of  exchange  ac- 
cepted by  them.  The  defense  set  up  is  that  the  acceptance  was  a 
qualified  one,  and  restricted  the  right  to  require  payment  to  the  payee 
alone,  and  that  the  acceptors  are  therefore  under  no  obligation  to  the 
respondents  who  took  by  indorsement  from  him. 

It  was  not  disputed  at  the  Ijar  that  the  acceptor  of  a  bill  of  exchange 
may  make  his  acceptance  a  qualified  one.  If  he  do  so,  the  drawer 
may,  of  course,  refuse  to  take  such  an  acceptance,  and  treat  the  bill 
as  dishonored  :  but  if  he  takes  the  bill,  the  obligation  of  the  acceptor 
is  not  absolute,  but  subject  to  the  qualification  which  he  lias  intro- 
duced. I  think,  further,  that  it  is  beyond  dispute  that  if  an  acceptor 
seeks  to  qualify  his  acceptance,  and  thus  to  modify  the  obligations 
which  an  acceptance  ordinarily  imposes,  he  must  do  so  on  the  face  of 
the  bill  in  clear  and  uriffpiivocal  terms,  and  in  such  a  manner  that  any 
person  taking  the  bill,  if  he  acted  reasonably,  could  not  fail  to  under- 
stand that  it  was  accepted  subject  to  an  expressed  qualification. 

About  these  propositions  T  do  not  think  there  can  be  any  differ- 
ence of  opinion  ;  the  difficulty  lies  in  applying  them  to  the  facts  of  the 

•Thi<<  word  was  ntrnrk  out  by  h  pen  mnrk.  By  th<«  proviBions  of  the  Bills 
of  Exrhang**  Art  (§  8.  siibsfr.  A)  [ho  wnrds  "order"  or  "bearer"  are  not 
neceHsary  to  render  a  bill  negotiable.  —  H. 

TSee  59  L.  J.  Q.  B.  639;  L.  B.  25  i).  B.  D.  .343.  —  H. 


G7()  ACCKPTANCK   OF    BILLS.  [ART.    XI. 

particular  taso.  The  bill  in  (iia'sliun  was  drawn  in  Kraiice  by  a  per- 
son named  Delobbol  Kliju)  upon  the  appellants,  and  forwarded  to 
London  for  their  aeeeptanre.  The  bill  is  drawn  on  a  printed  form 
containing  the  word  "  order "  immediately  preceding  the  name  of 
Delobbel  Flipo,  which  has  been  inserted  as  the  payee  of  the  bill.  This 
word  "  order  "  has  been  erased,  but  by  whom  does  not  appear,  nor  do 
I  think  it  material.  If,  as  suggested,  it  was  done  by  the  acceptors, 
they  were  not  justified  in  making  the  erasure,  and  in  any  case  there 
would  be  nothing  to  show  a  ])erson  taking  the  hill  that  the  word  had 
not  been  struck  out  by  the  drawer  at  the  time  he  inserted  the  name  of 
the  payee.  I  do  not  think,  therefore,  that  the  erasure  of  the  word 
"  order "  can  in  any  way  assist  the  contention  that  the  acceptance 
was  a  qualified  one.  That  must  be  determined  by  a  consideration  of 
the  effect  of  the  words  written  across  the  bill  by  the  acceptors. 

For  the  purpose  of  accepting  the  bill  the  appellant  company  im- 
pressed upon  it  by  means  of  a  stamp  the  words  "  accepted  payable  at 
Alliance  Bank,  London,"  underneath  which  the  signatures  of  two 
directors  and  the  secretary  were  w-ritten.  The  acceptors  wrote  across 
the  bill  above  the  word  "  accepted  "  the  words  "  In  favor  of  Mr.  L. 
Delobbel  Flipo  only :"  between  these  words  and  the  word  "  accepted  " 
was  written  "  No.  28."  In  considering  whether  the  efTect  of  the  words 
"  In  favor  of  Mr.  L.  Delobbel  Flipo  only  "  was  to  make  the  accept- 
ance a  qualified  one  in  the  manner  suggested,  regard  must  be  had  both 
to  the  words  used  and  to  the  situation  in  which  they  are  placed.  It 
may  be  that  if  the  same  words  had  been  found  in  the  body  of  the  ac- 
ceptance following  the  word  "accepted,"  they  would  have  amounted 
to  the  qualification  contended  for.  The  presence  of  any  words  in  the 
body  of  the  acceptance  would  of  itself  suggest  the  idea  that  some 
qualification  of  it  was  intended ;  but  \vhere  the  words  are  not  inserted 
in  the  bodv  of  the  acceptance,  I  do  not  think  the  same  impression  is 
likelv  to  be  produced,  though  the  words  may,  of  course,  be  so  clearly 
intended  to  qualify  the  acceptance  and  so  incapable  of  any  other 
reasonable  construction  that  they  would  be  as  effectual  for  the  pur- 
pose. But  in  the  present  case  the  words  written  above  the  acceptance 
are  not  "  Payable  to  Delobbel  Flipo  only,"  which  is  the  meaning 
sought  to  be  attached  to  them,  but  "  In  favor  of  Delobbel  Flipo  only," 
which  do  not  seem  to  me  necessarily  to  bear  the  same  meaning.  The 
words  "in  favor  of,"  when  used  in  relation  to  a  bill  of  exchange,  do 
not  ordinarily  mean  that  it  is  payable  only  to  the  person  in  whose 
favor  it  is  said  to  be  drawn ;  the  words  are  equally  applied  when  the 
bill  is  made  payable  to  his  order.  The  words  "  In  favor  of,"  there- 
fore, are  properly  paraphrased  by  "  payable  to,  or  to  the  order  of ;  "  but 
then  it  is  said  that  the  insertion  of  the  word  "only"  after  Flipo's 
name  would  show  that  this  could  not  be  the  meaning  intended.  It 
muBt  be  remembered,  however,  that  between  these  words  and  the  aq-- 


II.    1.]  GENERAL   ACCEPTANCE.  671 

ceptance  "  Xo.  28  "  was  inserted,  which  separates  the  words  which  it 
is  suggested  qualify  the  acceptance  from  the  acceptance  itself. 

Under  these  circumstances  I  do  not  think  that  it  is  impossible  that 
a  per.«on  taking  the  acceptance  by  way  of  indorsement  might  suppose 
that  these  words  "  In  favor  of  Delobbel  Flipo  only  "  were,  like  the 
"  No.  28,"  a  mere  memorandum  inserted  by  a  party  to  the  bill,  and 
not  intended  to  atfect  the  acceptance.  It  might  be  supposed  to  indi- 
cate that  it  was  the  28th  bill,  or  Xo.  28  of  the  bills  accepted  "  in 
favor  of  Delobbel  Flipo  only,"  as  distinguished  from  bills  accepted 
in  favor  of  Flipo  and  some  other  persons.  I  do  not  say  that  this 
would  be  the  interpretation  given  to  it  by  a  person  who  carefully 
and  critically  considered  it.  But  that  is  not  the  question.  It  is 
impossible,  as  I  have  said,  to  disassociate  the  words  used  from  the 
position  and  collocation  in  which  they  are  found,  and  if  these  be 
such  as  to  suggest  that  the  words  are  a  mere  memorandum,  a  person 
taking  the  bill,  even  if  he  exercised  the  ordinary  care  to  he  expected 
in  such  transactions,  would  not  be  likely  to  examine  or  weigli  them 
with  the  same  care  as  if  they  were  found  in  the  body  of  the  accept- 
ance. 

In  my  opinion  the  qualification  was  not  made  in  clear  and  unequiv- 
ocal terms,  and  in  such  a  manner  tliat  any  person  taking  the  bill, 
if  he  acted  reasonably,  could  not  fail  to  understand  that  it  was  accepted 
subject  to  that  qualification.  T  think,  therefore,  tlie  judgment  ought 
to  be  atrnrned." 

LoiM)  Bramweij,.  —  My  Lords,  T  consider  what  was  written  and 
printed  by  the  defendants  on  the  face  of  the  bill  as  one  —  one  thing 
only  —  an  acceptance  and  no  more,  not  an  acceptance  and  something 
else.  That  being  so,  T  am  unable  to  s(>e  any  difference  between  "  In 
favor  of  Flipo  only,  accepted  j)ayable,"  etc.,  and  "Accepted  in  favor 
of  Flipo  only,  payable,"  etc.  I  do  not  know  where  the  hodii  of  the 
acceptance  begins,  unless  at  the  beginning  of  what  is  written.  It  is 
said  that  "In  favor  of  Flipo  only"  does  not  ii<'cc<s;irilv  incnM  (he 
same  as  "  accepted  in  favor  of  Flipo  only."  I  think  it  docs;  but  if  not 
necessarily,  what  does  it  naturally  mean?  Fspecially  when  it  is  r<>- 
niembered  that  the  word  "order"  was  erased.  That  was  i;o  (joiiiit 
unauthorized,  if  done  by  the  drawees.  bn(  it  clearly  shows  the  iiileii- 
tion  of  the  drawees  if  done  by  them,  jind  the  knowledge  bv  the  drawer 
of  that  int<'nfion  if  done  by  him.  The  striking  out  of  "order"  was 
not  a  memorandum  for  the  use  of  the  drawees.  I  cannot  find  that  any 
other  cause  for  what  was  done  can  be  suggested. 

As  to  the  thing  being  clear  and  unequivocal,  I  begin  to  doubt  if 
there  is  such  a  thing,  but  it  is  enough  if  words  are  intelligible,  fan 
there  be  a  doubt  that  this  bill  might  have  been  protested   for  tion- 


"  r)()iiiions  for  aflirmancc  wvro  also  rlcliv<rc<|   hy   Lord   Halshury.  L.   ('.,  anH 
Lor'l   VN  atHon.  —  H. 


672  ArcKrTANrK  of  him>s.  [art.  xi. 

acceptance  according  to  its  tenor?     I  suppose  fron\  the  form  of  tlie 

anrptaiuc  that  the  ap|H'lhinls  th()u,i;'hl  they  liatl,  or  ini^lit  liavu, 
801110  cross-chliiii  a_^Minsl  l^'lipo.  I-'lijio,  prohahl}-,  wa,-.  ;;la(l  to  j^ct 
anylliing  from  them,  and  so  |)ul  up  with  the  accciitamr,  and  jx'rhaps 
indorsed  it  in  satisfaction  of  a  had  dcht  to  those  t^hid  to  get  anytlung 
from  him.'' 

Order  appealed  from  allirmed,  and  appeal  dismissed  with  costs. 


§  228  TROY  CITY  BANK  v.  LAUMAN. 

10  New  York,  477.  —  1859. 

Action  again.st  indorsers  of  hills  afldressed  to  the  payee  at  New 
York,  and  accepted  hy  the  payee  "  payal)le  at  Continental  Bank,  New 
York."  Presentment  at  the  C'ontinental  Bank;  payment  nd'used ; 
due  notice.    Judgment  for  plaintiff. 

S.  B.  Strong,  J.,  [after  disposing  of  other  questions  |.  The  two 
drafts  were  respectively  addressed  to  the  drawee  in  New  York,  and 
were  accepted  hy  him,  payable  at  the  Continental  Bank  in  that  city, 
where  the  demand  of  payment  was  made.  The  defendants'  counsel 
contended  on  tlie  trial  that  the  drafts  were  not  duly  accepted  or 
demand  of  payment  properly  made,  and  the}'  cited  the  case  of  Wood- 
worth  V.  Tlie  Banlc  of  America  (ID  John.  391),  to  sIkv.-  I' at  such 
practices  were  irregular  and  did  not  attach  any  rosponsihility  to  them. 
In  that  case,  however,  the  note  was  in  fact  payahle  in  Albany,  and 
there  was  a  marginal  memorandum,  signed  by  the  maker,  tliat  it  was 
payable  in  New  York.  That  memorandum  was  made  after  the  note 
had  been  indorsed  by  Judge  Woodwortli,  and  without  his  knowledge. 
It  was  held,  and  perhaps  properly,  that  the  memorandum  was  an 
alteration  of  the  note,  and  discharged  the  indorser.  The  alteration 
consisted  in  making  it  payable  in  a  different  city,  and  tlint  rendered 
it  material.  It  is  not  of  course  an  alteration  of  a  draft  to  accept  it 
as  payahle  at  a  designated  place  in  the  same  city,  and  if  it  could  be 
deemed  a  change  at  all,  it  is  not  made  by  the  payee  or  indorsee,  nor  is 
it  at  all  material. 

So,  too,  in  the  case  of  WaWer  v.  iUnih-  of  I  he  Slafr  of  Neiv  Ynrk  (!.'? 
Barb,  n.'ifi),  the  draft  was  directed  to  the  drawee  in  New  York  and 
accepted  by  him,  payable  at  Clayville  Mills,  in  Oneida  .-ounty.  It 
was  properly  held  that  the  change  was  material  and  rendered  the 
acceptance  void,  and  that  as  no  notice  of  such  acceptance  was  given 
to  the  indorsees,  they  were  discharged. 

If,  in  tlie  case  under  consideration,  the  drafts  had  been  made  pay- 
able at  a  particular  store,  counting  house,  or  ofTice  in  New  York,  it 
would  have  been  a  change,  although   I  do  not  think  that  it  would 

•  Opinion  for  reversal  was  also  delivered  by  Lord  Morris.  —  H. 


II.    2.]  QUALIFIED   ACCEPTANCE.  673 

even  then  have  been  a  material  one,  to  liave  accepted  it  as  payable 
at  another  place  in  the  same  city.  No  possible  injury  can  result  to 
the  drawer  or  indorser  by  making  a  bill  of  exchange,  directed  to  the 
drawee  in  a  city  generally,  payable  at  some  particular  place  in  the 
same  city.  It  becomes  pro  hac  vice  the  place  of  business  of  such 
drawee.  The  cases  differ  as  to  whether  the  holder  may  not,  never- 
theless, present  the  bill  for  payment  at  the  ordinary  place  of  busi- 
ness, or  if  he  has  none,  the  residence  of  the  drawee  ;^  but  I  have  seen 
none  wliich  decides  tiiat  he  is  bound  to  do  so.  I  am  confident  that  the 
practice  pursued  in  this  instance  corresponds  with  commercial  usage, 
and  think  that  it  should  be  sustained. 

[The  court  then  holds  the  notices  sufficient.] 

Judgment  affirmed.^ 


2.  Qualified  Acceptance. 

(a)   Conditional  acceptance. 

§  229         STEVENS  v.  ANDROSCOGGIN  WATER  POWER  CO. 
G2  Maine,  498.  —  1874. 

Appleton,  C.  J.  —  This  is  an  action  of  assumpsit  against  the 
defendants,  as  acceptors  of  the  following  order,  drawn  on  them  by 

James  Ilibbard : 

Shelbubne,  Feh.  25,  1873. 
Andboscoogin  Water  Power  Co., 

Edward   Pmmmer,   Af/ent. 
Please  pay  to  .lames  A.  Stevens,  for  cutting  and  hauling  lumber,  the  sum  of 
one  hundred  and  thirty-four  dollars,  and  charge  tlie  same  to  my  account. 

James  Hibbard. 

'  If  a  particular  i)lac<'  is  specified  in  the  acceptance,  the  presentment  for 
payment  must  Ije  made  at  that  place  or  the  drawer  and  indorsers  are  dis- 
charged. Brown  v.  Jones,  113  Ind.  46.  t'ontra:  \ia(jara  District  Bank  v. 
Fairman,  etc.,  Co.,  31  Parh.  ( N.  Y.)  407,  where  it  is  held  that  if  the  bill  is 
addresse<l  to  the  drnwe<'  in  Town  A.,  and  he  aecepts  it  payable  in  Town  P., 
it  is  improj)er  to  make  j)resentnient  in  P.,  but  it  should  be  presented  to  the 
acceptor  in  A.  Otherwise  if  he  accfpls  it  [iay:ibl<'  :it  a  i)articiilar  place  in 
Town   A.  —  II. 

2"  Pefore  the  1  &  2  fJeo.  4,  c.  78  (SiTgeant  Onslow's  Act),  it  was  a  point 
much  disputed  whether,  if  a  bill  [)ayable  generally  was  accepted  payable  at  a 
•particular  place,  such  an  acceptanci'  was  a  (umlilieil  one.  That  statute. 
however,  has  now  settled  that  an  acceptance  payable  at  a  banker's  or  other 
particular  place  is,  as  against  the  acceptor,  a  general  accr-ptance  unless  tlie 
acceptor  express  in  his  acceptance  that  the  bill  is  payable  there  only,  and 
not  otherwise  or  elsewhere."  Pyles  r)n  Pills,  p.  197.  Roirr  v.  Yoiitiq.  (2 
Prod.  &  Pitig.  li'if)),  held  such  an  acceptance  to  be  qualifierl.  In  tin-  United 
States  such  acceptances  have  generally  been  held  to  be  inKpialiliiMl.  Wallace 
V.  Mcfonnrll.  13  Peters  (T^.  S. )  13oi  1  Daniel.  §§  520,  fi4Nfi13.  The  Neg. 
Inst.  L.,  §  228.  enacts  substantially  the  provisions  of  Sergeant  Onslow's  Act, 
now  found  in  Pills  of  Kxchaiige  Act,  §  19.  —  H. 
MBOOT.  INSTIIDMKNTS  —  43 


67  i  ACCEl'TANCE    UF    UIl.l.S.  [AUT.    XI. 

In  answer  to  a  letter  from  the  plaintiff,  the  defendants  on  March 
18,  1873,  wrote  the  following  letter  to  him: 

LisitoN   Fali^s,  Me.,  March  18,  1873. 
Mr.  James  A.  Stevens: 

Dear  Sir:  Yours  of  the  tliirteeiitli  inst.,  is  received.  We  shall  not  pay 
any  orders  of  Mr.  Hibbard  until  we  settle  with  him.  If  there  ia  anything  over, 
I   will  ket.'p  it  back  for  the  purpose. 

Yours  truly, 

E.  Plummer,  A()rnt. 

The  order  of  February  25  was  retained  by  the  defendants  in  their 
possession.  On  Mareh  25,  1873,  the  defendants  were  summoned  as 
trustees  of  James  Hibbard,  in  a  suit  in  which  one  Bean  was  pbiintiff, 
returnable  at  the  September  term  of  the  Supreme  Judicial  Court  for 
the  county  of  Androscoggin,  and  for  the  sum  of  $35(5.70.  On  April 
28,  1873,  the  plaintiffs  attorneys  were  notified  that  this  action  would 
be  entered  at  the  September  term,  and  that  the  trustee  would  make  a 
full  statement  as  to  all  orders  drawn,  and  leave  the  question  of 
liability  to  the  decision  of  the  court.  Prior,  however,  to  the  Septem- 
ber term,  Hibbard  settled  the  suit  of  Bean,  and  directed  the  defend- 
ants to  pay  the  amount  due,  without  notifying  the  plaintifT  in  this 
suit.  At  the  time  of  this  settlement  there  were  due  Hibbard  from 
the  defendants,  four  hundred  and  four  dollars  and  forty-seven  cents, 
out  of  which  sum  they  paid  Bean  three  hundred  and  sixty-nine  dollars 
and  fifteen  cents,  and  the  balance  of  thirty- five  dollars  and  tliirty-two 
cents  they  paid  Hibbard.     This  payment  was  on  August  2,  1873. 

An  acceptance  may  be  absolute  or  conditional.  A  conditional 
acceptance  at  once  becomes  absolute  upon  the  performance  or  hap- 
pening of  the  condition. 

In  the  present  case  the  defendants'  promise  is  to  pay  if  in  settle- 
ment "there  is  anything  over."  When  the  acceptance  is  conditional, 
the  holder  may  accept  or  refuse  the  offer.  ^  The  plaintiff  acceded  to 
the  proposition  of  the  defendants  —  permitted  the  order  to  remain 
with  them,  and  did  not  sue  out  a  trustee  writ,  by  which  his  whole 
debt  would  have  been  secured.  There  was  a  settlement  and  the 
amount  due  exceeded  the  amount  of  Hibbard's  order.  The  defendants 
then  became  liable,  and  this  liability,  conditional  in  the  first  instance, 
accrued  long  before  the  trustee  suit  of  Bean.  The  payment  to  Bean 
by  the  defendants  was  in  their  own  wrong,  and  cannot  defeat  the  j)rior 
right  of  the  plaintiff. 

Defendants   defaulted.  * 


s  See  Neg.  In.st.  L.,  §  230.  —  H. 

♦  Any  condition  clparly  varying  the  tenor  of  the  bill  renders  the  acceptance 
conditional.  1  Dani<d  on  Nep.  Inst.,  §  500-.515;  4  Am.  4  Eng.  Encyc.  L.  (2nd 
ed.),  pp.  227-2.12.  The  conditional  acceptance  becomes  absolute  upon  the 
happening  of  the  condition.  Ibid.  An  acceptance  "  when  in  funds  "  is  con- 
ditional.    The  bill  is  payable  when  the  acceptor  has  in  his  hands  funds  which 


II.    2.]  ^  QUALIFIED    ACCEPTANCE.  675 

(b)   Partial  acceptance. 
§  229  PETIT  V.  BENSON. 

COMBEBBACH,   452.  —  1697. 

A  BILL  was  drawn  upon  the  defendant,  who  accepts  it  by  indorse- 
ment in  this  manner :  "  I  do  accept  this  bill  to  be  paid,  half  in  money 
and  half  in  bills."  And  the  question  was,  whether  there  could  be  a 
qualification  of  an  acceptance;  for  it  was  alleged  that  his  writing 
upon  the  bill  was  sufficient  to  charge  him  with  the  whole  sum.  But 
'twas  proved  by  divers  merchants,  that  the  custom  among  them  was 
quite  otherwise,  and  that  there  might  be  a  qualification  of  an  accept- 
ance; for  he  that  may  refuse  the  bill  totally,  may  accept  it  in  part. 
But  he  to  whom  the  bill  is  due  may  refuse  such  acceptance,  and  protest 
it  so  to  charge  tiie  first  drawer ;  and  tho'  there  be  an  acceptance,  yet 
after  that  he  hath  the  same  liberty  of  charging  the  first  drawer  as  he 
before  had.  '^ 


(c)  Local  acceptance. 
§  229  TROY  CITY  BANK  v.  LAUMAN. 

[Reported  herein  at  p.   672.] 

Halstead  V.  Skei.ton,  5  Q.  B.  86  (1843).  Tindal,  C.  J. —  The 
statute  '  enacts  that,  where  a  bill  is  accepted  payable  at  a  l)anker's, 
without  further  expression  in  the  acceptance,  such  acceptance  shall  be 
deemed  and  taken  to  he  to  all  intents  and  purposes  a  general  accept- 
ance of  sucli  l)ill ;  but  the  meaning  of  this  enactment  is  not  that  in 
such  a  case,  presentment  at  the  banker's  shall  be  an  invalid  present- 
ment, but  that,  in  an  action  against  an  acceptor,  presentment  to  him 
shall  be  good,  and  consequently  that  it  shall  he  unnecessary  to  present 
or  to  aver  presentment  at  the  banker's.  A  hill  of  exchange  drawn 
generally  on  a  party  may  be  accepted  in  three  dilFerent  forms:  Kither 
generally,  or  payable  at  a  particular  banker's,  or  payable  at   a  par- 


the  drawer  has  a  present  right  to  demand  and  receive.  Wintermute  v.  Post, 
24  N.  J.  L.  420;  Wallarr  v.  Dnufiln.i,  IIT.  N.  ('nr.  OSU.  An  acceptanee  of  a 
Hixty-day  bill  "  payable  on  pivinp  up  liill  of  Indinfr,  etc.."  is  u  qnuliricd  ac- 
eeptance;  hut  the  neeeptor  i^*  hound  even  thoiii;h  the  hill  of  l.ndinp  ii  not 
tendered  until  after  the  maturity  of  the  hill.  Smith  v.  Vertuc,  30  I>.  .T.  C.  P. 
56.  —  H. 

^  "  In  Molloy  and  tlie  other  hooks  there  is  n  whole  jiarafrraph  jihont  the 
partial  acceptanee  of  a  hill  of  exchnnfre,  and  tliey  allow  it  to  l»e  pood." 
Weqemloffr  v.  Kerne,  1  Stranjre,  214,  225.  —  II. 

•  Namely,  Sergeant  Onslow's  Act,  1  and  2  Geo.  4,  c.  78.  See  note  on  page 
478,  ante.  —  C. 


676  ACCIiPTANCK   UF    BILLS.  [AKT.    XI. 

tirular  banker's  niul  not  olsewhore.  It'  the  drawoo  aecjopts  geni'rally,  lie 
umiortakos  to  pay  ihv  bill  at  maturity  when  presented  to  him  for  pay- 
ment. If  he  aeeepts  payable  at  a  baid<er's,  he  undertakes  (since  the 
statute)  to  pay  the  bill  at  maturity  when  presented  for  payment  either 
to  himself  or  at  the  banker's.  If  he  accepts  payable  at  a  banker's  and 
not  elsewhere,  he  contracts  to  pay  the  bill  at  maturity  provided  it  is 
presented  at  the  banker's,  but  not  otherwise. 

Here  the  bill  was  accepted  according  to  the  second  of  these  three 
forms;  i.  e.,  payable  at  a  banker's,  without  any  restrictive  words;  so 
that  presentment  at  the  banker's  (though  if  made  it  would  have  been 
a  good  presentment)  was  yet  not,  as  against  the  acceptor,  necessary. 


(d)  Acceptance  qualified  as  to  time. 

§  229  HATCHER  v.  STALWORTH. 

25  Mississippi,  376. —  1853. 

Action  by  payee  against  acceptor  on  a  bill  payable  at  sight.  Plain- 
tiiT  presented  the  bill  to  defendant,  who  wrote  to  plaintiff  that  he 
(defendant)  would  pay  the  order,  but  could  not  say  when.  Judgment 
for  plaintiff. 

Mr.  Justice  Yerger  delivered  the  opinion  of  the  court. 

We  see  no  error  in  this  record.  Where  a  party,  on  whom  a  bill  is 
drawn  at  sight,  offers  or  promises  to  pay  at  a  future  day,  that  amounts 
to  an  acceptance,  if  acceded  to  by  the  holder.  (7  Pick.  R.  34;  Story 
on  Rills,  §§  243,  244.) 

The  proof  in  this  case  shows  this  to  have  been  the  state  of  facts; 
and  we,  therefore,  must  affirm  the  judgment.'^ 


(e)  Acceptance  by  one  or  more  drawees,  hut  not  by  all. 
§  229      TOMBECKBEE  BANK  r.  DUMELL  &  LYMAN. 

[Reported  herein  at  p.  687.] 

7  Tf  the  bill  is  drawn  payable  on  a  {?iven  date  it  may  be  accepted  payable  at 
a  different  date.  RvfisrU  v.  Phillips.  14  Q.  B.  891;  Green  v.  Raymond,  9  Neb. 
295;   Vanstrum  v.  Liljenf/ren.  37  Minn.  191. 

If  a  bill  is  drawn  payable  two  months  after  sight,  and  is  j)resented  on  Sept. 
14,  and  accepted  "  payable  Nov.  14,"  this  is  not  a  qualification  whether  there 
be  days  of  prace  or  not.  So,  if  there  be  days  of  grace,  and  it  is  accepted 
"  payable  Nov.  17,"  this  is  also  treated  as  an  acceptance  according  to  the 
tenor  of  the  bill.  But  an  acceptance  payable  on  any  other  day  than  the 
nominal  or  peremptory  day  of  payment  is  a  qualified  acceptance.  Keruner  v. 
Creditors,  7  Martin  N.  S.    (La.)   540.  —  H. 


ii.  2.']  qualified  acceptance.  677 

3.  Effect  of  Qualified  Acceptance. 

(a)   Holder  may  refuse  qualified  acceptance. 

§  230  BOEHM  v.  GARCIAS. 

I   Campbell,  425,   note.  —  1808. 

Action  on  a  bill  drawn  on  Lisbon,  "  payable  in  effective,  and  not 
in  rals  reals."  The  defendant  was  the  drawer  of  the  bill ;  and  the 
question  was,  whether  it  had  been  dishonored  for  nou-aceeptance  ? 
The  drawees  offered  to  accept  it,  payable  in  rals  denaro.<,  another  sort 
of  currency,  wliich  was  refused.  The  defendant  now  ]>roposed  to  show, 
that  vals  denaros  was  sufficient  to  answer  what  was  meant  by  "  effect- 
ive." 

Lord  Ellenborough.  —  The  plaintiff  had  a  right  to  refuse  this 
acceptance.  The  drawee  of  a  bill  has  no  right  to  vary  the  acceptance 
from  the  terms  of  the  bill,  unless  they  be  unambiguously  aiid  une- 
quivocally the  same.  Therefore,  without  considering  whether  a  pay- 
ment in  denaros  might  not  have  satisfied  the  term  "  effective,"  an 
acceptance  to  pay  in  denaros  was  not  a  sufficient  acceptance  of  a  bill 
drawn  payable  in  "  effective.''  The  drawees  ought  to  have  ati  cjjtcd 
generally,  and  an  action  being  brought  against  them  on  the  gi-neral 
acceptance,  the  question  would  properly  have  arisen  as  to  the  mean- 
ing of  the  term. 


§230  WiNTERMUTE  V.  PosT,  24  N.  J.  L.  420,  423  (1854). 
Haines,  J.  —  The  remaining  and  principal  point  arises  from  the  tenor 
of  the  acceptance,  "  when  in  funds."  This  is  a  conditional  accept- 
ance, and  the  plaintiff  was  not  bound  to  take  it.  If  he  were  not 
satisfied  with  it,  he  might  have  protested  the  note;  for  noii-ac('ey)tan('e, 
and  looked  to  the  drawer  for  its  payment.  Hut  having  taken  it 
without  objection,  he  must  submit  to  its  terms,  and  before  he  can 
enforce  it  against  the  acceptor  he  must  show  funds  of  the  drawer 
in  his  hands.* 

(h)  Qualified  arcrptancc  discharges  non-assenting  antecedent  parlies. 

§230  Walker  v.  Bank.  13  Barbour  (N.  Y.)  r,3fi  (IH.V^)." 
Action   against  the  bank,  as  agent,   for  negligence   in   not  giving 

•  Accord:  Htevens  v.  AndroMcoqqin  Water  Power  Co.,  62  Me.  498,  ante,  p. 
673;  Petit  v.  Benson,  Comb.  452,  ante,  p.  675;  Fiatchcr  v.  Stalivorth,  25 
Miss.  370.  nuir,  fi.  OH't;  (}rrrn  v.  Uai/moml,  9  Nob.  205;  Oihson  v.  Smith,  75 
Ga.  33.  If  an  apfnt,  ns  a  Itnnk.  rccoivos  .i  qiinlifu'fl  arrcptaiipp  without  au- 
thority, the  apent  b«"CompH  liable  to  the  principal  for  any  loss  ensuing  there- 
from.     Walkrr  V.  Hank    0  N.  V.  582.  —  H. 

»  AfTirm^d  9  N.  V.  5H2.  —  H. 


678  At'CKPTANCK    Ol'    ItlM.S.  [AI:T.    XI. 

notice  of  dishonor  of  certain  bill^.  Tlic  hills  were  drawn  upon  E.  C. 
Hamilton  and  were  accepted  in  this  form:  "Accepted,  payable  at 
the  Am.  Ex.  Bank:  Empire  Mills  by  E.  C.  Hamilton,  Treas." 
HuHHAun,  J.  —  Tlie  only  (juestion  presented  is  whether  Hamilton, 
the  drawee,  can  be  charued  as  acceptor.  If  he  cannot,  the  defend- 
ants' liability  is  undisputed,  because  of  their  neglect  to  give  notice 
of  dishonor.  It  is  an  undoubted  rule  that  an  acceptance  dispensing 
with  notice,  must  be  absolute  according  to  the  tenor  of  the  bill;  not 
qualiUed,  or  varying  in  any  nuiterial  particular.  (Story  on  Bills, 
§  240,  and  cases  cited  in  note  2;  Chitty  on  Bills,  '.i2[).)  The  obvious 
reason  is,  that  antecedent  parties,  if  made  liable,  are  entitled  to  full 
recourse  against  the  acceptor,  which  they  cannot  have  if  the  acceptance 
is  conditional.  It  is  also  well  settled  that  no  one  but  tlie  drawee 
named  can  become  an  acceptor,  except  for  honor  supra  protest. 
(Story  on  Bills,  §  121,  et  seq.)  [The  court  then  holds  that  no  one 
was  bound  by  this  acceptance.]  It  follows,  therefore,  that  the  de- 
fendant should  have  treated  the  bills  as  dishonored,  and  given  notice 
of  non-acceptance  to  the  indorsers,  who  by  the  omission  are  dis- 
charged from  liability. ^° 

10  See  also  judpes'  answers  to  tlie  3d  question  in  Rowe  v.  Young,  2  Brod. 
A  Bing.  165;   1  Daniel,  §§  510-511.  — H. 


AETICLE  XII. 

Presentment  of  Bills  of  Exchange  for  Acceptance. 
1.  In  what  cases  presentment  for  acceptance  necessary. 
§  240  TTART  v.  SMITH. 

15   Alabama,   807.-1849. 

Darg.'^n,  J.  —  Tliis  was  an  action  of  assumpsit,  on  a  bill  of  ex- 
change, drawn  by  the  defendant  in  favor  of  the  plaintiff,  on  Desha 
&  Smith,  dated  the  26tli  February,  1840,  payable  at  sight.  The  only 
evidence  introduced  to  charge  the  drawer  was  the  bill,  and  protest, 
showing  a  demand  of  payment  made  of  the  drawees,  on  the  Itli 
of  March,  1840,  and  notice  to  the  drawer.  The  court  charged  t!io 
jury,  that  the  plaintiff  could  not  recover. 

A  bill,  pavable  on  demand,  or  at  any  fixed  time,  need  not  be  pre- 
sented for  acceptance,  but  a  demand  of  payment,  at  the  time  the 
holder  has  the  legal  right  to  demand  payment,  is  all  that  is  neces- 
sary. And  if  the  bill  be  not  paid,  the  holder  may  protest  it  for  non- 
payment, and  on  his  giving  due  notice  to  the  drawer  and  indorsers, 
their  liabilitv  is  fixed.  (Eravs  v.  Briflgrs.  4  Porter,  315;  1  Peters, 
25,  2  lb.  170';  Chitty  on  Bills  (10th  ed.  |,  272.)  Put  when  the  time  of 
payment  is  uncertain,  and  a  presentation  of  the  bill  is  necessary, 
in  order  to  ascertain  and  fix  the  time  of  payment,  as  if  the  bill  be 
payable  at  a  number  of  days  after  sight,  then  the  bill  must  be  iire- 
sented  for  acceptance  before  payment  is  demanded.  (St(irv  on  P)ills, 
§  112,  227;  Chittv  on  Pills  [ioth  ed.],  272;  Bayley  on  P.ills  |  5th 
ed.],  217,  218.)' 

It  is  contended  that  a  bill  payable  at  sight  is  entitled  to  days  of 
grace,  and  therefore  it  must  be  presented  for  acceptance  before 
payment  can  be  demanded. 

I  am  free  to  confess,  that  my  opinion,  tnitrninniclcd  l)y  antliority, 
would  incline  me  to  hold  that  a  bill  of  e\ch;mL'-c.  jxninhlr  al  .^ii/hl.  is 
not  entitled  to  days  of  grace,  and  that  payment  may  be  demanded 
on  presenting  the  bill;  which,  if  refused,  would  authorize  the  holder 
forthwith  to  have  it  protested  for  non-payment,  ami.  on  giving  no- 
tice to  the  drawer,  to  hold  him  liable.  Put  tlie  law  seems  to  be 
settled  otherwise.  .Tndge  Story,  in  liis  treatise  on  bills,  says,  "that 
days  of  grace  are  allowed  on  all  bills,  whether  payable  at  a  certain 
time  after  date,  after  sight,  or  even   at  sight.     And   altiiongh   there 

1  Neg.  Inst.  L.  §  240.  —  H. 


680  PRKSRNTMKNT  FOR  AC'CKl'TANCE.  [ART.    XII. 

has  been  soino  divorsity  of  opiiiioii,  whelluT  bills  payable  at  sight 
are  entitled  to  days  of  grace,  it  is  now  settled  by  the  decisions, 
both  in  England  and  Aniorica,  (iiat  days  of  grace  are  allowable  on 
snch  bills."  (§  ;Mv>,  }).  4'^!).)  To  the  same  eUVct,  see  Chitty  on 
Bills  1 10th  ed.],  37G ;  Bayley  on  Bills  [Sth  ed.j,  244,  245;  Sclwyn's 
N.  P.  [9th  ed.],  351;  Coleman  v.  Saijre,  1  Barnard,  303;  Deliers  v. 
Harriot,  1  Show.  165;  Steplien's  N.  P.,  876.)  =  Under  the  influence 
of  these  authorities,  1  feel  constrained  to  hold  tliat  a  bill  payable  at 
sight  is  entitled  to  days  of  grace;  consecpiently  a  demand  of  pay- 
ment made  of  the  drawer,  upon  the  first  presentation  of  the  bill  to 
him,  is  insufficient  to  charge  the  drawer,  for  the  bill  is  not  then 
due.  As  there  was  no  evidence  of  any  previous  presentation  of  the 
bill  for  acceptance,  nor  notice  given  of  non-acc-eptance,  tlie  demand 
of  payment  was  prematurely  made  and  was,  therefore,  a  nullity.^ 

As  the  evidence  fails  to  show  a  demand  of  payment  on  the  day  the 
bill  was  payable,  the  court  correctly  instructed  the  jury  that  the 
plaintiff  could  not  recover. 

Let  the  judgment  be  affirmed. 


§  240  PLATO  V.  REYNOLDS. 

27  New  York,  586.  —  1863. 

Action  against  drawers  of  a  bill.    Judgment  for  plaintiff. 

Wright,  J.  —  The  bill  which  was  drawn,  payable  one  day  after 
date,  was  presented  to  the  drawee  for  acceptance  on  the  day  it 
matured;  acceptance  was  refused,  and  it  was  protested  for  non- 
acceptance.  The  certificate  of  the  notary  states  that  on  the  same 
day  (12th  September)  he  forwarded  written  notice,  by  mail,  to  the 
drawers  (the  defendants)  and  indorsers  (Miles  and  Bartlett),  inform- 
ing them  of  the  non-acceptance  thereof.  It  was  also  proved  that  on 
the  following  day  the  payees  (Miles  and  Bartlett)  received  the  origi- 
nal draft,  with  notices  of  protest  for  themselves  and  the  defendants, 
and  caused  such  notice  to  be  served  on  the  latter  that  day.  The 
drawee  also  informed  one  of  the  defendants,  on  the  12th  September, 
at  the  office  of  the  payees,  that  he  had  not  accepted  or  paid  the  draft. 
In  view  of  this  proof,  I  think  the  referee  did  not  err  in  refusing  to 
dismiss  the  complaint,  and  in  deciding  that  the  bill  was  duly  pre- 

2  Accord:      Knott    v.    Venahle,    42    Ala.    ISO;    Crihhs    v.    AdaniH,    13    Gray 
(Mass.)   597;  WaUh  v.  Dart,  12  Wis.  635;   Lucas  v.  hadew,  28  Mo.  342. 

Contra:  Traxk  v.  Martin,  1  E.  D.  Smith  (N.  Y.  f.  P.)  505,  where  a  very 
full  and  learned  discussion  of  the  subject  will  be  found.  —  H. 

3  ['nder  the  Nep.  Inst.  Law,  days  of  grace  are  abolished,  §  145.  and  such  a 
bill  would  not,  under  the  Law,  have  to  be  presented  for  acceptance.  —  H. 


I.]  WHEN   NECESSARY.  681 

sented  and  protested,  and  that  due  notice  was  given  to  the  defendant 
to  charge  them  as  drawers. 

The  defendants  claim  that  the  draft  being  due  when  presented, 
and  demand  made  by  the  notary,  it  was  then  too  late  to  present  it 
for  acceptance;  and  presentment  for  acceptance  of  a  bill  which  is 
due,  is  not  sufficient  to  charge  the  drawers.  But  it  is  well  settled 
that  the  holder  of  a  bill,  payable  a  specified  length  of  time  after 
date,  or  on  a  day  certain,  need  not,  for  the  purpose  of  charging  the 
drawers  and  indorsers,  present  it  for  acceptance  until  it  becomes  due 
and  payable.  It  may  be  presented  before  or  at  the  time  of  its 
maturity.  (Edwards  on  Bills,  387;  Story  on  Bills,  §  231;  Allen  v. 
Ni/.v.^am,  20  Wend.  321  ;  s.  C,  17  Id.  368.)      *     *     * 

All  the  judges,  except  Marvin,  J.,  agreed  that  a  refusal  to  accept 
on  the  day  payment  is  due  is  equivalent  to  a  refusal  to  pay,  and 
renders  a  demand  of  payment  unnecessary.*  On  the  question  of 
evidence,  all  the  judges  concurred. 

Judgment  reversed,^  and  new  trial  ordered. 


§  241  ROBINSON  v.  AMES. 

20  Johnson    (N.  Y.)    146. —  1822. 

This  was  an  action  of  assumpsit,  on  a  bill  of  exchange  drawn  by 
the  defendants,  merchants  in  Augusta,  in  tlic  state  of  Georgia,  on 
the  6th  of  March,  181!),  upon  Townscnd  and  White,  merchants,  in 
the  city  of  New  York,  for  five  hundred  dollars,  payable  sixty  days 
after  sight,  to  Starr  and  Ross,  or  order,  by  whom  it  was  indorsed  to 
the  plaintiff.  The  cause  was  tried  iit  the  New  York  sii tings,  in 
June,  1821,  before  the  chief  justice.  The  bill  was  presented  for 
acceptance  on  the  20th  of  May,  1H1!»,  and  notice  of  non-acceptance 
Bent,  by  mail,  on  the  next  day,  to  the  drawers,  by  a  notary,  directed 
to  them  at  Augusta,  in  Georgia.  On  the  22d  of  .July,  1810,  the 
same  notary  presented  the  bill  to  I  lie  drawers  for  payment,  which 
they  refused,  alleging  the  want  of  funds.  Notice  of  non-payment 
was  sent  through  the  post-ollice,  two  or  three  days  afterwards,  ad- 
dressed to  the  defendants,  at  Savaniuih,  in  Georgia. 

Townscnd,  one  of  the  drawees,  who  was  ;i  witness  for  the  plaintiff, 
testified,  that  on  the  20th  day  of  May,  181!),  the  drawees  had  no  funds 
in  their  hands  belonging  to  the  defendants,  and  had  then  aceepted 
drafts  to  the  amount  of  three  or  four  thoiisand  <Iollars  more  than  they 
had  funds  of  the  defendants,  and   that   this  was  the  last   hill  drawn 


♦  Apcorrl:      Philpntt    v.    Jtrynnt,    3    Car.    &    P.    244;    Washington    BatC    Y. 
Triplrtt,   1    Prt.    iV.  S. )   2.T.  —  If. 

•'>  On  a  question  of  nclmiHsion  c>f  cvidcnc-o.  —  II. 


682  PRESKNTMl'Nl'   KOIJ   .\(('i;i"l'A  NCE.  [ART.    XII. 

by  thciii.  TliaL  the  want  of  tuiuls  prorci'ilnl  from  a  fall  in  the  price 
of  cotton  shipped  by  the  ili'lViidaiits  to  T.  and  W'.;  that  by  an  agree- 
ment between  them,  the  defendants  were  aulhurized  to  make  pur- 
chases of  cotton,  on  the  joint  account  of  themselves  and  T.  and  W., 
and  to  draw  on  T.  and  W.  I'oi-  (Ik'  amount.  That,  on  the  26th  of 
April,  181!>,  T.  and  W.  st(«]>iHMl  payment.  That  after  the  Gth  of 
March,  and  before  the  faiiui'c  of  T.  and  W.,  they  bad  received  a  con- 
siderable amount  of  cotton  from  the  defendants,  but  had  accepted 
the  bills  of  the  defendants  to  a  larger  amount  than  the  value  of  the 
cotton  so  shipped,  and  the  difference  was  owing  to  a  loss  on  the 
cotton  shipped  ;  that,  if  the  defendants  were  to  pay  all  the  bills,  T. 
and  W.  would  owe  them  five  or  six  thousand  dollars;  but  if  T.  and 
W.  were  to  take  up  all  the  hills,  the  di-awees  would  owe  them  three 
or  four  thousand  dollars. 

It  was  })n)ved,  that  the  mail  which  left  Augusta  about  the  10th 
of  Marcii,  was  lost;  and  that  the  mail  goes  from  that  place  to  New 
York,  in  ten  days,  and  leaves  the  former  place  three  times  a  week. 
That  where  bills  are  remitted  by  merchants,  it  is  the  usual  course  to 
send  the  bill  by  one  mail,  and  to  advise  by  the  next. 

A  verdict  was  taken  for  the  plaintiff,  for  five  hundred  and  seventy- 
two  dollars,  subject  to  the  opinion  of  the  court  on  a  case,  as  above 
stated. 

Spencer,  Ch.  J.,  delivered  the  opinion  of  the  court. 

The  questions  in  this  case  are:  (1)  Whether  the  bill  was  trans- 
mitted in  due  time;  and  (2)  Whether  the  want  of  fund  in  the  hands 
of  the  drawees,  will  excuse  the  delay  in  presenting  the  bill,  or  the 
irregularity  in  the  notice  of  the  non-payment  of  it. 

1.  T  am  entirely  satisfied  that  there  is  no  foundation  for  saying 
the  defendants  are  precluded  from  setting  up  laches,  because  they  had 
no  right  to  draw  the  bill.  The  case  of  THrl-rrdil-p  v.  BnJhnar  (1 
Term  Hep.  105),  is  considered  the  first  case  deciding  that  notice  to 
the  drawer  of  the  dishonor  of  the  bill  was  unnecessary;  and  in  that 
case  the  drawer  had  no  funds,  and  knew  he  had  none,  in  the  hands 
of  the  drawee.  The  drawing  the  bill  was  considered  a  fraud,  and  it 
was  held  that  he  was  not  entitled  to  notice,  and  could  not  be  injured 
by  the  want  of  it.  It  has,  however,  since  that  case,  repeatedly  been 
decided,  that  where  there  are  any  funds  in  the  hands  of  the  drawee, 
80  that  the  drawer  has  a  right  to  expect  the  bill  will  be  paid,  or 
where  there  are  not  any  funds,  yet  if  the  bill  was  drawn  under  such 
circumstances  as  induced  the  drawer  to  entertain  a  reasonable  ex- 
pectation that  the  bill  would  be  accepted  and  paid,  the  person  so 
drawing  it  is  entitled  to  notice;  and,  a  fortiori,  he  is  entitled  to  have 
the  bill  duly  presented.  The  rule  is  correctly  laid  down  in  CJnridge 
V.  Dnlion  {\  Maule  ^  Schv.  220),  by  Lord  Ellenborough.  The 
principle  which  has  been  slntcd  is  very  ably  supported  by  Tliief 
Justice  Marshall,  in  Frr^ir^'   v.   T"' c  Barlr  of  rnlvmhin    M   CVanch'p 


L]  WHEN   NECESSARY.  683 

Bep.  153),  where  the  principal  authorities  are  reviewed.  There  is 
nothing  more  important,  than  that,  in  questions  of  a  general  mercan- 
tile nature,  there  should  be  a  uniformity  of  decision;  and,  although 
the  justice  and  equity  of  this  rule  may  not,  in  some  cases,  be  per- 
ceived, where  the  payee  has  purchased  a  bill,  and  it  is  drawn  in  good 
faith,  and  no  conceivable  loss  has  happened  by  the  want  of  notice; 
yet,  as  there  may  be  cases  where,  though  there  were  no  funds  in 
the  hands  of  the  drawee,  the  drawer  may  be  injured  by  the  want  of 
notice,  it  is  better  that  the  rule  on  the  subject  should  be  general  and 
uniform  throughout  the  mercantile  world. ^ 

In  the  case  of  Miller  v.  Hackley  (5  Johns.  Rep.  375)  ;  WeJdon  and 
Furniss  v.  Buck  avd  anotlier  (4  Johns.  Rep.  144)  ;  and  Mason  and 
Smede  v.  Franklin  (3  Johns.  Rep.  202),  it  was  decided  that  if  a  bill 
was  presented  for  acceptance,  and  the  drawee  refused  to  accept  it, 
and  notice  thereof  was  duly  given,  a  demand  of  payment,  and  notice 
of  a  refusal  to  pay,  was  unnecessary,  because  the  drawer  was  fixed 
already.' 

2.  The  only  remaining  question,  then,  is,  whether  there  was  laches 
in  presenting  the  bill  for  acceptance ;  for  there  is  no  doubt  that 
regular  notice  was  given  of  the  refusal  to  accept  the  bill,  the  day 
subsequent  to  the  demand.  I  do  not  find,  that  where  a  bill  of  ex- 
change has  been  drawn  payable  at  sight,  or  any  specified  number 
of  days  after  sight,  that  there  is  any  definite  or  fixed  rule  when  the 
bill  shall  be  presented  for  acceptance,  other  than  this,  that  due  dili- 
gence must  be  used.  And  it  is  certain,  that  with  respect  to  such  bills, 
and  particularly  where  they  are  negotiated  liy  the  payee,  there  is 
much  more  latitude,  as  to  the  time  of  presentment,  than  where  the 
hill  has  a  fixed  period  of  payment.  Tn  the  case  of  Muilman  v. 
D'Egvino  (2  IT.  Bl.  Rep.  565),  whicli  is  a  very  leading  case  on  tliis 
Buhject,  the  judges  felt  the  difficulty  of  saying  at  what  time  such  a  bill 
should  be  presented  for  payment.  Ch.  J.  Eyre  ol)served.  that  the 
courtB  had  been  very  cautious  in  fixing  any  time  for  an  inland  bill, 
payable  at  a  certain  period  after  sight,  to  be  presented  for  acceptance. 
He  said,  that  if,  instead  of  diawing  llieir  foreign  hills  pavable  as 
iimnrps.  in  the  old  way,  merchants  chose,  for  their  own  convenience, 
U>  <lraw  them  in  this  manner  and  to  make  the  time  commence  when 
the  holder  pleases,  he  did  not  see  how  the  courts  could  lay  down  any 
precise  rule  on  the  subject.  But  he  thought  the  holder  was  bound 
to  present  the  bill  in  a  reasonable  time,  in  order  that  the  period 
might  cf)mmence  from  which  the  j)ayment  was  to  take  place;  and 
that  what  was  reasonable  time  must  depend  on  the  particular  cir- 
cumstances of  the  case.  I'liIIer,  J.,  said,  that  he  thought  a  rule 
might,  thus  far,  be  laid  down  as  to  laclics,  with  regard  to  bills  pay- 


eRpf.  Nor,.  Tnst.  T,bw.  §   IR.''.  pv'\  P  21.'). —  TT, 
TPec   ^  248.  —  H, 


6S1  PBESENTMENT   FOH   ACOKl'TANCE.  |  AHT.    XII. 

able  at  sight,  or  a  certain  time  after  siglit,  namely,  that  tlicy  ought 
to  be  put  in  cireuhition.  It'  they  are  eireulated,  he  said,  the  parties 
are  known  to  the  workl,  and  their  credit  is  loola'd  to;  and  if  a  bill, 
drawn  at  three  days  sight,  was  kept  out  in  that  way  for  a  year,  he 
eouKl  not  say  there  would  he  laches;  but  further  than  that,  no  rule 
could  be  laid  down.  Heath,  J.,  observed  that  no  rule  could  be  laid 
down  as  to  the  time  for  presenting  bills,  payable  at  sight,  or  a  given 
time  after;  that  in  the  French  ordinance  of  ^(^7'^  (Postlethwaitc's 
Diet.  tit.  I'dlls  of  Ivxehange),  it  is  said,  that  a  bill,  ])ayable  at  sight, 
or  at  will,  is  the  same  thing,  and  that  this  agreed  with  Marius. 

Now,  here,  the  bill  was  put  in  circulation  by  Eoss  and  Starr;  and 
although  it  is  probable,  that  the  first  of  exchange  was  lost,  by  the 
loss  of  mail,  we  are  not  authorized  to  consider  that  as  a  fact  in 
the  case;  but  T  cannot  say,  that  upon  such  a  bill  there  has  been 
laches.  We  perceive  how  extremely  cautious  the  judges  were,  in  the 
case  cited,  in  laying  down  any  rule.  The  evident  inclination  of  their 
minds  was,  that  when  the  payee  put  the  bill  in  circulation,  the  sub- 
sequent holder  was  not  bound  to  any  strict  presentment.  The 
drawers  of  the  bill  evidently  did  not  mean  to  limit  the  time  of  pre- 
sentment, by  making  the  bill  payable  at  sixty  days  after  sight.  They 
meant  to  give  a  latitude,  as  to  time,  to  the  holder;  and  my  conclu- 
sion is,  that  there  is  not  such  laches  as  will  discharge  the  drawers. 

Judgment  for  the  plaintiff.® 

8  Accorrt:  Wnllnre  v.  ,1r/n/,  4  IMason  ( U.  S.  C.  C.)  3,36;  s.  c,  5  Mason,  118, 
in  which  a  "  sixty  days  after  si2;ht  "  liill  rlrawn  Jtine  IS  at  Havana,  Cuba,  on 
W.  in  London,  and  there  presented  Oct.  31,  having;  bepn  locked  iip  in  the 
holder's  hands  in  Boston,  from  July  6  to  Sept.  29,  was,  on  the  second  trial, 
fonnd  by  the  jury  to  have  been  presented  within  a  reasonable  time;  Ajimar 
V.  Dcprs,  7  Cowen.  (N.  Y.)  70.5.  in  which  case  a  "three  days  after  Fi<,'ht  " 
bill  drawn  Dec.  12  in  New  York,  presented  Jan.  10  in  Richmond,  Va.,  havincj 
been  in  the  payee's  hands  during  that  time,  was  held  by  the  court  to  have 
been  presented  within  a  reasonable  time,  under  the  circumstances  of  the  case; 
Bo'lnn  V.  Tlnrrod.  0  Mart.  (La.)  ."520 -.  dnirnn  v.  Jarh-.fnn,  20  Johns.  (N.  Y.) 
170:    Montrliv.^  v.   Chnrlr.i,   76   Til.   30.5. 

In  the  following  cases  the  delay  was  deemed  to  be  unreasonable:  Mullick 
v.  Radakissen,  9  Moore  P.  C.  60;  Fernandez  v.  Lewis,  1  McCord,  (S.  ('.)  322; 
Diimnttt  V.  Pope,  7  Blackf.  (Ind.)  367;  Plwrnix  Ins.  Co.  v.  .Allen.  11  Mich. 
.501  ;    rhambrr.f  v.   nW.  26  Tex.  472. 

Whether  what  is  a  reasonable  time  is  a  question  for  the  jury  or  for  the 
eourt  has  occasioned  some  conflict.  The  que.stion  was  left  to  the  jury  in 
Wallarr  v.  .•If/ry.  supra;  it  was  decided  by  the  court  in  .\ymar  v.  Beers,  supra; 
it  was  held  to  be  "  a  mixed  (piestion  of  law  and  fact  "  in  PreseotI  Bank  v. 
CaveHp.  7  Oray,  (Mass.)  217.  See  1  Daniel,  §  466;  note,  17  Am.  Dec. 
544-549. —  H. 


II.]  WHEN"  SUFFICIENT.  .      685 

n.  What  constitutes  sufficient  presentment. 

§  242  SIIARPE  V.  DEEW. 

9  Indiana,  281.  —  1857. 

Stuart,  J.  —  Suit  on  a  bill  of  exchange  by  Drew,  indorsee,  against 
Sharpe,  the  indorser.  The  action  was  instituted  before  the  mayor 
of  the  city  of  Evansville,  where  the  plaintiff  had  judgment  for  the 
bill  and  interest.  Sharpe  appealed  to  the  Circuit  Court,  where  it 
was  tried  with  tlie  like  result.  Sharpe  excepted  to  the  rulings  of 
that  court,  and  now  appeals  to  this. 

Two  points  are  made  and  argued  —  1.  The  evidence  of  present- 
ment to  the  drawee  for  acceptance.  2.  The  evidence  of  notice  of 
protest  to  Sharpe. 

1.  It  is  correctly  contended  that  the  presentment  for  acceptance 
should  be  to  the  drawee  himself,  if  he  can  be  found.  (Chitty  on 
Bills,  278.)  If  to  an  agent  or  other  person  authorized  to  accept, 
the  fact  should  appear. 

In  the  present  case  the  only  evidence  of  presentment  is  the  certifi- 
cate of  protest.  The  notary  certifies  "  that  on,  etc.,  I  did  present 
the  annexed  draft  of  T.  C.  Wetmore  on  W.  W.  Peters,  at  the  store 
of  Silliman  and  Gardiner,  and  demanded  acceptance  of  the  same, 
which  was  refused,"  etf.  It  is  contended  that  this  is  not  evidence 
of  a  presentment  to  Peters  for  acceptance. 

The  statute  makes  notarial  certificates  evidence  of  the  facts  therein 
stated  (2  R.  S.,  p.  91.)  The  notarial  certificate  is  clear  as  to  the 
facts  of  presentment,  the  place  of  presentment,  the  demand  of  accept- 
ance, and  the  refusal.  To  whom  was  it  presented?  Who  refused 
to  accept?  It  cannot  admit  of  doubt  that  Peters  himself  was  the 
person.  The  plain  English  of  the  protest  is  that  the  notary  found 
Peters  at  the  store  of  Silliman  and  Gardiner,  Troy,  N.  Y.,  and  there 
demanded  of  him  acceptance,  which  Peters  refused.  The  form  here 
used  seems  to  he  the  common  one  prescribed  l)y  the  books.  (Chitty 
on  Bills,  333;  Byles  on  Rills.  101.) 

The  language  is  not  even  obscure.  Tlic  presentment,  tlie  deTnaiui, 
the  refusal,  all  clearly  mean,  that  it  was  the  drawee  who  was  the 
object  and  actor.  We  are  not  at  liberty  to  doubt  the  sufficiency  of 
the  evidence  tliat  the  hill  was  duly  presented  for  acceptance. 

("The  Court  then  holds  the  notice  of  dishonor  sufficient.] 

Per  Curiam.  —  The  judgment  is  affirmed,  with  5  per  cent,  dam- 
ages and  costs.' 

•  It  woiilfl  srfni  that  prcwnttiifnt  for  arcfptanrp  miiHt  bo  made  to  the 
drawpp  or  his  nuthorizfd  npf-nt  in  prrton  nnd  that  diliRPiit  inqiiiry  should  Ym 
made  for  thp  drawpp  if  no  pprson  is  found  at  his  officp  or  rpsidpnop  hnvinpj 
authority  to  accept  for  him.     finnk  v.  Triplrtt.  1   Pot.    (U.  S.)   25,  34;   Wi/it- 


(JSli 


PBESENTM1:NT  FOH  ACCKPTANCK.  [AHT.    XII. 


§242         FALL  RIVER  UNION  BANK  v.  WTLLARD. 

5  MirrcALK   (Mass.)    210. —  1842. 

Action  against  indorser  of  bill.  'I'he  jury  woro  instructed  that  if 
tiie  drawees  were  informed  hy  the  bank  tliat  it  lield  sucli  a  bill  drawn 
on  tbem  by  A.  (ami  indorsed  by  defendant),  and  tliey  tbereupon 
informed  plaintilf  that  they  should  not  ac('ei)t  nor  })ay  it,  and  if  no 
notice  thereof  was  given  to  the  indorser  (defendant),  he  was  dis- 
charged.    Verdict  for  defendant. 

HuiiBAUD,  J.  —  It  is  a  well  establislied  principle  of  tlie  law  regu- 
lating bills  of  exchange,  that  the -holder  of  a  hill,  ])ayable  at  a  certain 
time  after  date,  need  not  present  it  for  acceptance  prior  to  the  day 
of  payment.  And  though  it  is  usual  and  safe  so  to  do,  as  he  thereby 
strengthens  his  security,  or,  in  case  of  non-acceptance,  acquires  an 
immediate  right  to  call  on  the  other  parties  to  the  bill,  yet  he  is 
under  no  legal  obligation  to  do  it,  nor  can  the  omission  be  taken 
advantage  of  by  the  drawer  or  indorsers.  (GoodaJl  v.  Dolley,  1  T.  R. 
7112  ;  Chit,  on  Bills,  Tart  I.,  c.  5 ;  3  Kent,  Com.  [Ith  ed.]  82 ;  O'Keefe 
V.  Dunn,  6  Taunt.  305;  s.  c,  1  Marsh.  G13.) 

[The  court  then  decides  that  an  agreement  by  the  holder  made 
with  the  drawer  not  to  present  the  bill  for  acceptance,  but  only  for 
payment  at  maturity,  will  not  discharge  the  accommodation  indorser, 
although  such  agreement  was  not  known  or  assented  to  by  the 
indorser.] 

The  evidence  which  was  introduced  tended  to  show  that  the  cashier 
of  the  Fall  River  Union  Bank  (the  plaintiffs  in  this  suit)  met  Chace, 
one  of  the  house  upon  which  the  bill  was  drawn,  and  informed  him 
that  the  bank  had  the  draft  (now  in  suit),  upon  which  Chace  told 
the  cashier  that  they  should  not  accept  or  pay  it.     And  the  instruc- 


man  v.  Chiappella,  23  How.  (U.  S.)  3(58,  377;  CJirek  v.  fx'oprr,  5  E.p.  175. 
It  has,  however,  been  held  that  it  will  he  presumed  that  a  clerk  in  the 
drawee's  countinjr  house  has  authority  to  accept  or  refuse  to  accept.  A'r/.son 
V.  FottcraU,  7  Leigh,  (Va.)  ISO;  Staivbark  v.  State  Bank,  11  Gratt.  (Va.) 
260.  "  Comparing  presentment  for  acceptance  with  pn-sentment  for  pay- 
ment, it  is  clear  that  the  two  cases  are  governed  by  somewhat  different  con- 
siderations. Sfieaking  generally,  presentment  for  acceptance  should  be  per- 
sonal, while  presentment  for  payment  should  be  local.  A  bill  should  be 
presented  for  payment  where  the  money  is.  Any  one  can  then  hand  over 
the  money.  A  bill  should  be  presented  for  acceptance  to  the  drawee  himself, 
for  he  has  to  write  the  acceptance;  but  the  place  where  it  is  presented  to  him 
is  comparatively  immaterial,  for  all  he  has  to  do  is  to  take  the  bill.  Again 
f except  in  the  case  of  demand  drafts),  the  day  for  payment  is  a  fixed  day; 
but  the  drawee  cannot  tell  on  what  day  it  may  suit  the  holder  to  present  a 
bill  for  acceptance.  The?e  considerations  are  material  as  bearing  on  th« 
question  whether  the  iiolder  has  used  reasonable  diligence  to  effect  present- 
ment."    Chalmers,  Bills  of  Exchange  Act    (5tli  cd.),  pp.   137-138.  — H. 


II.]  WHEN  SUFFICIENT.  687 

tion  to  the  jury  was,  that  if  no  notice  thereof  was  given  to  the 
indorser,  he  was  discharged.  Waiving  the  question  whether  the 
cashier  was  agent  for  the  plaintiffs  for  the  purpose  of  presenting 
the  draft  for  acceptance,  or  not,  we  are  of  opinion  that  this  was  not 
a  due  presentment  of  the  bill  for  acceptance.  The  term  present- 
ment imports,  not  a  mere  notice  of  the  existence  of  a  draft  which 
the  party  has  in  his  possession,  but  the  exhibiting  of  it  to  the  person 
on  whom  it  is  drawn ;  that  he  may  see  the  same,  and  examine  his 
accounts  or  correspondence,  and  judge  what  he  shall  do;  whether 
he  shall  accept  the  draft,  or  not.  Here  there  appears  to  have  been 
nothing  more  than  a  casual  meeting  of  the  parties,  and  the  conversa- 
tion on  the  subject  of  the  draft  ensued.  If  this  had  been  communi- 
cated, it  would  have  created  no  obligation  on  the  part  of  the  indorser 
to  make  present  payment,  and  consequently  such  conversation  im- 
posed no  present  duty  on  the  holders,  as  to  the  other  parties  to  the 
bill.  With  this  view  of  the  case  we  are  not  satisfied  with  the  instruc- 
tion given  to  the  jury.  To  confirm  it,  would  tend  to  introduce  a 
looseness  of  practice  on  the  subject  of  presenting  bills  for  acceptance, 
which  will  lead  to  disputes  and  difficulties  greater  than  now  exist. 
Verdict  set  aside,  and  a  new  trial  granted.^ 


§  242        TOMBECKBEE  BANK  v.  DUMELL  &  LYMAN. 
5  Mason   (U.  S.  C.  C.)   56. —  1828.2 

AssuMP.siT  on  a  bill  of  exchange  drawn  on  17th  of  March,  1827,  in 
Alabama,  by  Stone,  Ellis  &  Co.,  at  sixty  days'  sight,  on  the  defend- 
ants, for  $.'},()0<),  payable  to  Moses  Sewall  or  order,  and  by  him  in- 
dorsed to  the  plaintiffs.  The  declaration  averred  a  presentment  for 
acceptance,  and  an  acceptance  and  a  subsequent  non-payment.  There 
were  other  coiints  on  other  similar  bills.     Plea,  the  general  issue. 

At  the  trial,  the  sole  defense  relied  on  was,  that  tlie  acceptance 
was  made  by  Jacob  Dumell  after  the  dissolution  of  the  partnership 
between  him  and  his  co-defendant,  John  Toyman.  Tt  appeared  in 
evidence,  that  the  firm  was  dissolved  on  flic  1st  of  .January,  1827; 
but  it  was  not  advertisefl  in  the  newspapers  until  the  r)th  of  .April. 
1827,  when  it  was  publisfied  at  Providence,  where  the  firm  carried 
on  business.  The  acceptances  of  all  the  bills  were  after  jlie  dissolu- 
tion was  so  advertised. 

«  Rut  it,  sopnrt  that  tho  nrtunl  oxhibition  of  tho  tiill  is  not  nPcr.Msary  if  the 
drawpp  i»  pnnblofl,  without  *poinp  it.  to  pivp  nn  intrllifrpnt  rospon«o.  1 
Danipl.  5  462;  Fishrr  v.  RrrkwUh.  10  Vt.  31;  nurUmitnn  First  N.  /?.  v.  Hatch, 
78  Mo.,  1.1.  Othorwisp  nn  pxtrin^ir  arroptnncp,  ns  by  tclpgram,  would  serve 
no  nredftil  ptirposo.      Sre  Nrp.  Inst.  T..  §  222.  —  If. 

•  ■.  c,  24  Fed.  C'ae.  1«.  —  II. 


688  PRESENTMENT  Ft)H  ACCKl' FANCE.         [AKT.  XII. 

SxoJiV,  J.  —  Upon  tliis  statenieiit  of  fact;?,  which  is  not  contro- 
verted, 1  am  of  opiiuon,  that  the  phaintifTs  are  not  entitled  to  recover. 
No  partner  lias  any  aufiiority  after  a  dissolution  of  the  partnership 
to  bind  his  copartners  hy  any  new  contract.  The  acceptance  of 
these  bills  is  altogether  a  new  contract.  It  is  true,  that  if  the  part- 
nership is  still  ostensibly  carried  on  in  the  name  of  the  firm,  and  no 
public  notice  is  given  of  the  dissolution  of  the  partnership,  though 
it  is  secretly  dissolved,  thircl  persons,  dealing  with  the  firm  upon  the 
faith  of  the  partnersliip  and  joint  responsibility,  are  entitled  to  hold 
all  the  partners.  But  it  is  otherwise,  where  the  dissolution  is  made 
public.  Here,  before  the  acceptance,  the  dissolution  was  publicly 
announced.  The  partners  had  not  held  out  to  the  payee,  or  the 
present  holders,  that  they  would  accept  the  bill.  Every  non-accepted 
bill  is  necessarily  taken  upon  the  faith  and  credit  of  the  drawer; 
and  no  person  can  bind  the  drawee  by  his  acceptance,  except  a  per- 
son having  an  express  or  implied  authority  for  that  purpose.  After 
the  dissolution  of  the  partnership,  and  a  public  notice  of  it,  there 
was  a  withdraw^al  of  all  such  authority;  and  consequently  the  accept- 
ance, as  to  John  Lyman,  is  void.  Upon  principle  then,  the  action, 
being  joint  upon  a  joint  acceptance,  fails  as  to  both. 

Mem.  By  consent  of  the  parties,  the  plaintiff  discontinued  as  to 
Lyman,  amended  his  declaration,  and  took  a  judgment  against 
Dumell  alone.' 


III.  When  presentment  for  acceptance  excused. 

§  245  CniTTY  ON  Bills  of  Exchange,  p.   307. 

If  the  drawee  of  a  bill  cannot  be  found  at  the  place  where  the 
bill  states  him  to  reside,  and  it  appear  that  he  never  lived  there,  or 
has  absconded,  the  bill  is  to  be  considered  as  dishonored  {Anon. 
Ld.  Eaym.  74.3)  ;  but  if  he  has  only  removed,  it  is  incumbent  on  the 
holder  to  endeavor  to  find  out  to  what  place  he  has  removed,  and 
to  make  the  presentment  there  (Collins  v.  Butler,  2  Stra.  1087)  ;  and 
he  should  in  all  cases  make  every  possible  inquiry  after  the  drawee, 
and  if  it  be  in  his  power  present  the  bill  to  him  ;  though  it  will  be 
unnecessary  to  attempt  to  make  such  a  presentment  if  the  drawee  has 
left  the  kingdom,  in  which  case  it  will  be  sufficient  to  present  the 
bill  at  his  house  (Cromwell  v.  Hynson,  2  Esp.  211),  unless  he  have  a 


3  Such  an  acceptance  is  a  qualified  acceptance  (Neg.  Inat.  L.,  §  229  subsec. 
5),  and  binds  the  one  accepting  {Smith  v.  Milton,  133  Mass.  369),  but  if 
received  by  the  holder  discharges  prior  non-assenting  parties,  ante,  p.  677. 
If  one  of  the  drawees  refuses  to  accept  it  would  seem  unnecessary  to  make  a 
further  presentment  upon  the  others;  but  the  language  of  §  242,  subsec.  1, 
provides  for  presentment  to  all.  —  H. 


v.]  EFFECT  OF  DISHONOR.  689 

known  agent,  when  it  should  be  presented  to  liini.  (Ibid;  Phillips 
V.  Astling,  2  Taunt.  206.)  If  on  presentment  it  appears  that  the 
drawee  is  dead,  the  holder  should  inquire  after  his  personal  repre- 
sentative, and,  if  he  live  within  a  reasonable  distance,  should  present 
the  bill  to  him.*    (Molloy,  b.  2,  e.  10,  §  34;  Poth.  pi.  146.)  ^ 


IV.  Duty  of  holder  where  bill  not  accepted. 

§  247  UNITED  STATES  v.  BARKER. 

24  Federal  Cases   (Cib.  Ct.,  Dist.  Pa.)    1004.  —  1824.« 

Actions  on  bills  of  exchange. 

Washington,  J.  [charged  the  jury  as  follows]  ;  *  *  *  The 
law  merchant,  as  settled  by  judicial  decisions  in  England,  and  in 
New  York,  requires  that,  in  all  cases  of  bills  which  must  be  presented 
for  acceptance,  due  notice  of  the  protest,  in  case  acceptance  is  refused, 
must  be  given,  without  waiting  for  the  maturity  of  the  bill,  and  a 
demand  of  payment ;  such  too  is  the  rule  in  Massachusetts  and  South 
Carolina.  And  the  rule  is  the  same  in  England,  even  in  cases  of 
bills  which  need  not  be  presented  for  acceptance,  if  in  fact  they  be 
presented,  and  acceptance  be  refused.  It  is  supposed  that  the  cases 
of  Brown  v.  Barry,  3  Dall.  365,  and  Clarl'  v.  Bussel,  id.  415,  have 
established  a  different  rule  as  to  the  law  merchant  of  the  United 
States.  We  do  not  so  understand  those  cases.  *  *  *  'phe  neces- 
sity of  giving  due  notice  of  the  dishonor  of  a  bill  which  has  been 
refused  acceptance,  is  not,  in  our  opinion,  dispensed  with  in  those 
cases.     *     *     *  ^ 


V.  Effect  of  dishonor  of  bill  presented  for  acceptance. 
§248  UNION  NAT.  BANK  v.  M.MMrS  ADM'R. 

[Reported  herein  at  p.  .77.1 1 

<  But  Bee  Rmith  v.  Bank,  L.  R.  4  P.  C".   194;   2  Daniel,  §   1)78.-11. 

"Excuse  for  dolay  is  to  \ye  (listin^^uislied  from  excuse  from  presentment 
altojrether.  V.  N.  v.  Itarker,  1  Paine,  (  U.  R.  ('.  ('.)  156,  103;  Aymar  v.  liirrs, 
7  Cow.    (N.   V.)    705;    1    Daniel,   S   478.  —  H. 

•Reporter!   bIho   in   4    Wash.   C.   C.   404.  —  C. 

T  See  aho  \nt.   I'nrk   Itnnk  v.  Saitla,   127   App.  Div.    (N.  Y. )    (J24.  —  C. 
HEOOT.  IN8TUDMBNTB  —  44 


GUO  PBliSENTMENT  FOll  ACCEPTANCE.  [AUT.    XII, 

§  248  WINTHROP  v.  FEPOON. 

1  Bay    (So.  Car.)   408.  —  1795. 

[Action  against  drawer  of  bill,  brought  before  time  for  payment 
had  e.xpired.  The  bill  was  presented  for  aoceptanee,  dishonored,  and 
duly  protested.] 

Upon  the  first  ground,  the  court  were  clearly  of  opinion,  that 
the  action  lay  upon  the  protest  for  non-acceptance,  although  the 
time  for  payment  of  the  bill  was  not  expired.  Every  man,  by  the 
law  of  merchants,  who  draws  a  bill,  undertakes  by  the  very  act  of 
drawing  that  tlie  ])ill  sliall  be  accepted  and  paid,  when  at  maturity, 
agreeable  to  the  terms  of  the  bill.  And  the  very  end  and  design  of 
a  protest,  is  to  give  notice  of  non-acceptance;  or,  if  accepted,  of 
non-payment ;  in  either  event,  the  drawer  becomes  liable.  And  the 
holder,  in  case  of  a  protest  for  non-acceptance,  is  under  no  obliga- 
tion to  wait  till  the  time  for  payment  expires;  because  the  drawer 
has  broke  part  of  his  original  contract,  that  is,  that  the  bill  should 
be  accepted;  and  because  also  (if  the  bill  should  even  be  paid  when 
due),  the  holder  would  lose  the  benefit  of  the  credit  in  trade,  which 
the  acceptance  of  a  bill  would  give  him,  as  well  as  the  use  of  the 
money,  which  he  might  obtain  at  a  small  discount.  The  obligation 
in  every  such  case  would  be  on  the  part  of  the  defendant  to  show 
that  the  bill  w^as  afterwards  paid,  which  might  be  given  in  evidence 
by  way  of  mitigation  of  damages.  P>ut  in  this  case,  no  payment, 
even  at  this  day,  is  alleged  ;  therefore,  the  plaintiff  is  entitled  to  a 
recovery.     (Doug.  55;  3  Will.  17;  Kyd,  17.)  ' 


1  If  a  right  of  action  arises  on  presentment  for  aeceptancc,  no  new  right 
arises  on  presentment  for  payment.  Whitehead  v.  Walker,  9  M.  &  W.  506. 
See  Robinson  v.  Ames,  20  Johns.  14G,  ante,  p.  681;  ,^terry  v.  Robinson,  1  Day, 
(Conn.)  11.  But  if  there  is  an  acceptance  for  honor  or  a  reference  in  case 
of  need,  there  must  be  a  presentment  for  payment,  and  protest  for  non- 
payment, Ix'fore  presentment  to  the  acceptor  for  lionor  or  referee  in  case  of 
need.     Neg.  Inst.  L.,  §  280.— H. 

[See  also  Nat.  Park  Bank  v.  Saitta,  127  App.  Div.    (N.  Y.)    624.  —  C] 


ARTICLE  XIII. 
Protest  of  Bills  of  Exchange. 
I.  What  instruments  must  be  protested. 
§  260  SUSSEX  BANK  i.  BALDWIN. 

[Reported  herein  at  p.  Jf80.'\  i 


II.  What  constitutes  sufficient  protest. 

§261  UENNISTOUX  v.  STEWAET. 

17  Howard  (  U.  S.)   600.  —  1S54. 

]\Jn.  .TrsTiCE  OitiKi:    Iclivered  the  opinion  of  (he  court. 
The  i)hnintifTs  declared  ai^^ainst  the  defendant,  as  drawer  of  a  bill 
of  exchantre,  hy  t!ie  name  and  style  of  James  Keid  and  Co.,  of  which 
the  followin£(  is  a  copy:  — 
No.—.     £4,417   14.S.   11^/.  ?V^.  ifoRiLE,  Fiept.  9,   1S50. 

Sixty  flays  after  sight  of  tliis  first  of  oxchanjje,  (.second  and  tiiird  unpaid), 
pay  to  tlie  order  of  ourselves,  in  l^ondon,  forty-four  hundred  and  seventeen 
pounds,  14.';.  1  If/,  st'g,  value  received,  and  charge  the  same  to  the  account  of 
1,058  hales  of  cottf)ii  j) -r  '  ^^■indsor  Castle.' 

Your   ohedient    servants, 

Pr.  pro.  J.\MES  Reid  and  Co., 

\Vm.  Moult,  Jb. 
To  Hy.  Ciokk  Booth,  Es(|.,  Liverpool, 
f  .\ccef)tance  across  the  face  of  the  hill:] 

Seventh  Octoher.  1850.  Accepted  for  two  thousand  five  hundred  and  seventy- 
one  [lounds  eightee?!  shillinjis  and  seven  pence,  heing  halance  unaccepted  for 
acct.   l.O.'iS  1).  coltnn,  pr.  Windsor  Castle,  payahle  at  (!lyn  and  Co. 

Pr.  pro.  IIe.nuy  Coke  nonrii. 

And.  K.  Hykne. 
I»ii<-  '.\    h.crrn. 
[  Indorsed : ] 

I'iiy   Me.s.sh.s.   a.   Dennistoin   and  Co.,  or  order. 

I'r.   pro.  .Iami:.s   l{Eti)  and  Co. 

\Vm.  Mon.T,  .Tr. 

I  .\s  (()  priiteKt  of  inland  liills  and  promissory  notes,  see  Neg.  Inst.  L.,  §  18fl. 
Rep  nl^^o  Shdir  v.  Mc\rill.  !I5  N.  C.  535,  anir,  j).  584.  l*rotest  is  now  neces- 
Rnry  in  fhr'e  cases:  (1)  foreign  hills;  (2)  hills  accepted  for  honor;  and  (3) 
bills  containing  n  reference  in  case  of  need,  if  the  holder  desires  to  resort  to 
the  referee.  Neg.  Inst.  I..,  §  28(;.  Protest  is  proper,  hut  not  necessary,  in 
two  cases  (1)  inland  hills  and  i)roniissory  notes;  (2)  for  better  security, 
S  2fiP».  The  protest  ffir  nftn  payment  after  protest  for  non-nccrpt.ance  is 
anomalous;  it  may  Im-  necessary  to  meet  the  requirr-nients  of  foreign  law, 
§  205.  —  II.  '  " 

[fiOll 


Gy2  PKOTEST  OF  BILLS.  [AKT.    XIII. 

After  roadiii^  this  bill,  with  its  indorsenionts,  the  plaintiU'  otl'ered 
in  evideuce  a  regular  protest,  iiulorscd  on  a  copy  of  a  bill  agreeing 
in  every  particular  with  the  above,  exccjjt  that  for  "  And.  E.  Byrne  " 
was  written  "  t'has.  Jiyrne." 

The  defendant  objected  to  the  reading  of  the  protest  in  evidence, 
because  it  did  not  describe  the  bill  of  exchange  produced  by  the 
plaintiffs,  but  a  different  bill.  The  court  sustained  this  objection, 
and  excluded  the  protest  from  the  jury,  which  is  tiie  subject  of  the 
first  bill  of  exceptions. 

A  protest  is  necessary  by  the  custom  of  merchants  in  case  of  a 
foreign  bill,  in  order  to  charge  the  drawer.  It  is  defined  to  be  in 
form  "  a  solemn  declaration  written  by  the  notary  under  a  fair  copy 
of  the  bill,  stating  that  the  ])ayment  or  acceptance  lias  been  demanded 
and  refused,  the  reason,  if  any,  assigned,  and  that  the  bill  is,  there- 
fore, protested." 

A  copy  of  the  bill,  it  is  said,  should  be  prefixed  to  all  protests, 
with  the  indorsements  transcribed  verbatim.  (1  Pardess.  444;  Cliitty 
on  Bills,  458.) 

However  stringent  the  law  concerning  mercantile  ])aper,  with  re- 
gard to  protest,  demand,  and  notice,  may  appear,  it  is  nevertheless 
founded  on  reason  and  the  necessities  of  trade.  It  exacts  nothing 
harsh,  unjust,  or  unreasonable.  A  protest,  though  necessary,  need 
only  be  noted  on  the  day  on  wliich  payment  was  refused.  It  may 
be  drawn  and  completed  at  any  time  before  the  commencement  of 
the  suit,  or  even  before  the  trial,  and  consequently  may  be  amended 
according  to  the  truth,  if  any  mistake  has  been  madc.^ 

The  copy  of  the  bill  is  connected  with  the  instrument  certifying 
the  formal  demand  l)y  the  ])ublic  officer,  as  the  easiest  and  best  mode 
of  identifying  it  witli  the  original.  Mercantile  paper  is  generally 
brief,  and  without  the  verbiage  which  extends  and  enlarges  more 
formal  legal  instruments.  Hence,  it  is  much  easier  to  give  a  literal 
copy  of  such  bills,  than  to  attempt  to  identify  them  by  any  abbrevia- 
tion or  description.  The  amount,  tlie  date,  the  parties,  and  the  con- 
ditions of  the  bill,  form  tlie  substance  of  every  such  instrument. 
Slight  mistakes,  or  variances  of  letters,  or  even  words,  when  the 
substance  is  retained,  cannot  and  ought  not  to  vitiate  the  protest. 
A  lost  bill  may  be  protested,  when  the  notary  has  been  furnished 
with  a  sufficient  description,  as  to  date,  amount,  parties,  etc.,  to 
identify  it. 

In  indictments  for  forgery,  it  is  not  sufficient  to  state  the  "  sub- 
stance and  effect"  of  the  instrument;  it  must  be  laid  according  to 
the  "tenor,"  or  exact  letter;  but  the  law  merchant  demands  no 
Buch  stringency  of  construction.     The  sharp  criticism  indulged  when 

»  S«e  §  262.  —  H. 


II.]  ESSENTIALS  Oi'  PKOTEST.  693 

the  life  of  a  prisoner  is  in  jeopardy  cannot  be  allowed  for  the  purpose 
of  eluding  I  he  payment  of  just  debts. 

It  is  unnecessary  tliat  a  copy  of  the  protest  should  be  included  in 
the  notice  to  the  drawer  and  iudorsers.^  The  object  of  notice  is  to 
inform  the  party  to  whom  it  is  sent  that  payment  has  been  refused 
by  the  maker,  and  that  he  is  held  liable.  Hence,  such  a  description 
of  the  note  as  will  give  sufficient  information  to  identify  it,  is  all 
that  is  necessary.  What  was  said  by  Mr.  Justice  Story,  in  delivering 
the  opinion  of  this  court,  in  MiUs  v.  The  Bank  of  the  United  States* 
with  regard  to  variances  and  mistakes  in  notices,  will  equally  apply 
to  protests :  "  It  cannot  be  for  a  moment  maintained  that  every 
variance,  however  immaterial,  is  fatal.  It  must  be  such  a  variance  as 
conveys  no  sufficient  knowledge  to  the  party  of  the  particular  note 
which  has  been  dishonored.  If  it  docs  not  mislead  him,  if  it  con- 
veys to  him  the  real  fact,  without  any  doubt,  the  variance  cannot 
be  material,  either  to  guard  his  rights  or  avoid  his  responsibility." 

In  the  case  before  us,  the  protest  had  an  accurate  copy  of  every 
material  fact  which  could  identify  the  bill  —  the  date,  the  place 
where  drawn,  the  amount,  the  merchandise  on  which  it  was  drawn, 
the  ship  by  whicli  it  was  sent,  the  balance  on  the  cotton  for  which 
it  was  accepted,  the  names  of  drawers,  acceptor,  indorsers ;  in  fine, 
everything  necessary  to  identify  tlie  bill.  The  only  variance  is  a  mis- 
take in  copying  or  deciphering  the  abbreviations  and  flourishes  with 
which  the  christian  name  of  the  acceptor's  agent  is  enveloped.  The 
abbreviation  of  "And."  has  been  mistaken  for  ("lias.,  and  the  middle 
letter  E.  omitted.  The  omission  of  the  middle  letter  would  not  vitiate 
a  declaration  or  indictment.  Nor  could  the  mistake  mislead  any  per- 
son as  to  the  identity  of  the  instrument  described. 

We  are  of  opinion,  therefore,  that  the  objection  made  to  this  protest, 
"that  it  does  not  describe  the  bill  of  exchange  produced,  hut  a  dif- 
ferent bill,"  is  not  true  in  fact,  and  should  have  been  overruled  by  the 
court. 

This  renders  it  unnecessary  for  u.s  to  notice  the  offer  of  testimony 
to  prove  the  identity,  which  was  also  overruled  by  tlie  court. 

The  judgment  of  the  Circuit  Court  is  reversed,  ami  venire  de  novo 
awarded. 


»  Nor  even  montion  of  protest.  Ex  parte  fjoncnthul,  L.  H.  9  Cli.  591.  Nor 
iH  thp  rprtificatc  nf  prohv^t  cvidcntM'  f)f  notice,  except  by  atutute.  Hank  v. 
dray,  2  I!ill    (\.  V.)   227,  antc^  p.  580.  —  II. 

*Ante,  p.  539.— H. 


694  PROTEST  oi'  HILLS.  [abt.  xin. 

§  261  CAYUGA  COUNTY  RAXlv  v.  HUNT. 

2   HiiJ.    (N.   V.)    035.—  1842. 

Assumpsit.  *  *  *  'phe  action  was  by  tlie  plaintiffs  as  in- 
dorsees against  the  detenilaut  as  lutlorser  of  a  bill  of  exchange  drawn 
by  James  Treat  on  Stephen  Sieard  &  Co.,  New  York,  and  accepted 
by  them. 

The  bill,  which  liore  date  January  16th,  1839,  was  payable  to  the 
order  of  the  defendant  at  ninety  days;  and  no  place  of  i)ayment  was 
mentioned  therein.  On  the  trial,  after  proving  the  signature  of  the 
defendant  as  indorser,  the  plaintitfs  gave  in  evidence  a  notarial  certi- 
ficate of  protest,  stating  that  on  the  lOtli  (lay  of  April,  ls;;!(,  the 
notary  presented  the  bill  in  question  at  No.  1  Wall  street,  the  olFice 
of  the  acceptors,  but  found  the  same  closed  and  no  person  there  of 
whom  payment  could  be  demanded ;  that  he  then  presented  the  same 
to  the  widow  of  Stephen  Sicard,  for  payment,  which  she  refused, 
saying  that  the  partner  of  her  late  husband  was  at  the  South,  and  she 
knew  nothing  of  it.  The  plaintiffs  also  read  in  evidence  a  notarial 
certificate,  stating  that  notice  of  protest  of  the  bill  in  question  had 
been  duly  given  to  the  defendant.  This  certificate  was  dated  Feb- 
ruary 9th,  1841,  nearly  two  years  after  presentment  and  protest.  No 
further  evidence  was  offered  by  the  plaintiffs.  The  defendant's 
counsel  moved  for  a  nonsuit,  on  the  ground,  1.  That  the  present- 
ment of  the  bill  in  question  to  the  widow  of  Stephen  Sicard,  de- 
ceased, was  insufficient  to  charge  the  indorser;  2.  That  it  did  not 
appear  from  the  certificate  of  protest  that  the  bill  was  presented  for 
payment  to  any  person  at  the  office  of  S.  Sicard  &  Co.,  or  that  the 
notary  called  for  that  purpose  during  office  hours ;  and  3.  That  the 
certificate  of  notice  of  protest  was  not  given  till  nearly  two  years 
after  protest  was  made.  The  judge  denied  the  motion,  and  the  de- 
fendant excepted. 

Bji  the  Court,  CowE>J,  J.  —  The  bill  of  exchange  was  payable  gen- 
erally, mentioning  no  place.  The  drawees  were  Stephen  Sicard  & 
Co.,  "who  accepted  the  hill  as  a  firm,  thus  becoming  joint  debtors. 
On  the  death  of  Sicard,  he  was  discharged  at  law,  the  liability  develop- 
ing on  the  surviving  partner  (Story  on  Partn.,  §  301,  302),  to 
whom  alone  the  plaintiffs  were  bound  to  have  the  hill  presented  for 
pa}Tnent.  The  mode,  therefore,  in  which  the  bill  was  presented  to 
the  widow  and  supposed  personal  representative  of  Sicard,  or  whether 
she  were  in  fact  his  representative,  becomes  entirely  unimportant. 

No  objection  was  made  at  the  trial  that  the  presentment,  which 
was  at  No.  4  Wall  street,  where  the  survivor  transacted  business, 
should  have  been  at  his  residence  or  any  other  place.  Therefore 
the  question  on  the  place  of  presentment  does  not  arise.     It  must  be 


n.]  ESSENTIALS  OF  PltOTEST,  695 

taken   to  have   been  proper.      Nor  was  the   manner  of  presentment 
denied  to  be  proper;  nor  tiie  day. 

But  it  is  objected  tiiat  the  time  of  day  should  have  been  mentioned 
in  the  notary's  certificate;  for  perhaps  it  might  have  been  after  the 
hours  of  rest.  The  certificate  states  that  it  was  presented  on  the 
third  day  of  grace.  Tliis,  coming  from  a  witness  on  tlie  stand, 
would  be  deemed  prima  facie  evidence  of  presentment  at  a  proper 
time  in  the  day;  and  if  an  improper  hour  were  in  truth  selected,  it 
would  lie  with  the  adverse  party  to  show  the  fact  by  cross-examina- 
tion or  otherwise.  It  would  not  be  intended  that  a  late  hour  was 
resorted  to.  .We  think,  therefore,  that  tlie  certificate,  in  fair  con- 
struction, imports  a  presentment  during  the  proper  hours  of  business. 
These,  except  where  the  paper  is  due  from  a  bank,  generally  range 
through  the  whole  day  down  to  bed-time  in  the  evening.  (Chitty 
on  Bills,  421  [r.],  Am.  ed.  1839,  and  cases  there  cited.)  It  would 
be  quite  a  forced  presumption  on  the  words  of  an  officer  saying  he 
presented  on  such  a  day,  to  fix  the  hour  either  before  or  after  that 
when  business  is  usually  transacted.  It  would  be  to  suppose  the 
notary,  at  the  expense  of  his  own  convenience,  going  at  an  improper 
hour  for  the  mere  sake  of  doing  wrong.^ 

It  is  no  objection  that  the  certificate  of  notice  was  drawn  up  by 
the  notary  two  years,  or  any  other  length  of  time,  after  notice  was 
given.  The  statute  gives  it  as  a  substitute  for  his  personal  testi- 
mony at  the  trial.  It  is  properly  called  for  and  may  be  drawn  up 
when  it  happens  to  be  wanted  as  evidence.  The  notary  cannot  be 
expected  always  to  prepare  it  as  a  matter  of  course;  for  noii  constat 
it  may  ever  be  wanted.  It  was  said  on  tlie  argument,  that  ordinarily 
it  is  drawn  up  and  tran.sniittod  to  the  holder  at  or  about  the  time 
when  the  business  is  done.  That  is  the  better  practice;  but  it  is  not 
essential. 

[Omitting  a  question  of  usury.] 

New  trial   denied. 

"  "  Went  with  the  draft  to  the  bank  and  demanded  payment,"  is  suflTicient. 
Rank  V.  Camrrnn,  7  Harh.  ( N.  Y.)  143.  "Went  witli  the  note  ami  iiiiKic 
demand  at  maker's*  office  and  j)erson  in  cliarfre  answered,  '  No  fiimls.'  "  is 
snffirient.  The  maker  is  entitled  to  liave  the  note  exhibited,  yet  if  lie  docs 
not  ask  to  we  it,  and  refuses  payment  on  oilier  grounds,  the  presentment  is 
sufilcient.     I'ffffi  v.   \'inal,   Ida  Mass.  artF). 

A  eerlifieate  (hat  the  iiotary  pre*ent<'<l  the  draft  to  "one  of  the  firm  of 
Warren,  (lark  &  Co.,"  is  insufTicient  for  not  stjitinj;  the  name  <if  the  person 
on  whom  demand  was  made.  Otargo  Co.  Bank  v.  Warren,  18  Barb.  (N.  Y.) 
290.  —  H. 


696  PROTEST  OF  BILLS.  [aUT.    Xlll. 

§263        MORELAND'S  ADMIN ISTKATOR  v.  CITIZENS' 

NATIONAL  BANK. 

114    Kentlcky,   577.  — 1903. 

Opinion  of  the  court  by  Judge  Paynter  — 

The  issue  herein  arises  over  certain  bills  of  exchange.  There  is  no 
issue  as  to  the  drawing,  acceptance,  and  indorsement  of  them.  In 
this  action  it  is  sought  to  hold  the  accommodation  drawer  and  in- 
dorser  responsible  on  them.  The  payment  is  sought  to  be  avoided 
by  the  drawer  and  indorser  of  same  on  the  grounds  that  the  law 
was  not  observed  in  noting  protest,  giving  notice  of  protest,  and 
writing  the  instruments  of  protest  by  the  notaries  public.  Two  of 
the  bills  over  which  there  is  a  controversy  are  for  $5,000  each,  one 
for  $3,685,  one  for  $3,000,  and  one  for  $3,200.  These  bills  were 
drawn  by  J.  P.  Moreland,  accepted  by  S.  D.  Walden,  and  indorsed 
by  J.  P.  Fuqua.  It  appears  that  the  bills  (unless  the  one  for  $3,685 
was  not)  w^ere  protested  on  the  days  that  they  matured.  As  to  that 
bill  it  is  insisted  that  it  w^as  not  protested  until  the  day  after  its 
maturity.  That  defense  is  interposed  in  addition  to  the  others  here- 
tofore stated.  T.  N.  Parish,  notary  public,  protested  the  bills  for 
$5,000  each  on  the  days  of  their  maturity,  and  indorsed  on  them, 
"  Protested  for  nonpayment,"  and,  in  addition  to  tliat,  gave  the  day 
of  the  month  and  year,  to  which  indorsement  he  affixed  his  official 
signature.  W.  H.  Moore  was  the  notary  who  protested  the  hill  for 
$3,000  and  the  one  for  $3,200.  No  memorandum  noting  the  protest 
was  left  attached  to  either  of  the  bills  by  the  notary,  nor  was  such 
indorsement  made  upon  them.  Either  on  the  day  the  bills  were 
protested  or  on  a  subsequent  day  the  instruments  of  protest  were 
written,  but  the  evidence  leaves  no  doubt  that  the  notices  of  protest 
were  duly  mailed  to  the  drawer  and  indorser  of  the  several  bills  on 
the  days  they  were  protested. 

The  first  thing  which  we  will  consider  is  whether  the  noting  by 
Parish  was  sufficient.  The  authorities  seem  to  be  agreed  that  the 
noting  of  initial  protest  was  unknown  to  the  law  as  distinguished 
from  the  protest,  but  that  it  has  grown  into  practice  within  recent 
years.  It  seems  to  be  well  established  that,  if  the  instruments  of 
protest  are  not  written  shortly  after  the  demand  and  protest,  the 
noting  or  initial  protest  is  necessary  as  a  basis  for  the  instrument  of 
protest.  2  Dan.  Neg.  Inst.  (4th  Ed.),  section  939.  This  court  in 
Read  v.  BanTc,  1  T.  B.  Mon.,  93,  15  Am.  Dec,  86,  had  under  con- 
sideration the  question  as  to  the  necessity  of  noting.  The  court 
said:  "The  protest  was  drawn  up  so  soon  as  the  ordinary  course  of 
business  would  permit,  or  at  least  in  sufficient  time  to  supersede  the 
necessity  of  noting  the  bill  at  the  moment."  The  court  seemed  to 
be  of  the  opinion  that,  if  the  instrument  of  protest  was  written  as 


n.]  ESSENTIALS  OF  PBOTEST.  697 

soon  as  the  ordinary  course  of  business  would  permit,  or  at  least 
in  sufficient  time  to  supersede  the  necessity  of  noting  the  bill  at  the 
moment,  then  those  sougiit  to  be  held  liable  were  bound.  We  are  of 
the  opinion  that  the  inaorsements  which  Parish  made  on  the  bills 
were  sufficient. 

The  facts  as  to  the  bills  protested  by  Paris  differ  somewhat  from 
those  protested  by  Moore.  We  will  not  go  into  the  discussion  of 
the  question  of  the  competency  of  evidence  to  prove  the  course  of 
business  of  notaries  in  protesting  paper;  neither  is  it  necessary  for 
us  to  determine  whether  the  instruments  of  protest  were  written  on 
the  day  the  bills  matured,  or  on  a  subsequent  day;  hence  the  neces- 
sity is  obviated  of  determining  whether  the  proof  is  sufficient  to  im- 
peach the  dates  of  the  instruments  of  protest,  they  bearing  dates 
that  the  bills  matured.  If  the  noting  of  protest  was  made,  the  in- 
struments of  protest  could  have  been  prepared  thereafter.  Moore 
testified  that  when  he  protested  the  bills  he  attached  to  each  of  them 
a  memorandum  showing  the  protest,  but  when  the  instruments  of 
protest  were  written  he  destroyed  it,  as  he  had  no  further  use  for  it. 
Counsel  for  appellee  urges  tliat  the  preservation  of  these  slips  was 
essential  to  the  validity  of  the  protest  in  extcnso,  as  they  form  a 
necessary  part  of  the  record  in  establishing  tlie  steps  that  must  be 
taken  in  order  to  fix  liability  upon  the  drawer  and  indorser.  The 
object  of  noting  is  to  have  a  record  from  which  the  instrument  of 
protest  can  be  written,  so  a  notary  will  not  be  required  to  rely  upon 
his  memory  as  to  the  facts.  If  the  noting  was  made,  the  destruction 
of  it,  whether  it  was  purposely  or  accidentally  done,  could  not  in- 
validate the  instrument  of  protest  which  was  based  upon  it.  It  pre- 
serves the  right  of  the  notary  to  prepare  that  instrument,  and,  when 
done,  the  essential  steps  have  been  taken  to  fix  the  liability  upon 
the  accommodation  drawer  and  indorser.  'i'he  bill  having  been  pro- 
tested for  non-[)ayrncnt  and  notice  having  been  given  to  the  drawer 
and  indorser,  the  noting  having  taken  place,  and  the  instrument  of 
protest  having  been  executed,  the  liability  of  the  drawer  and  indorser 
was  fixed.  The  destruction  of  the  paper  upon  which  the  noting  was 
made  could  not  relieve  them  of  the  liatiility  that  ha<l  attached  by 
the  necessary  act  of  the  notary. 

After  the  several  bills  were  drawn,  and  before  their  maturity, 
Moreland  made  an  assignment  to  E.  P.  Taylor  for  the  benefit  of  his 
creditors.  When  the  bills  were  protested,  notices  of  protest  were  not 
Bent  to  the  assignee,  but  to  Morelnnd.  It  is  insisted  that,  as  the 
aesigncc  accepted  the  trust,  and  qualified  as  such  assignee,  notices  of 
protest  should  have  been  given  to  hitu,  instead  of  to  Moreland,  in 
order  to  bind  the  trust  estate.  The  exaet  question  here  presented 
has  not  been  before  this  court,  although  this  court,  in  Cnllnhnn  v. 
Bank,  H2  Kv.,  2.31.  fi  P..  1S8,  held  that  notice  of  the  dishonor  of  a 
bill  to  one  who  is  the  assignee  of  the  payee  was  sufficiejit.     But  the 


69S  PROTEST  OF   BILLS.  [AKT.    XIII. 

court  said:     "  We  must  not  be  uiiderstootl  as  determiiiiug  wlietlier  a 
iiotiie  of  the  dishonor  of  negotiable  paper  sent  to  the  bankrupt  or 
insolvent  alone,  and  not  to  the  assignee,  would  or  would  not  be  sulli- 
cient,  as  that  (]uestion  is  not  jiresented  in  this  ease."    The  text-writers 
upon  this  question  are  extremely  unsatisfactory.     1  Pars.  Notes  &  B., 
r)0(),  in  speaking  of  the  person  to  whom  notice  of  protest  should  be 
given  in  the  case  of  a  bankrupt,  says:   "That  perhaps   the   notice 
should  be  given  to  the  assignee,  if  the  holder  knows  or  might  know, 
by  the  exercise  of  due  diligence,  that  the  estate  is  in  his  hands:" 
but  he  adds :    "  But  notice  might  perhaps  even  then  be  sufficient  if 
given  to  the  bankrupt."    Byles,  Bills,  page  216  says:    "  If  the  drawer 
of  the  bill  become  bankrupt,  notice  must  nevertheless  be  given  to  him, 
in  all  events,  before  the  choice  of  assignees.     If  the  assignees  are 
appointed,  perhaps  notice  should  be  given  to  them."     Daniel,  Neg. 
Paper,  section  1002,  says:     "If  the  party  be  bankrupt,  it  is  best  to 
give  notice   to  him,  and   to  his  assignee  also.     If  there  be  yet  no 
assignee  appointed,  notice  to  him  is  sufficient,  and  perhaps  it  might 
be  sufficient,  even  if  one  had  been  appointed.     If  given  to  the  assignee 
alone,  it  would  probably  be  sufficient."     When  a  'party  assigns  all 
of  his  property  for  the  benefit  of  his  creditors  and  places  it  in  the 
hands  of  a  trustee  for  distribution,  all  of  his  creditors  are  entitled  to 
participate  in  the  distribution  of  it.     This  is  true  whether  the  debts 
have  matured  or  not.     Moreland's  liability  on  these  bills  existed  at 
the  time  of  the  assignment,  and,  if  it  was  preserved,  then  the  holder 
of  them  was  entitled  to  participate  in  the  distribution  of  the  proceeds 
of  the  assigned  estate.     He  being  personally  liable  to  the  holder,  it 
was  important  to  it  that  he  receive  notice  of  protest  that  that  lia- 
bility might  be  preserved.    When  that  liability  was  preserved,  it  seems 
to  us  to  necessarily  follow  that  the  holder  of  the  bills  is  entitled  to 
participate  in  the  trust  estate,  because  the  very  purpose  of  his  assign- 
ment was  to  pay  his  liabilities  in  full  or  pro  rata,  as  the  case  may  be. 
We  conclude  that  notice  to  Moreland  was  sufficient  to  preserve  his 
liability,  and,  if  his  liability  continued,  there  is  no  c^^ciipc  from  the 
conc'lusion  that  the  holder  of  the  hills  which  evidenced    it  was  en- 
titled to  participate  in  the  distribution  of  the  estate.     *     *     * 

The  judgment  is  affirmed. 


in.  By  whom  protest  should  be  made. 

§  262  CARTER  v.  UNION  BANK. 

7  HuMPHRKY    (Tenn.)    548.  —  1847. 

Geeen,  J.,  delivered  the  opinion  of  the  court. 

This  is  an  action  against  the  plaintiff  in  error,  as  the  indorser  of 
a  bill  of  exchange  drawn  in  Memphis,  Tennessee,  by  Arthur  Bowen 


III.]  BY  WHOM  MADE.  699 

on  Fort  and  Wilcox,  Xew  Orleans,  in  favor  of  plaintiff  in  error,  for 
SSj-'JOO,  and  l)y  liim  indorsed.  TJie  bill  was  presented  at  maturity, 
payment  demanded  and  was  protested  for  non-payment  by  A.  B. 
Cends,  a  notary  public  of  New  Orleans.  The  instrument  of  protest 
states,  tliat  the  notary  "  by  his  deputy,  McDime,  Jr.,  presented  said 
draft  to  Mr.  Fort,  one  of  the  members  of  the  firm  of  Fort  and  Wilcox, 
the  acceptors,  at  their  office,  and  demanded  payment  thereof,  and 
was  answered  that  the  same  would  not  be  paid."  The  protest  was 
made  the  11th  June,  1845. 

By  an  act  of  the  General  Assembly  of  Louisiana,  passed  the  14th 
of  March,  1844,  it  is  made  lawful,  for  each  and  every  notary  public 
in  Xew  Orleans,  to  appoint  one  or  more  deputies,  to  assist  him  in 
making  of  protests  and  delivery  of  notices  of  protests  of  hills  of 
exchange  and  promissory  notes:  Provided,  that  each  notary  shall 
be  responsible  for  the  acts  of  each  deputy  employed  by  him;  and 
provided,  that  each  deputy  shall  take  an  oath,  faithfully  to  perform 
his  duties  as  such,  before  the  judge  of  the  parish  in  which  he  may 
be  appointed;  and  provided,  tlie  certificate  of  notice  of  protest  shall 
state  by  whom  made  or  served. 

The  defendant,  at  the  trial  below,  objected  to  the  protest  which 
was  offered  as  evidence,  which  objection  was  overruled  by  the  court, 
and  the  evidence  was  admitted.  The  jury  found  a  verdict  for  the 
plaintiff,  and  the  defendant  appeaV-d  to  this  court. 

It  is  now  insisted,  that  this  protest  is  not  evidence  of  the  present- 
ment and  demand  of  the  bill,  because  it  states  thnt  the  deninud  was 
made  by  the  deputy  of  the  notary. 

Tt  is  certainly  true,  as  the  general  rule,  that  a  foreign  bill  must  be 
presented  by  the  notary  in  person,  and  demand  of  payment  made  by 
him,  and  that  the  demand  by  his  deputy  is  not  suflicient.  But  it  is 
seen,  that  the  law  of  Louisiana,  where  this  bill  was  payable,  authorizes 
the  employment  of  a  deputy  in  this  service,  and  that  the  protest  must 
certify  by  whom  the  deinand  was  made. 

In  Story  on  Hills  (§  27(]),  treating  of  protest  of  foivigii  bills,  it  is 
laid  down,  that  the  protest  "should  be  made  out  and  drawn  up  in 
the  form  rcfpiired  by  the  law  or  usage  of  the  place  where  it  is  made, 
and  that  so  e.s.sential  is  the  product i(tn  of  the  protest,  that  it  cannot 
be  supplied  by  mere  proof  of  noting  for  non-acceptance,  and  a  subse- 
quent protest  for  non-payment."  And  Mr.  f'hitty  observes  (Chitty 
on  Bills,  333),  "whenever  ncttice  of  non-acceptance  of  a  foreign  biil 
is  necessary,  a  protest  must  also  be  made,  which,  though  mere 
matter  of  form,  is  by  the  custom  of  merchants  indispensably  neces- 
Bary,  and  cannot  be  supplied  by  witnesses  or  oath  of  the  party,  or  in 
any  other  way,  and,  as  it  is  said,  is  a  part  of  the  constitution  of  a 
foreign  bill  of  exchange."  The  mere  production  of  this  protest,  in 
the  caap  of  n  bill  pavablo  and  protected  out  of  the  conntry.  will  be 
evidence  of  its  dishonor,  "and  to  it  all  foreign  courts  give  credit." 


•yOO  PROTEST  OF  DILLS.  [ART.    XIII. 

And  at  page  ISG,  lie  says:  "  With  rospoct  to  the  protest,  it  should 
always  be  made  according  to  the  law  of  the  place  where  the  payment 
ought  to  have  been  made,  though,  witli  regard  to  notice  of  dishonor, 
it  must  be  given  to  the  drawer  within  the  tune,  and  according  to  the 
law  of  the  place  where  the  hill  was  drawn,  and  to  the  indorscrs 
according  to  the  law  of  the  place  where  the  indorsements  were  made." 
These  authorities  settle  the  question,  and  establish  the  following 
propositions :  — 

1.  That  a  protest  is  indispensable  to  the  dishonor  of  a  foreign  bill 
of  exchange. 

2.  That  the  protest  is  to  be  made  according  to  the  law  of  the  place 
where  the  bill  is  payable. 

3.  That  the  protest  properly  authenticated,  is  evidence  by  its  mere 
production,  of  the  presentment  and  demand,  in  all  foreign  courts, 
where  the  dishonor  of  the  bill  is  required  to  be  proved. 

•i.  That  no  other  evidence  of  the  facts  stated  in  the  protest  is 
competent. 

The  protest  in  the  present  case  was  made  according  to  the  law  of 
Louisiana,  where  the  bill  was  payable,  and,  therefore,  is  evidence 
here  of  the  dishonor  of  the  bill. 

It  is  objected,  that  there  is  no  evidence  that  Memphis  was  the 
defendant's  place  of  residence. 

It  appears,  that  annexed  to  the  name  of  the  defendant  on  the  bill 
is  added  "  Memphis,  Tennessee."  This  we  regard  as  part  of  his 
indorsement,  and  as  sufficient  authority  to  authorize  the  holder  to 
send  the  notice  to  Memphis. 

Affirm  the  judgment.' 


«"In  many  cases,  oven  with  rofrard  to  forri-n  bills  of  pxcbange,  the  protest 
may,  in  the  absence  of  a  notary,  be  made  by  other  functionaries,  and  even  by 
merchants.  But  where,  as  in  Mississippi,  a  justice  of  the  peace  is  authorized 
by  positive  law  to  perform  the  functions  and  duties  of  a  notary,  there  is  no 
ground  to  say  that  his  act  of  protest  is  not  ecjually  valid  with  that  of  a 
notarv.  Quoad  hoc  he  acts  as  a  notary." —  Mr.  .Justice  Story  in  Tiiirkc  v. 
McKay,  2  How.  ( U.  S.)  66,  72  (1S44).  Conf.  Todd  v.  NeaVs  Adm'r,  49  Ala. 
273;  Read  v.  Bank,  1  T.  B.  Men.  (Ky.)  92.  Costs  for  protest  cannot  be 
allowed  where  the  protest  is  by  a  private  individual  not  authorized  to  charge 
fees.     Read  v.  Bank,  supra.  —  H. 


ARTICLE  XIV. 

Acceptance  for  Honor/ 

BYLES,  BILLS  OF  EXCHANGE,  Etc.   (13th  ed.),  1879. 

[Chapter  XX.] 

When  acceptance  is  refused,  and  the  bill  is  protested  for  non- 
acceptance,  or  where  it  is  protested  for  better  security,  any  person  may 
accept  it  supra  protest,-  for  the  honor  of  the  drawer  or  of  any  one 
of  the  indorsers.  The  method  of  accepting  supra  protest  is  said  to 
be  as  follows,  viz. :  The  acceptor  supra  protest  must  personally 
appear  before  a  notary  public,  with  witnesses,  and  declare  that  he 
accepts  such  protested  bill  in  honor  of  the  drawer  or  indorser,  as 
the  case  may  be,  and  that  he  will  satisfy  the  same  at  the  appointed 
time;  and  then  he  must  subscribe  the  bill  with  his  own  hand,  thus  — 
"  Accepted  supra  protest  in  honor  of  A.  B.,"  etc.,^  or,  as  it  is  more 
usual,  "  Accepts  S.  P."  And  a  general  acceptance  supra  protest 
which  does  not  express  for  whose  honor  it  is  made  is  considered  as 
made  for  the  honor  of  the  drawer.* 

Any  person  may  accept  a  bill  supra  protest;  and  the  drawee  him- 
self though  he  may  refuse  to  accept  the  bill  generally,  may  yet  accept 
it  supra  protest,  for  the  honor  of  the  drawer  or  of  an  indorser."    And 


1  Called  in  Fronrli,  "  Acceptation  par  Tntcrvontion,"  Code  de  Commerce, 
126.     Byles,  Ch.  XX. 

'  I  am  not  aware  of  any  autliority  to  show  that  there  may  be  an  acceptance 
for  lionor  without  a  protest,  and  the  statute  6  &,  7  Will.  4,  c.  58,  i^eenis  to 
assume  that  hills  acceptrd  for  honor  are  always  protesttvl :  see  Vandniyill  v. 
Tyrrrll,  M.  &  M.  87;  dcralopulo  v.  Wielrr,  10  C.  B.  690;  Bayley  (6th  ed.), 
181;  NouRuier,  Lettres  de  Change,  §§  584-55)1.  Unless,  indeed,  there  be  a 
direction  to  another  person  in  case  of  need:  Chitty  105,  2.30.  Where  the 
direetion,  in  case  of  nee<l.  is  appended,  it  is  said  to  be  necessary  to  present  a 
foreipn  bill  to  that  other  person.  But  then  he  is  more  properly  an  ori<:jinal 
alternative  drawee  than  an  acceptor  for  honor.  As  to  a  direction  "  in  case 
of  need  "  on  an  indorsement,  see  l,ronard  v.  Wilson,  2  C.  &  M.  585).  There 
seems  from  that  case  no  obligation  to  present  an  inland  bill  (where  the 
direction  in  case  of  need  is  given  by  an  indorser)  to  the  party  to  whom, 
in  case  of  nwd,  it  may  be  presented.  The  referee,  in  case  of  need,  appointed 
by  the  indorser,  though  agent  to  pay  the  bill  is  not  agent  to  receive  notice 
of  dishonor:  In  re  Leeds  Banking  Compan;/,  l.aw  Kep.  1  Equity  7fl;  35 
L.  J.  Ch.  3.3. 

a  Beawes,    pi.    38. 

«  Chitty    (ftth  ed.),   344;    Beawen   39. 

»  Beawes  33.  And  it  has  Wen  lield  in  America  that  it  is  no  objection  that 
the  acceptor  supra  prolrsi  takes  tlie  guarantee  of  the  drawee,  Byl«'s  on  Bill^ 
(flth    American   edition),   403. 

[701] 


70?  ACrPiPTANCF,   FOR   TTONOR.  [aut.    XIV. 

though  wo  liavc  socn  that,  aftiT  one  <^oiuM-al  accoptaiico,  there  can- 
not lie  another  accept  a  nee,''  yel,  when  a  hill  has  heen  aeeej)te(l  supra 
protest,  for  the  honor  of  one  party,  it  may,  l)y  another  individual, 
be  accepted  supra  protest,  for  the  honor  of  another."  In  no  one 
case  is  the  liohler  obliged  to  take  an  acceptance  for  iionor." 

The  holder  of  a  dishonored  hill,  who  is  otfered  an  acceptance  for 
the  honor  of  some  one  of  the  preceding  parties  to  the  bill,  should 
first  cause  the  bill  to  he  protested,  and  then  to  he  accepted  supra 
protest,  in  the  manner  above  described.  At  maturity  he  sliould 
again  present  it  to  the  drawee  for  payment,  who  may,  in  the  mean- 
time, have  been  put  in  funds  by  the  drawer  for  that  purpose.  If 
payment  by  the  drawee  be  refused,  the  bill  should  be  protested  a 
second  time  for  non-payment,®  and  then  presented  for  payment  to 
the  acceptor  for  honor. ^  Doubts  having  arisen  as  to  the  day  when 
the  bill  should  be  again  presented  to  the  acceptor  for  lionor,  or  referee, 
in  case  of  need,  for  payment,  the  6  and  7  Will.  4,  c.  58,  enacts  that 
it  shall  not  be  necessary  to  present,  or  in  (vise  the  acceptor  for  honor 
or  referee  live  at  a  distance,  to  forward  for  presentment,  till  the 
day  following  that  on  which  the  bill  becomes  due.^ 

In  a  case  which  attracted  much  attention,  it  was  proved  that  where 
a  foreign  bill,  drawn  upon  a  merchant  residing  in  Liverpool,  pay- 
able in  London,  is  refused  acceptance,  the  usage  is  to  protest  it  for 
non-payment  in  London.  The  bill  is  put  into  the  hands  of  a  notary, 
and  he  formerly  used  to  make  protest  at  the  Royal  Exchange,  but 
that  custom  is  obsolete:  the  notary  now  is  merely  desired  by  the 
holder  to  seek  payment  of  the  bill,  and  on  a  declaration  by  the 
holder  that  the  drawee  has  not  remitted  any  funds,  or  sent  to  say 
where  the  bill  will  be  paid,  the  notary  at  once  marks  it  as  protested 
for  non-payment.  The  court  (with  the  exception  j)erhaps  of  Mr.  J. 
Bayley),  seemed  to  think  this  might,  if  the  bill  were  payable  in  Lon- 
don, be,  in  ordinary  cases,  sufficient.  But  tliey  were  all  agreed  that 
it  would  not  have  been  sufficient  in  the  principal  case  to  charge  the 
acceptor  svpra  protest,  because  the  acceptance  was  in  these  words,  — 
"If  regularly  protested  and  paid  when  due,"  and  they  said  the 
drawees  could  not  be  said  to  refuse  unless  they  were  asked.  The 
court  also  appear  to  have  been  clear  that,  though  there  might  be 
cases  in  which  an  exhibition  of  tlic  bill  to  a  notary  in  London  is  sufh- 


«. Jackson  v.   Hudson,  2  Camp.  447. 

T  Beawps,  pi.  42. 

•  Nutford  V.  Walcott,  12  Mori.  410;  1  Ld.  Raym.  .57.5,  s.  r. ;  Boawos,  37; 
Gregory  v.   Walcup,   Comb.   70;    Pillans  v.   Van   Mierop,   3   Burr,    10G3. 

»  floare  v.  Cazmove,   16  East,  301. 

1  Williams  v.  Grrmainr.  7  B.  &  C  477,  1  M.  &  R.  394,  8.  c. 

s  Accorfling  to  thfi  Frnnch  law  the  acceptor  for  honor  is  bound  to  pive 
notice  to  the  person  for  whose  honor  he  accepts.     Code  de  Commerce,  127,  128, 


ART.    XIV,]  FORM  AND  ESSENTIALS.  703 

cient,  yet  that  in  all  cases  a  bill  may  be  sent  to  the  drawee,  and 
indeed  that  such  is  the  more  regular  course.^ 

By  the  2  and  3  Will.  4,  c.  98,  it  is  enacted  that  all  bills  made  pay- 
al)lc'  by  the  drawee  in  any  place  other  than  his  residence  are,  on  non- 
acceptance,  to  be  without  further  presentment  protested  for  non- 
{•nyment  in  the  place  where  they  are  made  payable. 

The  undertaking  of  the  acceptor  supra  protest  is  not  an  absolute 
f!  .'jagement  to  pay  at  all  events,  but  only  a  collateral  conditional 
v!  1,'agenient  to  pay  if  the  drawee  do  not.  "  It  is,"  says  Lord  Ellen- 
i'orough,  "  an  undertaking  to  pay,  if  the  original  drawee,  upon  a 
presentment  to  him  for  payment,  should  persist  in  dishonoring  the 
bill,  and  such  dishonor  by  him  be  notified  by  protest  to  tlie  person 
who  has  accepted  for  honor."*  The  learned  judge  proceeds  to  lay 
down  the  doctrine  that  a  second  protest  is  necessary;  observing: 
The  use  and  convenience,  and,  indeed,  the  necessity  of  a  protest 
upon  foreign  bills  of  exchange  in  order  to  prove,  in  many  cases,  the 
regularity  of  the  proceedings  thereupon,  is  too  obvious  to  warrant 
us  in  dispensing  with  such  an  instrument  in  any  case  where  the 
custom  of  merchants,  as  reported  in  the  authorities  of  law,  appears 
to  have  been  required.'"  And  a  second  protest,  for  non-payment  by 
the  drawee,  is,  after  acceptance  supra  protest,  equally  necessary,  in 
order  that  eitlicr  the  holders  may  charge  the  acceptor  supra  protest, 
or  the  acceptor  supra  protest  may  charge  the  party  for  whose  honor 
the  acceptance  was  given.  The  object  of  an  acceptance  for  honor  is 
to  save  to  the  holder  all  those  rights  which  he  would  have  enjoyed 
had  the  bill  been  accepted  in  a  regular  manner.  If  the  bill  be 
drawn  payable  at  a  cortnin  period  after  sight,  and  accepted  supra 
protest,  a  second  presentment  for  payment,  and  a  protest  and  notice, 
is  still  essential  for  the  purpose  of  enabling  the  holder  to  sue  either 
drawer  or  acceptor  supra  protest,  or  enabling  the  latter  to  sue  the 
partv  for  whose  honor  he  has  accepted.  And  the  time  wliich  the 
bill  has  to  run  is  computed,  not  from  the  date  of  the  exhibition  to 
the  drawee,  but  froin  the  date  of  the  acceptance  supra  protests 
Presentment    to    the    drawee,    and    protest,   must    be    averred    in    the 


»  Milrhnll  v.  Baring.  10  B.  &  C.  4 ;  M.  &  M.  381  :  4  C.  &  P.  .ir>. 

*  ftnnrr  v.  f'nzrnorr,  ]f\  East,  .'lOl.  Spp  Vnnflnrall  v.  Terrell.  M.  f;  M.  R7. 
In  Amcrirji  it  in  hold  thai  wliorf  a  firnft  lias  boop  iirotostcil  for  tmn  urcpp- 
tancp,  thf  hnlflor  is  not  bnnnfl  to  prosonl  it  at  niatnrity  for  pnvniont  :  E.rrtrr 
Hank  V.  (Inrrlnn,  8  Now  Hanip.  (50.  Rnt  fliis  is  not  so  whon  tlioro  has  boon 
an  accpptanr'^  Huprn  prolrsl.  An  aropj>tnr  for  thr  honor  of  the  drawer  can- 
not rccovor  apainsf  him  without  proof  of  prosontniont  for  acrcplarirc  or 
pnymont  an«l  refusal,  and  notice  to  the  drawer:  liarinp  v.  Clark.  10  I'iek.  220. 
He  who  aerepts  .lupra  prnlrrtt  is  not  liahie  unless  demand  of  payment  is  mado 
on  the  drawee  and  nofiee  of  the  refusal  pivcn:  Srhrilirhl  v.  nfiynnl.  3  Wendell, 
491. 

•1  Thid. 

9}Villiama  v,  Urrmainr,  7  H.  A-  ('.   lOR:    1   Man,  A-   H.  .101,  403.  R,  C, 


704  ACCEPTANCE    FOR    HONOR.  [AKT,    XIV. 

iltH'laration.'  The  acioptor  .^upra  protest  Irhoiiios  liable  to  all  parties 
on  till'  bill  subsi'iiiK'nt  to  him  lor  whose  honor  the  acceptance  was 
nuuli'/ 

'riu'  arioptor  supra  protest  admits  the  genuineness  of  the  signa- 
ture, ami  is  bound  by  any  estoppel  binding  on  the  party  for  whose 
honor  he  accepts.  Thus,  where  a  bill  was  drawn  in  favor  of  a  non- 
existing  person  or  order,  but  the  name  of  the  drawer  and  the  name 
of  the  payee  and  first  indorser  were  both  forged  and  the  defendant 
accepted  for  the  honor  of  the  drawer,  it  was  held  that  the  defendant 
was  estopped  from  disputing  that  the  drawer's  signature  was  genuine, 
and  that  the  bill  was  drawn  in  favor  of  a  non-existing  person,  was 
negotiable,  and  had  become  payable  to  bearer.® 

By  acceptance  supra  protest,  the  party  for  whose  honor  it  was 
made,  and  all  })arties  antecedent  to  him,  become  liable  to  the  acceptor 
supra  protest  for  all  damages  which  he  may  incur  by  reason  of  his 
acceptance.^  The  acceptor  supra  protest,  where  the  bill  has  been 
protested  for  better  security,  has  his  remedy  also  against  the  ac- 
ceptor.- It  wRs  once  held  ^  that  a  party  paying  for  the  honor  of  the 
drawer  had  no  claim  on  the  assignees  of  the  accommodation  acceptor, 
because  the  drawer  himself  had  none ;  but  in  a  recent  case  it  was 
decided  that  he  could  recover  against  the  acceptor  whether  the  accept- 
ance were  given  for  value  or  not.* 


SCHOFIELD  V.   BAYARD  AND  OTHERS. 

3  Wendell  (N.  Y.)  488. —  1830. 

This  was  an  action  of  assumpsit,  tried  at  the  New  York  circuit  in 
January,  1828,  before  the  Hon.  Ogden  Edwards,  one  of  the  circuit 
judges. 

The  defendants  drew  a  bill  of  exchange  in  the  name  of  Le  Roy, 
Bayard  <Sr  Co.,  (the  name  of  their  firm),  dated  New  York,  15th  August, 
1825,  upon  Messrs.  Crowder,  Clough  &  Co.,  of  Liverpool,  for  £1,000 
sterling,  payable  in  London,  at  60  days  after  sight,  to  Mr.  E.  Peter- 
son, or  order,  and  by  him  indorsed  to  the  plaintiffs,  merchants  of 

TTbid. 

«  Ronrr   V.    Cnzmnvp,    16    East.    301 -.    Bayloy    (6th    ed.),    178;    Beawes,   33; 
Marius,  21;    Ex  parte  Wnckerhath.  .5  Ves.  574. 
9  Phillips  V.  Im   Thurm,  L.  R.,  1   C.  P.  220. 

1  Beawps,   47. 

2  Rx  parte  Warkprhnth.  5  V<>s.  .574. 

3  Ex  parte  I.amhert.   13  Vps.   170. 

*  Ex  parte  Huan,  L.  R..  6  Eq.  344.  In  America  it  is  held  that  if  a  third 
party  takos  tip  a  hill  at  its  maturity  for  ths  honor  of  the  drawer,  and  at  his 
request,  he  thereby  releases  the  aecommodation  acceptor  of  such  hill,  whether 
he  intended   it  or  not.     Rpe  Bvles  on  Bills    (6th   American  ed.),  406. 


ART.    XIV.]  FORM  AND  ESSENTIALS.  705 

Birmingham.  Tlie  bill  was  protested  for  non-acceptance  on  the  10th 
September,  and  notice  given  to  the  defendants  on  the  17th  October, 
after  which  Baring  Brothers  &  Co.,  of  London,  accepted  it  supra 
protest  in  these  words:  "Accepted  under  protest  and  account  for 
honor  of  the  drawers,  and  will  be  paid  for  their  account  if  needful, 
and  regularly  presented  when  due."  The  bill  was  subsequently  sent 
to  Liverpool  to  be  presented  to  the  drawees  for  payment.  The  cor- 
respondents of  the  plaintiffs  at  Liverpool,  on  the  10th  November, 
enclosed  the  bill  to  the  plaintiffs  in  a  letter,  with  advice  that  the 
presentation  should  be  made  in  London,  and  the  letter  was  put  in 
the  post-office  on  the  same  day,  in  season  for  the  mail  for  Birming- 
ham on  that  day,  but  by  some  oversight  of  the  clerks  in  the  post- 
office  it  was  not  sent  until  the  next  day,  and  conso(juently  did  not 
reach  the  latter  place  until  the  12th  November,  which  was  Saturday. 
The  l)ill  could  not  bo  forwarded  to  be  presented  in  season  on  that  day, 
and  Monday  after  was  too  late.  Had  the  letter  been  forwarded  from 
Liverpool  on  the  10th  by  the  mail  which  left  there  on  the  evening  of 
that  day,  it  would  have  reached  Birmingham  about  11  o'clock  a.  m. 
of  the  next  day,  and  might  have  been  forwarded  from  tlience  to 
London  by  mail  on  the  afternoon  of  the  same  day  at  4  p.  m.,  and 
would  have  reached  London  in  sufficient  time  for  the  general  delivery 
of  letters,  between  9  and  10  o'clock  on  the  following  morning,  which 
would  have  been  in  season.  The  bill  reached  London  on  the  14th 
November,  and  payment  was  demandorl  of  Messrs.  Baring  Brothers 
&  f'o.,  who  gave  the  following  answer  in  writing:  "  Baring  Brothers 
&  Co.,  accepted  this  bill  conditionally,  viz.,  to  pay  it  if  needful 
and  regularly  presented  when  due.  The  bill  is  expressly  made  pay- 
able in  London,  wl-,ere  payment  should  have  been  sought  on  the 
12th  inst. ;  that  has  not  been  done,  and  therefore  they  consider 
their  friends,  MesBrs.  Le  Roy,  Bayard  &  Co.,  as  well  as  themselves, 
are  acquitted  from  all  liability  by  such  irregularity."  The  bill  was 
protested  for  non-payment,  mid  notice  given  to  the  defendants  on 
the  10th  January,  ISSG.  Messrs.  Crowder,  Clougli  &  Co.  were  bank- 
rupts when  the  bill  was  drawn,  the  drawers  had  no  funds  in  their 
hands,  and  llif  bill  unnld  not  have  bcm  jwiid  bv  tlicni  had  it  been 
presented  to  tli<-iM  for  paynient  when  du(\  A  verdict  was  taken  for 
the  plaintiffs  for  the  principal,  damages,  exchange,  and  interest,  sub- 
ject to  the  opinion  f)f  this  court  on  a  case  made. 

%  the  Conrt.  SwAfu:.  Cm.  .1.  ^  Where  a  bill  is  accepted  supra  pro- 
test, the  hobhr  must  demand  [tayinent.  and  if  refused,  notice  of  such 
refusal  must  be  given.  Such  acceptance  is  a  coiulitiomil  eiifjage- 
ment;  and  to  render  such  acceptor  absolutely  liable,  the  bill  must 
be  duly  pre.uented  for  f)aynient  to  the  drawee,  niul  protested  in  case 
of  refusal.  (Chitty  on  Bills,  212;  Ifi  East,  391.)  The  above  authori- 
ties say  the  payment  must  l)e  demanded  of  the  drawees;    but  if  the 

NBOOT.   INSTROMBNTB  —  45 


706  ACCEI'TAKCE    VoU    llONOU.  [^'^'i'-    ^IV. 

bill  is  payable  at  a  particular  jihuo,  payiiK'nt  must  be  demanded  at 
that  place. 

In  tliis  case  the  only  real  <jUestion  is,  whether  thi'  holder  is  excused 
by  reason  of  the  mistake  in  the  post-ollice  at  Liverpool,  from  not 
making  demand  in  season.''  It  is  proved  in  this  case  that  the  drawees 
were  bankrupt  when  the  bill  was  drawn,  and  had  no  funds  of  the 
drawers  at  that  time  or  since,  and  that  at  no  time  would  they  have 
accepted  or  paid  the  bill.  It  does  not  appear,  however,  that  the 
bill  would  not  have  been  paid  by  the  acceptors  had  it  been  regularly 
demanded.  In  the  case  of  Patience  v.  Townley  {2  Smith,  223),  a 
bill  drawn  on  Leghorn,  due  the  10th  September,  1800,  was  not 
demanded  till  the  31st  December;  Leghorn  being  then  occupied  by 
the  enemy,  or  in  some  such  critical  situation,  it  was  impossible  to 
present  it  in  season.  The  plaintiff  had  a  verdict,  which  the  court 
refused  to  set  aside.  Lord  EUenborough  saying:  "Duly  presented, 
is  presented  according  to  the  custom  of  merchants,  which  necessarily 
implies  an  e.xception  in  favor  of  those  unavoidable  accidents  which 
must  prevent  the  party  from  doing  it  within  the  regular  time ; "  and 
it  was  left  to  the  jury  to  say  whether,  from  the  situation  of  the 
country,  it  was  impossible  for  the  plaintiff  to  present  it  in  due  time. 
That  cause  presented  a  case  of  impossibility;  but  this  case  presents 
no  impossibility,  if  due  diligence  had  been  used.  The  plaintiff  should 
not  have  sent  the  hill  to  Liverpool  at  all.  It  is  true,  that  after  the 
letter  containing  it  had  been  left  at  Liverpool  on  the  10th  November, 
it  could  not  have  reached  London  in  season ;  hut  it  was  the  fault 
of  the  plaintiffs  to  have  parted  with  the  bill  in  the  manner  they 
did.  Instead  of  sending  it  to  Liverpool,  they  should  have  sent  it  to 
London,  and  then  it  would  have  been  in  season,  and  probably  would 
have  been  paid. 

I  am  of  opinion,  that,  by  the  law  merchant,  payment  should  have 
been  demanded  in  London  on  the  12th  of  November;  and  that  not 
having  been  done,  and  there  being  no  impossibility  to  prevent  it  but 
what  is  attributable  to  the  want  of  due  diligence  on  the  part  of  the 
holders,  the  defendants  are  legally  discharged,  and  are  entitled  to 
judgment. 


6  See  Neg.  Inst.  L.,  §  141.  — H. 


ARTICLE  XV. 

Payment  for  Honor. 

BYLES,  BILLS  OF  EXCHANGE,  Etc.  (13th  ed.)  1879. 

[Chapter  XXL] 

Payment  supra  protest  is  where  a  bill  of  exchange,  having  been 
protested  for  non-payment,  is  paid  by  another  person  for  the  honor 
of  some  one  of  the  parties.  Any  party  to  a  bill  of  exchange,  whether 
drawer,  drawee,  payee  or  indorser,  may  pay  for  honor.  So  may  a 
mere  stranger,  without  any  previous  request  or  authority  from  the 
party  for  whose  honor  he  pays.  This  right  is  not  founded  on  the 
English  common  law,  but  is  a  provision  of  the  general  law  merchant, 
introduced  to  aid  the  credit  and  circulation  of  bills  of  exchange. 
It  extends  to  no  other  instrument.  Such  payment  should  be  pre- 
ceded, on  the  part  of  the  payer,  in  the  presence  of  a  notary  public, 
by  a  declaration  for  whose  honor  the  bill  is  paid,  which  should  be 
recorded  by  tlie  notary,  either  in  the  protest  or  in  a  separate  instru- 
ment.' It' is  clear  that  there  can  be  no  payment  for  honor  till  the 
bill  is  dishonored  by  non-payment.;'  and  a  protest  is  essential,^ 
though  it  may  be  drawn  out  in  due  form  afterward.* 

A  party  l)aying  a  bill  of  exchange  supra  protest  has  his  action 
against  the  party  for  wliom  the  payment  was  made,  and  against  all 
other  parties  to  wiiom  the  party  could  have  resorted  for  roimhurse- 
ment.'^  But  he  thereby  discharges  all  the  subsequent  parties,  although 
that  discharge  does  not  prevent  his  relying  on  any  title  they  may 
have.' 

A  man  paying  for  honor  of  an  indorser  may,  if  he  choose,  give 
immediate  notice  to  the  prior  indorsers,  but  he  is  not  bound  so  to 
do.  He  may,  if  he  please,  send  the  protest  or  the  bill  or  notice  to 
the  indorser  for  whose  honor  he  pays,  and  any  subsequent  regular 
notice  given  by  that  party  ^  will  suflfice. 

>  fJpawos.   |il.  5."?:    Marius.    12S;    ("ode  do  (  omnu'icc.  art.    158. 

2  Draron  v.  Stodhart,  2  Man.  &   fir.  317. 

3  In  Vati'lnrnll  v.  TjirrrH.  1  M.  &  M.  87.  so  lifld  by  Lord  Tentordon;  and  in 
Ex  parte  WjfMr.  :{()  L.  .1.  Tlky.  10,  l.y  Lord  (ampholl.  .As  it  is  hy  the  French 
I^w.  fodp  di'  Comniprcp.  art.  I'jS.  and  l>y  the  law  of  Scotland.  Bell's  Conim. 
b.  3.  pt.   1.  c.  4.  8  307. 

4  (IrraUjpuln  v.    Wiclrr,   IOC   H.  fidO. 
•'•  Bay  ley    (fith   cd.)    318. 

iCocIp  lie  Conimerc*'.  art.  l.'ift.  In  .America  it  is  held  that  an  acceptor  supra 
prntrnl.  f<ir  the  honor  of  the  first  indorser.  may  recjuire  as  a  condition  of 
payment  that  the  holder  shall  indor-e  the  hill  to  him.  See  Byles  on  Bill;*  (0th 
American  ed.).  40«. 

T  Goodnll  V.   I'olhill.   U   L.  J..  C".   I'.    Utl;    ]    C.  B.  233. 

1707  J 


'^08  PAYMENT   FOR   HONOR.  [ART.    XV. 

It  is  ooncoived  that  a  man  laiinot,  hy  paying  supra  protest,  revive 
the  liability  of  an  indorser  already  discharged  by  laches. 

And  where  a  party  pays  generally  for  honor,  without  a  protest,  a 
bill  already  indorsed  in  blank,  he,  as  an  indorsee,  may,  it  seems, 
sue  any  party  on  the  bill.* 

The  most  obvious  and  advantageous  course  to  be  pursued  by  a 
man  desiring  to  protect  the  credit  of  any  party  to  a  dishonored  bill 
is  simply  to  pay  the  amount  to  the  holder  and  take  the  bill  as  an 
ordinary  transferee. 

But  the  holder  may  possibly  object;  for  example,  the  bill  may 
not  have  been  indorsed  in  blank,  and  the  holder  may  refuse  to 
indorse  even  sans  recourse.  In  such  an  event  a  payment  supra  protest 
becomes  essential. 

The  party  paying  suprd  protest  has  also  his  remedy  against  the 
acceptor,  and  that  whether  tlie  acceptance  was  given  for  value  or 
not,  unless  there  be  an  equity  attached  to  the  bill  amounting  to  a 
discharge.^ 

It  is  necessary  that  the  protest  should  be  made  before  payment.^ 

The  law  merchant  as  to  payment  supra  protest  does  not  extend  to 
promissory  notes,  which  are  not,  like  bills  of  exchange,  instruments 
calculated  or  intended  for  circulation  all  over  the  gIol)e.  Whoever, 
therefore,  pays  a  note  for  anotlier  person  without  authority,  express 
or  implied,  does  so  at  his  peril. - 

In  ordinary  cases,  however,  where  tlie  note  is  indorsed  in  blank, 
he  of  course  becomes  a  transferee  of  the  note.^ 


^  Mertena  v.  Winnington,  1  Esp.  113.  But  see  the  observations  on  this  case 
by  Lord  Campbell  in  Ex  parte  Wylrie,  30  L.  J.  Bky.  10. 

9  Ex  parte  Wackerbath,  5  Ves.  574;  Ex  parte  Hwun,  L.  l\..  0  E(|.  344,  ex- 
plaining and  overruling  Ex  parte  Lambert,  13  Ves.  179.  A  party  taking  up 
a  bill  for  the  honor  of  any  party  to  it  succeeds  to  the  title  of  tlie  party  from 
whom  he  took  it.  and  is  in  effect  an  indorsee  by  the  law  merchant,  though  he 
cannot  himself  indorse:  Pothier,  vol.  4,  pt.  1,  §§  113,  114;  Nouguier,  Lcttres 
de   Change,   §§   584-591. 

1  Vandeicall  v.  Tyrrell,  1  M.  &  M.  87.  Although  it  need  not  Im>  drawn  out 
in  full,  or  extended,  as  it  is  called,  till  afterwards:  Geralopulo  v.  Wiclrr.  10 
C.   B.   690. 

2  Story  on   Promissory   Notes,   §   453. 

8  Payment  supra  protest  is  a  peculiarity  of  the  law  merchant.  Tlic  |)ayer 
for  honor  is  practically  in  the  position  of  an  indorsee,  except  that  he  dis- 
charges all  parties  subsequent  to  the  one  for  whose  honor  he  pays.  It  has 
been  held  that  one  who  pays  for  the  honor  of  the  drawer  cannot  recover 
against  an  accommodation  acceptor.  McDoiiell  v.  Cook.  14  Miss.  420; 
Gazzam  v.  Armstrong,  3  Dana  (Ky. ),  554;  2  Daniel,  §  1255.  But  this  doe- 
trine  was  founded  upon  a  misapprehension  of  the  facts  of  Ex  parte  Jjamhert 
(13  Ves.  179).  and  the  doctrine  is  distinctly  repudiated  in  Ex  parte  Swan, 
L.  R.,  C,  Eq.  344.  By  Neg.  Inst.  L.,  §  304,  the  payer  for  honor  succeeds  to 
the  rights  of  the  holder,  both  as  to  the  party  for  whose  honor  he  pays,  "  and 
all  parties  liable  to  that  party."  The  clause  qnoted  seems  to  leave  the  ques- 
tion of  the  liability  of  the  accommodation  acceptor  still   in  doubt.  —  H. 


ARTICLE  XVI. 

Bills  in  a  Set. 

BYLES,  BILLS  OF  EXCHANGE,  Etc.  (13th  ed.)  1879. 

[Chapter  XXX.] 

Foreign  bills  ^  are  often  drawn  in  parts,  all  the  parts  together 
making  what  is  called  a  set. 

Exemplars  or  parts  of  the  bill  are  made  on  separate  pieces  of  paper, 
each  part  being  numbered,  and  referring  to  the  other  parts.  Each 
part  contains  a  condition  that  it  shall  continue  payable  only  so  long 
as  the  others  remain  unpaid.  These  parts  should  circulate  together; 
or  one  may  be  forwarded  for  acceptance  while  the  other  is  delivered 
to  the  indorsee,  thus  relieving  him  from  the  necessity  of  forwarding 
his  part  for  acceptance,  but  giving  him  the  indorser's  security  imme- 
diately, and  diniinisliing  the  chances  of  losing  the  hill.^  Every  trans- 
feror is  bound  to  hand  over  to  his  transferee  all  the  parts  of  the  bill 
in  his  possession,  and  he  may  even  be  liable  to  hand  them  over  to 
a  subsequent  transferee,  if  he  have  them  still  in  his  possession.^ 

The  whole  set,  of  how  many  parts  soever  it  be  composed,  consti- 
tutes but  one  bill,*  and  the  regular  payment  and  cancellation  of  any 
one  of  the  parts  extinguishes  all.'' 

A  firm,  who  were  both  payees  and  acceptors  of  a  foreign  bill  in 
three  parts,  indorsed  one  part  to  a  creditor  to  remain  in  his  hands 
until  some  other  security  was  given  for  it,  and  then  indorsed  another 
part  of  the  same  bill  for  valu(>  to  a  third  person.  They  afterwards 
gave  the  first  indorsee  the  proposed  security,  and  took  back  the  first 
part  of  the  bill  from  him.  Held,  that  the  holder  of  the  second  part 
was  not  precluded  from  recovering  against  the  firm:  First,  because 
the  substitution  of  the  security  for  the  first  part  was  not  a  payment; 
and  secondly,  because  the  firm  were,  as  between  themselves  and  the 
8ecf)nd  indorsee,  estopped  from  disputing  the  regularity  of  their  ac- 
ceptance and  indorsement  of  the  second  part." 

>  Noujriijpr  (Iph  LettrpB  de  Chanjjp,  1.  104. 

2  Thr-  fiu-ility  wliicli  ilriiwirif^  a  hill  in  sets  afTords  fi)r  its  pn'sontniont  lias 
bern  licM  to  arfcli-rafp  tlic  timo  wiftiin  wliicti  a  tjill,  payal)l('  aflf-r  si^lil,  ought 
to  Im»  [)rf'Hcn<<'(|  for  accojitatK'p.     Hirakcr  v.  (Irnhnm,  4   M.  &   W.  7'21. 

«  I'inaril  v.  Klockmnn.  32  T..  J.  Q.  R.  82;  3  Bost  A  Smith.  .188. 

«  S<-p  Caran  v.  Thalmnnn,  138  .App.   Div.    (  N.  Y.)    2»7.  — ('. 

»  Rylf"<  on  RillH  (Oth  .\moriran  pilition),  578.  A  contract  to  (iciivcr  ii[)  a 
bill  drawn  in  parts  is  a  contract  to  ih-livcr  tip  every  part.  Kcarnry  v.  Weat 
Qrandn  Mining  Company,  1    TI.  k  \.  412. 

(Sec  CnrnH  v.  Thalmann,   1.38   .App.   Div.    (N.  Y.)    297.  — ('.] 

»  UoldHWorth  v.  Hunter,  10  15.  4  (  .   141). 

[7091 


710  lui.i.s  IN'  A  sl;t.  [aut.  xvi. 

But  as  botwoon  bona  fide  hoKlois  for  valuo  of  tlilTert'iit  parts  of  the 
same  bill,  ho  who  first  obtains  a  title  to  his  })art  is  entitled  to  the 
other  parts,"  and  might,  it  lias  been  said,  maintain  IroviT  fur  them, 
even  against  a  subsequent  buna  fide  holder.** 

If  a  man  be  under  an  obligation  to  deliver  a  foreign  bill,  it  seems 
he  is  bound  to  deliver  as  many  ])arts  as  may  be  applied  for." 

An  omission  on  one  part  to  express  the  reference  to  the  others,  and 
the  condition  relating  to  them,  may  have  the  effect  of  obliging  the 
drawer  to  pay  more  than  one  part.' 

The  drawer  should  accept  only  one  part.  For  if  two  accepted 
parts  should  come  into  the  hands  of  dill'erent  holders,  and  the  ac- 
ceptor should  pay  one,  it  is  possible  that  he  may  be  obliged  to  pay 
the  other  part  also.- 

And  he  should  not  pay  without  taking  back  the  part  which  he  has 
accepted,^  for,  having  paid  the  unaccepted  part,  he  may  be  obliged 
afterwards  to  pay  the  accepted  part  also. 

And  if  the  indorser  improperly  circulate  two  parts  to  distinct 
holders,  he  may  be  liable  on  each.*  The  forgery  of  the  payee's  in- 
dorsement on  one  of  the  parts  will  of  course  pass  no  interest  even 
to  a  bona  fide  holder.  ■' 

It  is  conceived  that  an  indorser  is  not  bound  to  pay  any  one  part 
unless  every  part  bearing  his  indorsements  he  delivered  up  to  him.' 

Copies  of  bills  are  not,  it  is  believed,  much  used  in  this  country. 
A  protest  may  be  made  on  the  copy  of  a  bill  in  some  cases.''  But 
abroad,  wdien  a  bill  is  not  drawn  in  sets,  it  is  sometimes  the  practice 
to  negotiate  a  copy,  while  the  original  is  forwarded  to  a  distance  for 
acceptance. 

In  such  a  case  the  person  who  circulates  the  copy  should  transcribe 
the  body  of  the  bill,  and  all  the  indorsements,  including  his  own, 
literally,  and,  after  all,  he  should  write  "Copy:— the  original  being 


~  Ibid;   Perreira  v.  Jopp,  10  B.  &  C.  450  n. 

8  For  it  is  the  diitv  of  a  person  takiiifr  one  of  tlie  several  parts  to  inquire 
after  the  others.  Lang  v.  Smyth.  7  Bing.  284.  204,  5  M.  &  P.  78;  and  he  is 
advertised  by  the  part  wliich  he  does  take  that  he  takes  it  without  the  others 
at  his  peril. 

9  1  Pard.  334.  But  since  each  part  is  now  subject  to  a  stamp,  if  issued  or 
n."j.'oti:ited  apart  (33  &  34  Vict.,  c.  97.  §  .'5.5),  it  may  be  doubtful  whether  he  is 
so  bound,  unless  the  party  applyinjr  will  fiirnish  the  extra  stamps. 

1  Davison  v.  Robertson,  3  Dow,  218,  228;  Beawes,  430;  Poth.  Ill;  2  Pard. 
367.  But  not  an  inaccurate  reference  or  an  omission  to  name  one  part  ob- 
viously by  mistake.     Bayley   (Cth  ed.),  30. 

2  See  flohlsuorth  v.   Hunter.  10  B.  &  C.  449. 

3  Code  de  Commerce,  art.   148. 

4  See  Holdnxcorth  v.   Hunter,  supra. 

^' Cheap  V.  Ilarley,  3  T.  R.  127.     See  Smith  v.  Mercer,  6  Taunt.  80;  1  Marah. 
453,  S.  C;  Fuller  v.'  Smith,  1  C.  &  P.  107;  By.  &  M.  49,  s.  c. 
«'cour  de  Cassation,  4  Avril,  1832;  Sirey,  t.  32,  1.  29. 
T  Dehers  v.   Harriot,  1  Show.  1G3. 


ART.    XVI.]  ACCEPTAXCE  AND  TRANSFER.  711 

with  such  a  person."  If  he  should  omit  to  state  that  the  bill  is  a 
copy,  or  to  write  his  own  indorsement  after  the  word  copy,  he  may 
become  liable  on  the  copy  as  on  an  original.^ 

It  is  a  common  but  not  a  safe  practice  for  a  drawer,  to  whom  a 
negotiated  part  has  come  back  with  many  indorsements  on  it,  to  sub- 
stitute a  new  part  without  such  indorsements.  The  holder  of  such 
a  substituted  part  may  be  deprived  of  his  remedy  against  the  acceptor 
by  the  intermediate  act  of  the  drawer." 


§310  WALSH  t'.  BLATCHLEY. 

6  Wisconsin,  422.  —  1853. 

The  plaintiff  declared  in  trespass  on  the  case  upon  promises,  for 
money  lent ;  money  laid  out  and  expended ;  money  paid  and  received 
by  the  defendants  for  tlie  use  of  the  plaintiff,  etc ;  and  gave  notice 
of  the  cause  of  action,  the  indorsement  by  defendants  upon  the  i)ill 
of  exchange,  copied,  and  served  with  the  declaration  as  follows : 

Express  Exchange  Office, 
Adam.s  &  Co.  Downieville,  San   Francisco. 

Exchange  for  $250.  Oct.  G,   1854. 

No.  9.1)17. 
At  sight  of  this  second  of  exchange  —  first  and  third  unpaid  —  pay  to  the 
order  of  Phn-be  Blatchley,  two  hundred  and  fifty  dollars  value  received,  and 
place   to    account   of   exchange. 

Adams  &  Co. 
To  Mf^sbs.  Adams  &  Co.,  New  York. 
( Countersigned ) , 

S.    W.    Lang  worthy,    C.    B.    Macy,    Agents. 
Indorsed   by    Plia-be   Blatchley   to   Henry   Dart  or   order,   and   by   J.   IIenr> 
Dart  to  P.  0.  Strang  or  order,  and   by   Strang  to  P.   Walsh   or  order. 

The  defendants  plead  the  general  issue;  and  by  mutual  agreement 
of  counsel  the  cause  was  tried  before  tiie  circuit  judge,  without  the 
intervention  of  a  jury,  who  found,  and  reported  in  writing  witli  his 
decision,  tlio  facts  and  conclusions,  and  recited  in  full  in  the  opinion 
of  tlu!  court  therein. 

By  the  Court,  C'olk,  J.  —  This  case  was  tried  by  the  court  without 
the  intervention  of  a  jury,  ami  the  judge  found  the  following  facts: 

First.  That  tin-  action  is  brought  u[)on  the  bill  of  exchange  intro- 
duced in  evidence,  and  described  in  the  plaintiff's  declaration.  'I'hat 
this  bill,  which  is  the  second  of  the  set,  was  indorsed  by  tiie  defendants 
on  a  Sunday. 

Second.  That  the  first  of  the  set  was  sold  by  defendants  to  plain- 
tiff about  the  1st  of  January,  1855.    That  the  plaintiff,  without  delay, 


MV.ur   Koyale  de  Paris,   14  Janvier,   1S30;    Sirey,  t.  30,  1.    172. 
»  Kallx  V.  Uenniatoun,  G  Exch.  483. 


712  BILLS   IN   A   SET.  [AUT.    XVI. 

sent  the  same  by  mail  to  his  ronvspoiulont  in  New  York  city,  the 
resilience  of  the  drawee,  for  presentation  for  payment.  'J'liat  by 
some  delay  in  the  mail  the  letter  did  not  reach  New  York  until  the 
9th  of  April  following,  at  which  time  the  letter,  with  inclosure,  was 
duly  received  by  the  said  correspondent.  That  the  bill  was  not  pre- 
sented for  payment. 

Third.  That  in  the  last  of  March,  the  plaintiff,  fearing  tlie  said 
first  bill  was  lost,  procured  the  defendants  to  indorse  and  deliver  to 
hiiu  the  second  of  the  set,  and  had  it  presented  on  the  third  day  of 
April  following  for  payment,  to  the  drawee,  and  payment  was  re- 
fused. The  bill  was  duly  protested,  and  proper  notice  given  to  the 
defendants,  who  were  indorsers. 

The  conclusions  of  law  which  the  court  drew  from  these  facts, 
were,  "  1st.  That  the  liability  in  this  action,  if  any  at  all,  is  upon 
the  second  bill  of  the  set,  and  not  on  the  first;  2d.  That  because  the 
said  bill  was  indorsed  on  Sunday,  that  therefore  such  indorsement 
was  absolutely  void." 

We  have  examined  with  considerable  care  the  authorities,  and 
have  not  been  able  to  find  a  case  precisely  like  the  present,  although 
it  would  seem  as  if  the  point  must  frequently  have  arisen  in  the 
courts  in  this  country,  and  in  England.  The  case  of  Perreira  v. 
Jepp  et  al.  (cited  in  a  note  on  page  449,  11  B.  and  C),  would  seem 
to  have  a  strong  bearing  upon  the  case  at  bar.  It  was  there  held 
that  he  to  whom  any  part  of  the  set  is  first  transferred,  acquires  a 
property  in  all  tlie  other  parts,  and  may  maintain  trover  even  against 
a  bona  fide  holder,  who  subsequently,  by  transfer,  or  otherwise,  gets 
possession  of  another  part  of  the  set.  That  is,  deciding  that  the 
first  indorsement  of  one  of  the  set  vests  in  the  indorsee  the  absolute 
right  to  the  possession  of  the  wliole  set.  And  we  suppose  it  would 
follow,  from  tliis  doctrine,  that  the  indorsetnent  of  the  second  in  this 
case  was  entirely  unnecessary.  The  liability  of  the  indorser  arose 
from  indorsing  the  first  of  the  set  for  value.  We  think  her  liability 
was  not  increased  one  jot  or  tittle  by  indorsing  the  second  of  the  set. 
Suppose  she  had  indorsed  all  of  them  in  January,  at  the  time  she 
indorsed  the  first,  is  it  not  oljvious  that  her  liabilitv  would  not  have 
been  different  from  what  it  is?  Tt  is  conceded  that  the  indorsement 
of  the  first  was  good,  and  this  indorsement  was  entirely  adequate  to 
carry  with  it  the  second  and  third.  (See  Edwards  on  Bills,  304  and 
162;  Holdsirorth  v.  Unriier,  10  B.  C.  449;  Kenworthy  v.  IIopHns,  1 
Johns.  Cas.  107.)  Eitlier  of  the  set  may  be  presented  for  accept- 
ance, and,  if  not  accepted,  a  right  of  action  arises  upon  due  notice 
against  the  indorser.  (Dovmes  and  Co.  v.  Church,  13  Peters,  205.) 
The  bill  upon  which  the  protest  was  made  was  declared  on  and  pro- 
duced, and  it  also  appeared  that  the  first  had  not  been  presented  for 
payment.    The  court  says,  and  we  think  properly  and  correctly,  that 


ART.  XVI.]  ACCEPTANCE  AND  TRANSFER.  713 

if  the  first  had  been  presented  for  payment  and  protested,  even  as 
late  as  April  Uth,  that  upon  proper  notice  the  iudorser  would  have 
been  held,  for  the  delay  in  the  mail  would  have  been  a  sulhcient 
excuse  for  the  apparent  neglect  in  not  presenting  it  for  acceptance 
before.  The  case  might  have  been  relieved  from  all  doubt  or  diffi- 
culty, had  the  indorsee  declared  upon  the  first  of  the  set,  and  pro- 
duced on  the  trial  tlie  second,  which  had  been  presented  for  accept- 
ance and  dishonored.  (Wells  v.  Whitehead,  15  Wend.  527.)  This 
he  did  not  see  fit  to  do,  but  we  think  he  was  entitled  to  recover  even 
as  the  facts  appeared  before  the  court. 

The  judgment  is  reversed,  and  a  now  trial  ordered.^ 

1  It  seems  that  an  indorsee  has  no  right  to  demand  the  other  parts  except 
from  his  immediate  indorser.  Thus,  the  fourth  indorsee  cannot  maintain  an 
action  against  the  second  indorser  for  outstanding  parts  of  tlie  .set.  I'inard  v. 
Klockinntm,  3  B.  &  S.  .388;   s.  c,  32  L.  J.,  Q.  B.  82. 

In  an  action  against  the  acceptor  on  one  part  of  the  set.  the  holder  need 
not  file  the  other  part  or  parts,  ./o/in.son  v.  Offuft,  4  Met.  (Ky. )  19.  In  an 
action  against  the  indorser  on  tiie  second  part,  after  dishonor  by  non- 
acceptance,  the  holder  need  not  account  for  the  first  part;  it  is  a  matter  of 
defence  "  to  =how  either  that  some  other  bill  of  the  set  has  been  presented 
and  accepted,  or  paid;  or  that  it  has  been  presented  at  an  earlier  time  and 
dishonored,  and  due  notice  has  not  been  given;  or  that  another  person  is  the 
proper  holder,  and  has  given  notice  of  his  title  to  the  party  sued;  or  that 
8ome  other  ground  of  (Icfenre  exists,  which  displaces  the  prima  fnric  title 
made  out  by  the  plaintiff."  Dninirn  v.  Church.  13  Pet.  (V.  S.)  205;  Miller 
V.  Palmer,  58  Md.  452.  But  where  the  second  of  the  set  is  protested  for  non- 
acceptance,  the  holder  must  produce  that  number  of  the  set.  because  other- 
wi.'^c  it  may  have  been  accepted  svpra  protest  for  the  honor  of  the  defendant, 
and  he  be  liable  upon  it.  ^yrl}n  v.  Whitrhrnrl,  15  Wend.  (N.  Y.)  527.  If 
the  drawee  accepts  more  than  one  part,  he  is  liable  on  each  to  holders  in  due 
course.  Holdsworth  v.  fluntrr,  10  B.  &  ('.  449;  Hank  v.  ^Seal,  22  How. 
( U.  S. )  90.  If  tlu;  drawee  dislionors  one  part,  but  si'.bscnuently  honors  ami 
pays  l!"e  other  part,  the  drawer  is  discharged.  /*«f/c  v.  \Varncr,  4  Calif. 
396.  —  H. 


AKTK'LK  XVII. 

Pno^nssdKY  N^(vrKs  and  Chkcks. 

I.  Promissory  notes. 

1.  Origin  and  History.* 

[See  pages  27-28.] 

2.   Form   and  Interpretation. 
See  Article  II,  pp.  ;)4-'.3o;},  ante. 


'The  statute  of  3  &  4  Anno,  c.  9,  §  1  (1704),  provided  that,  "Whereas  it 
hath  been  held,  that  notes  in  writing,  signed  by  the  party  who  makes  the 
same,  whereby  such  party  promises  to  pay  unto  any  other  person,  or  his 
order,  any  sum  of  money  therein  mentioned,  are  not  assignable  or  indorsable 
over,  within  tlie  custom  of  niercliants.  to  any  other  person;  and  that  such 
person  to  whom  the  sum  of  money  mentioned  in  such  note  is  payable  cannot 
maintain  an  action,  by  the  custom  of  merchants,  against  the  person  who  first 
made  and  signed  the  same;  and  that  any  person  to  whom  such  note  should 
be  assigned,  indorsed,  or  made  payable,  could  not,  within  the  said  custom 
of  merchants,  maintain  any  action  upon  such  note  against  the  person  who 
first  drew  and  signed  the  same:  Therefore,  to  the  intent  to  enco\irage  trade 
and  commerce,  which  will  be  much  advanced  if  such  notes  shall  have  the 
same  effect  as  inland  bills  of  exchange,  and  shall  be  negotiable  in  like 
manner,  be  it  enacted,  etc.,  (1)  That  all  notes  in  writing  that,  after  [May 
1st,  1705],  shall  be  made  and  signed  by  any  person  .  .  .  whereby  such 
person  .  .  .  doth  or  shall  ])n)niise  to  pay  to  any  other  person  or  per- 
sons, .  .  .  his,  her  or  their  order,  or  unto  bearer,  any  sum  of  money 
mentioned  in  such  note,  shall  be  taken  and  construed  to  be,  by  virtue  thereof, 
due  and  payable  to  any  such  person  or  persons  ...  to  whom  the  same 
is  made  payable:  (2)'  and  also  every  such  note  payable  to  any  person  o'- 
per.son8,  .  .  .  his,  her,  or  their  order,  shall  be  assignable  or  indorsnbl^ 
over  in  the  same  manner  as  inland  bills  of  exchange  are  or  may  be,  accord 
ing  to  the  custom  of  merchants;  (3)  and  that  the  person  or  persons  .  .  . 
to"whom  such  sum  of  money  is  or  shall  be  by  such  note  made  payable,  sli.'ill 
and  may  maintain  an  action  for  the  same,  in  such  manner  as  he,  she.  o- 
they  might  do  upon  any  inland  bill  of  exchange,  made  or  drawn  according  to 
the"  custom  of  merchants,  against  the  person  or  persons  .  .  .  who  signed 
the  same;  (4)  and  that  any  person  or  persons  ...  to  whom  sucli  note 
is  indorsed  or  assigned,  or  the  money  1  herein  mentioned  ordered  to  be 
paid  by  indorsement  thereon,  shall  and  may  maintain  his.  her.  or  their  action 
for  such  sum  of  money,  either  against  the  y)erson  or  persons  .  .  .  who 
signed  such  note,  or  against  any  of  the  j)ersons  that  indorsed  the 
game,  in  like  manner  as  in  ca^es  of  inland  bills  of  exchange." 

The  .statute  was  held  to  apply  to  foreicn.  as  well  .-ts  domestic,  notes. 
Milne  v.  Graham,  1  Barn.  &  Cress.  192.  Statutes  of  like  tenor  have  been 
passed  in  the  American  states.  1  Daniel,  g  5.  Independent  of  statute,  some 
f»tn  +  '.-  have  held  promissorv  notes  to  be  negotiable  by  force  of  common  law. 
Dvnn  V.  Adams.  1  Ala.  .527:  Trvin  v.  \faury.  1  Mo.  194.  See  1  Parsons, 
Bills  and  Notes   (2d  ed.),  pp.  9-13;   Story  on  Prom.  Notes,  §  6.  —  H, 

[Hi] 


I.    3.]  NON-NEGOTIABLE  NOTES.  715 

§  320  EDELMAN  v.  RAMS. 

58  Miscellaneous  (N.  V.  Sur.  Ct.,  Apr.  T.)  5G1.— 1908. 

Demurrer  to  complaint  on  promissory  note  overruled  and  defend- 
ant appeals. 

GiLDERSLEEVE,  P.  J.  *  *  *  The  appeal  from  the  interlocutory 
judfjment  rendered  on  January  3,  1908,  is  well  founded,  and  that 
judgment  must  be  reversed.  The  plaintiff's  cause  of  action  rests  upon 
a  promissory  note  made  by  the  defendant  and  payable  to  the  "  order 
of  myself.*'  Although  the  complaint  alleged  the  making  and  delivery 
for  value  of  the  note  to  the  plaintiff,  and  that  the  plaintiff  was  the 
lawful  holder  and  owner  of  the  note,  and  its  presentation  and  demand 
for  and  refusal  of  payment,  it  contained  no  allegation  that  said  note 
was  ever  indorsed  by  the  defendant,  its  maker.  The  Negotiable 
Instruments  Law  of  the  state  (Laws  18!)7,  p.  755,  c.  612)  repealed 
all  prior  statutes  regarding  hills  and  notes,  and  provides  by  section 
320  thereof  as  follows : 

"  A  negotiable  promissory  note  within  the  meaning  of  this  act  is 
an  unconditional  promise  in  writing  made  by  one  person  to  another 
signed  bv  the  maker  engaging  to  pay  on  demand  or  at  a  fixed  or 
determinable  future  time,  a  sum  certain  in  money  to  order  or  to 
bearer.  Where  a  note  is  drawn  to  the  maker's  own  order,  it  is  not 
complete  until  indorsed  by  him." 

The  note,  unless  indorsed  by  the  defendant,  was  therefore  incom- 
plete, and  the  failure  of  the  complaint  to  allege  such  indorsement 
rendered  it  demurrable.     Oriell  v.  Ch/dc,  53  N.  Y.  Supp.  fil,  (\2. 

Interlocutory  judgment  of  January  3,  n»OS,  reversed,  and  de- 
murrer sustained,  with  costs,  with  leave  to  the  plaintiff  lo  amend  the 
complaint  within  five  days  upon  payment  of  said  (osts.  Costs  of  one 
party  to  be  offset  against  those  allowed  the  otlicr.    All  concur. 


3.    NoN-\K(i()TI.\I!l.l',    NoTF.S. 

§320  SMITH   r.   K  MX  DA  Id..   Iai-.ttoii. 

(■>    I MiM   i;i;r<>ins,   \2'.'>.       I  7!'  t. 

AsstTMl'siT    on    Hie    foljftwing    Inst  runiciit,    given    by    defendant's 
tcptator :  — 

Thrrp  monOis  nf(or  flnto  I   promiso  to  pay  to  Mr.  Smitli.  ciirricr.    to/,  vmIup 
rccfivrti   in   (rust   for  Mth.   K.  TlnimpMon,  as  witncHH  my  liand. 

]j.    Ankf.w. 

25  June.    1787. 

The  action   was  commenfed    Scptfudjcr   2n,    17!)3.      DrfcndMnt    ob- 
jected   tliat    the    instrument   was    not    a    promissory   note   wiilijn    the 


716  PKOMISSOUY    NOTES.  [ART.    XVII. 

statvito  (,;>  and  1  Anno,  c.  !»),  and,  if  not,  the  cause  of  action  ai:crued 
Sept.  vJ,  1TS7,  llirce  inonlll^  alicr  llic  dale  ui'  the  note,  and  conse- 
quently that  six  years  had  ehi])sed  before  tlie  suing  out  of  tlie  writ, 
and  tiiat  the  cause  ol"  action  was  barred  by  tlie  statute  ol'  limitations. 

Verdict  for  defendant,  with  leave  to  ])laintill'  to  move  to  set  that 
verdict  aside,  and  to  enter  .;  verdict  for  him,  i(  this  court  thought 
he  was  entitled  to  recover.     Motion  accordingly. 

LoKD  Ki:\Yox,  C.  J.,  said,  If  this  were  res  Integra,  and  there  were 
no  decisions  upon  the  subject,  there  would  be  a  great  deal  of  weight 
in  the  defendant's  objection ;  but  it  was  decided  in  a  case  in  Lord 
Raymond  (2  Lord  l?aym.  1545),  on  demurrer,  that  a  note  payable  to 
B.,  without  adding  or  to  his  order,  or  to  bearer,  was  a  legal  note 
within  the  act  of  Parliament.  Tt  is  also  said  in  Marius  that  a  note 
may  be  made  payable  either  to  A.  or  bearer,  A.  or  order,  or  to  A. 
only.  In  addition  to  these  authorities  I  have  made  inquiries  among 
different  merchants  respecting  the  practice  in  allowing  the  three 
days'  grace,  the  result  of  which  is  that  the  Bank  of  England  and  the 
merchants  in  London  allow^  the  {'.irce  days'  grace  on  notes  like  the 
present.  The  opinion  of  mercliants  indeed  would  not  govern  this 
court  in  a  question  at  law,  Ijut  I  am  glad  to  llnd  that  the  practice  of 
the  coniiuercial  world  coincides  with  the  decision  of  a  court  of  law. 
Therefore,  I  think  that  it  would  be  dangerous  now  to  shake  that 
practice,  whicli  is  warranted  by  a  solemn  decision  of  this  court,  by 
any  speculative  reasoning  upon  the  subject;  and  consequently  this 
rule  must  be  made  absolute  to  enter  a  verdict  for  the  plaintiff. 

Rule  absolute.^ 


§320  CARXWTx'KJITT  v.  GRAY,  Executor. 

127  Xi;w  York,  02.  —  IPOl. 

Action    on    the    following    instrument,    executed    by    defendant's 

testator :  — 

QuAKKYViLLE,   Heptcmher  2,    1H71. 
Thirty  days  after  death,  T   proniiso  to  pay   to  Cornoiius  Carnwriglit  fifteen 
hundred   dollars,  with   interest. 

Samxifl  p.   Fukmgh. 

Plaintiff  gave  no  evidence  of  consideration,  but  proved  the  genuine- 
ness of  the  signature,  put  the  note  in  evidence,  and  rested  his  case. 

Judgment  for  plaintiff.      Defendant  appeals. 

Brown,  J.  —  When  the  plaintitT  rested  his  case  and  again  at  the 
close  of  the  testimony  the  defendant  moved  to  dismiss  the  complaint 

2  Grace  is  allowed  on  non-negotiable  notes.  Duncan  v.  Maryland  Savings 
Inst..  10  Gill  &  J.  (Md.)  290;  Dubiiy.s  v.  Farmer,  22  La.  Ann.  47S ;  Cox  v. 
Reivhardt,  41  Tex.  501.  Contra:  Luce  v.  .S7io//.  70  Tnd.  1.52.  The  matter  is 
now  unimportant  where  days  of  crace  are  abolished.    Nejj.  Inst.  L.,  §  145.  —  H. 


I.    3.]  NO N- NEGOTIABLE  NOTES.  717 

upon  the  ground  that  no  proof  had  been  given  that  the  instrument 
sued  upon  had  any  consideration.  These  motions  were  denied  and 
the  court  instructed  the  jury  that  the  instrument  was  a  promissory 
note  and  imported  a  consideration,  and  that  the  burden  rested  upon 
the  defendant  to  show  that  it  was  without  a  consideration. 

The  exceptions  to  these  rulings  present  the  principal  question 
argued  upon  this  appeal. 

The  statute  of  this  state  in  reference  to  promissory  notes  provides 
as  follows  (1  R.  S.  768)  : 

§  1.  All  notes  in  writing,  made  and  signed  by  any  person,  whereby 
he  shall  promise  to  pay  to  any  other  person  or  his  order,  or  to  the 
order  of  any  other  person,  or  unto  the  bearer,  any  sum  of  money 
therein  mentioned,  shall  be  due  and  payable  as  therein  expressed; 
and  shall  have  the  same  effect  and  be  negotiable  in  like  manner  as 
inland  bills  of  exchange,  according  to  the  custom  of  merchants. 

§  4.  The  payees  and  indorsees  of  every  such  note  payable  to  them 
or  their  order  and  the  holders  of  every  such  note  payable  to  bearer, 
may  maintain  actions  for  the  sums  of  money  therein  mentioned, 
against  the  makers  and  indorsers  of  the  same  respectively,  in  like 
manner  as  in  cases  of  inland  bills  of  exchange,  and  not  otherwise.' 

Our  statute  is  a  substantia]  reenactment  of  the  statute  of  Anne 
(3  and  4  Anne,  c.  9),  which  provided  that:  "All  notes  signed  by  a 
person  promising  to  pay  to  another  his,  her,  or  their  order  or  to 
bearer"  should  be  construed  to  be  by  virtue  thereof  due  and  payable 
to  any  such  person  to  whom  the  same  is  made  payable,  etc.,  etc. 

This  statute  was  held  by  the  courts  of  England  to  include  within 
its  terms  a  non-negotiable  note.  (Smith  v.  Kendall,  6  D.  &  E.  123; 
Burchell  v.  Slocock,  2  Ld.  Raym.  1545;  3  Kent's  Com.  77.)  In  the 
case  first  cited  Lord  Kenyon  said  :  "  A  note  may  be  made  payable 
to  *  A.'  or  bearer,  '  A.'  or  order,  or  to  '  A.'  only."  Similar  decisions 
were  made  "by  the  courts  of  this  state  under  our  own  statute.  (Down- 
ing V.  Backensloes,  3  Caine,  137;  President  v.  JIurtin,  9  Johns.  217; 
Kimball  v.  I/mitivf/ton ,  10  Wend.  075;  /fall  v.  Farmer,  r,  Dcnio.  4.^1.) 

In  Douuiurj  V.  liack-evsloes  a  non-negotiable  note  was  declared  on 
as  within  the  statute  and  th'e  defendant  demurred  on  the  ground  that 
the  declaration  did  not  allege  the  transaction  and  consideration  upon 
which  the  note  was  given.  The  court  gave  judgment  for  the  plain- 
tiff, saying:  "The  very  point  was  settled  in  Green  v.  fjonq  (April 
Term,  HDH),  in  conformKy  to  the  adjudieations  in  Westminster 
TIall." 

In  President  v.  ffnrfin  it  was  said:  "The  note  set  forth  is  a  good 
promissory  note  within  the  statute,  though  it  has  no  words  bearer  or 


»This   stntiito    jr   now   mppalrd   by   N.   Y.    Nep.   Inst.    L.,   §   340,   and    i.s   re- 
placed   by   §   320. —  H. 


718  I'lJOMISSOUV    XOTKS.  [art.    XVII. 

order.     This   i.>?  the  established   English   law,  and  the  same  rule  is 
reeoi^nized  l\v  this  court." 

In  Kimball  v.  Huiilinyhm  Ihe  action  was  upon  a  due  hill  in  this 
form:  "Due  Kimball  (S:  Kenston  three  hundred  and  twenty-five 
dollars  payable  on  demand."  Judge  Nelson  said:  "The  instrument 
is  a  promissory  note  within  the  statute.  Neither  the  acknowledgment 
of  value  received  or  negotiable  words  are  essential  to  bring  it  within 
the  statute."  (See  also  Carver  v.  Hayes,  47  Me.  257;  Franklin  v. 
March,  6  N.  H.  364.) 

No  authority  is  cited  in  the  courts  of  this  state  or  of  England 
holding  that  a  non-negotiable  note  is  not  within  the  terms  of  the 
laws  cited,  and  we  are  of  the  opinion  that  the  language  of  our  statute 
includes  a  note  payable  to  a  person  without  words  of  negotiability. 

Tlie  instrument  sued  upon  being,  therefore,  a  promissory  note 
within  the  statute  of  this  state,  it  follows  that  it  imports  a  considera- 
tion. By  the  express  terms  of  the  statute  the  sum  of  money  therein 
mentioned  is  declared  to  be  "  due  and  ))ayahlo  as  therein  expressed." 
That  it  is  "  due  and  payable "  according  to  its  terms  is  the  legal 
conclusion  which  the  court  must  draw  from  the  instrument  itself. 
A  valid  contract  is  thus  declared  to  exist,  and  of  course  a  considera- 
tion must  be  implied.  Hence  "  value  received  "  need  not  appear  on 
the  face  of  the  note,  as  those  words  express  only  w^hat  the  law  implies. 
{Hatch  V.  Traj/es,  11  Ad.  &  El.  702;  Hall  v.  Farmer,  5  Denio,  484.) 
The  effect  of  laws  which  make  promissory  notes  negotiable,  or 
which  authorize  actions  of  debt  upon  them,  though  non-negotiable, 
is  to  take  them  out  of  the  common-law  rule  which  requires  that  every 
contract  must  be  shown  by  the  party  who  sues  upon  it,  to  be  sup- 
ported by  a  consideration,  and  enables  the  holder  to  maintain  an 
action  thereon  without  alleging  or  proving  a  consideration.  In  other 
words,  a  consideration  is  implied  from  the  character  of  the  instrument. 
(Peasley  v.  Boatwright,  2  Leigh,  195  ;  Hatck  v.  Trayes,  supra.) 

The  English  statute  was  enacted  to  settle  the  controversy  that 
prevailed,  whether  under  the  customs  of  merchants  promissory  notes 
were  negotiable.  They  were  thereby  declared  to  be  assignable  or 
indorsable  over  in  the  same  manner  as  inland  bills  of  exchange  were 
according  to  the  customs  of  merchants,  and  holders  were  empowered 
to  maintain  actions  thereon  in  the  same  manner  as  they  might 
do  upon  any  inland  bill  of  exchange  made  or  drawn  according  to 
the  custom  of  merchants. 

Our  statute  contains  similar  provisions.  Promissory  notes  and 
inland  bills  of  exchange  were,  by  virtue  of  these  laws,  put  upon  an 
equality.  They  were  made  negotiable  if  they  contained  words  of 
negotiability,  but  whether  negotiable  or  not,  and  whether  they  ex- 
pressed value  received  or  not,  it  was  no  longer  necessary  in  actions 
thereon  to  aver  and  prove  consideration. 

Such  was  and  is  the  rule  as  to  inland  bills  of  exchange.     (1  Daniel 


I.    3.]  NOX-NEGOTIABLE  NOTES.  719 

on  Negotiable  Inst.,  §  161;  Raubitschek  v.  Blank,  80  N.  Y.  479; 
Averett's  Adm'rs  v.  Booker,  15  Gratt.  163;  Wells  v.  Brigham,  6 
Cush.  6.) 

And  the  same  rule  under  the  statute  was  made  applicable  to 
promissory  notes.  (Tuunsend  v.  Derby,  3  Metcalf,  363;  Dean  v. 
Carruth,  108  Mass.  242;  Bank  of  Troy  v.  Topping,  0  Wend.  277;  13 
Id.  557;  Chitty  on  Bills  [Oth  Am.  ed.],  78-181;  Paine  v.  ^^alke,  57 
How.  Pr.  273;  Story  on  Promissory  Notes,  §51;  3  Kent's  Com. 
77,  78;   1  Parsons  on  Conts.  [6th  ed.],  249;  1  Parsons  on  Bills,  193.) 

The  statute  does  not  require  a  note  to  express  value  received  upon 
its  face,  and  no  definition  of  such  an  instrument  requires  the  expres- 
sion of  that  fact. 

The  note  sued  upon,  although  by  its  terms  payable  after  the  death 
of  the  maker,  was  a  valid  instrument. 

A  promissory  note  is  defined  to  be  a  written  engagement  by  one 
person  to  pay  absolutely  and  unconditionally  to  another  person 
therein  named,  or  to  the  bearer,  a  certain  sum  of  money  at  a  speci- 
fied time  or  on  demand.  (Story  on  Prom.  Notes.,  §  1;  Coolidge  v. 
Ruggles,  15  ilass.  387.)  It  must  contain  the  positive  engagement 
of  the  maker  to  pay  at  a  certain  definite  time  and  the  agreement  to 
pay  must  not  depend  on  any  contingency,  but  be  absolute  and  at  all 
events.  Tried  by  this  standard  the  instrument  set  out  in  the  com- 
plaint was  a  valid  promissory  note.  The  fact  that  it  was  payable 
after  the  death  of  the  nuiker  did  not  affect  its  character.  (3  Kent's 
Com.  76.) 

It  follows  from  tliese  views  that  the  motion  to  dismiss  the  com- 
plaint was  properly  denied,  and  there  was  no  error  in  the  charge  of 
the  court. 

Tbe  point  made  by  the  appellant  that  the  court  erred  in  its  charge 
as  to  the  burden  of  proof  on  the  question  of  consideration,  assuming 
that  evidence  pro  and  con  upon  the  question  was  given,  was  not  raised 
at  the  trial.  Tlio  proposition  made  by  tlie  defendant  at  tbe  close  of 
the  judge's  charge,  and  the  only  one  to  which  an  exception  appears  in 
the  record,  was  as  follows:  "In  order  that  there  may  be  no  doubt 
about  our  position  we  ask  the  court  to  charge  the  jury  that  there  has 
been  no  evidence  given  of  consideration,  and  to  direct  a  verdict  for 
the  defendant  upon  that  ground."  The  defendant  having  thus 
squarely  plantefl  himself  on  the  ground  that  there  was  no  evidence 
of  consideration,  and  asked  the  court  to  direct  a  verdict  in  his  favor, 
cannot  now  claim  that  there  was  evidence  for  the  jury  and  that  he 
was  entitled  to  a  different  instruction  from  that  given. 

The  defendant's  claim  all  through  the  trial  was  that  the  note  did 
not  import  a  consideration,  and  that  the  plaintiff  could  not  recover 
without  proof  of  that  fact,  and  his  motion  to  dismiss  the  complaint 
and  to  direct  a  verdict  in  his  favor,  and  his  exr-eyitions  to  the  charge, 
all  sharply   present  that  question;  but  he  nowhere  claimed  that  he 


73>0  PKO.MISSOIiY    NOTES.  [AUT.    XVll. 

liiul  >;ivoii  ovidemo  whii-li,  if  boliovod  l»y  the  jury,  overcame  the  pre- 
.Miiiii-tiou  arising  in  l'a\(>r  of  llu'  iioti'.  This  clearly  appears  from  the 
s.ateiiu'iit  I  have  quotecL 

The  iwooptions  to  the  a(hiiissioii  of  evidence  present  no  error,  and 
the  jiulgnient  shouki  be  allirnieil. 

All  I'oncur,  except  Follett,  Cm.  .1.,  and  Vann,  J.,  dissenting,  and 
Pahkkh,  J.,  not  voting. 

Judgment  affirmed.* 


§  320  CROMWELL  v.  HEWITT. 

40  New  York,  491.  — 1869. 

Action  against  payee-indorser  of  two  instruments  as  follows :  — 

New  York,  March  22tl,  ISGl. 
?75. 

Sixty    days   after   date   I    promise   to   pay   to    Richard    Hewitt   seventy-five 
dollars,  value  received. 

William  Ryan. 

[Indorsed] : 
James  R.  Hewitt, 
Richard  Hewitt. 

Another  of  like  tenor  for  four  months  was  made  and  indorsed  as 
above. 


*  Accord:  Hegeman  v.  Moon,  131  N.  Y.  462.  Contra:  Bristol  v.  Warner,  19 
Conn.  7,  ante.  p.  2.34;  Currier  v.  Jjockicood,  40  Conn.  349,  ante,  p.  42.  The 
question  as  to  whether  a  non-negotiable  promissory  note  imports  a  considera- 
tion mu.st  turn  upon  a  construction  of  the  statute  governing  promissory 
notes.  Apparently  the  Neg.  Inst.  L.,  §  320,  has  changed  the  law  in  New  York, 
as  the  section  referred  to  includes  only  negotiable  promissory  notes.  —  H. 

[In  Deyo  v.  Thompson,  53  App.  Div.  (N.  Y.)  9,  it  was  held  that  under 
the  provisions  of  the  Negotiable  Instruments  Law  a  note  in  the  following 
form,  "  On  demand  I  promise  to  pay  Helen  Deyo  three  hundred  dollars," 
does  not  import  a  consideration,  and  the  burden  is  upon  a  party  suing  on 
such  note  to  prove  the  existence  of  a  consideration  therefor  by  extrinsic  evi- 
dence. Merwin,  .!..  said:  "The  note  was  not  negotiable  and  did  not  express 
consideration.  In  Carnwright  v.  Gray  (127  N.  Y.  92)  it  was  held,  of  such 
a  note,  that  it  imported  a  consideration  and  that  the  burden  of  showing  a 
want  thereof  was  upon  the  defendant.  This  decision  was  based  on  the 
provisions  of  the  Revi.sed  Statutes  (Part  2,  chap.  4,  tit.  2,  1  R.  S.  768)  on 
the  subject  of  promissory  notes.  These  provisions  were  repealed  by  the 
Negotiable  Instruments  Law  (Chap.  612,  Laws  of  1897),  and  I  find  no 
provision  in  that  law  that  will  allow  us  to  hold  that  a  note,  like  the  present 
one.  imports  a  consideration.  In  the  Carnwright  case  it  was  evidently  con- 
sidered that,  in  the  absence  of  a  statutory  provision,  there  was  no  presump- 
tion of  consideration  and  that  the  burden  of  proving  it  was  upon  the  party 
who  brought  the  action.  And  that  seems  to  be  the  rule.  (1  Daniel  Neg. 
Inst..  4th  ed.  §  162)."  P.  12.  This  point  dnos  not  seem  to  have  been  passed 
upon  as  yet  by  the  New  York  Court  of  Appeals. —  C] 


t-    3.]  NON-NEGOTIABLE  NOTES.  Til 

James  Hewitt  was  oiiginally  made  a  defendant,  but  the  action  as 
to  him  was  di^iontinued,  and  tliis  action  is  against  Kichard  Hewitt, 
the  payee-iudorser. 

The  plaintiff  testified  that  tlie  defendant  was  owing  the  plaintiff, 
and  that  it  was  understood  between  them  that  when  these  notes  were 
passed  over  by  him  in  payment,  that  they  were  taken  solely  upon 
his  responsibility,  and  that  he  assured  plaintiff  that  they  should  be 
paid. 

The  action  was  to  charge  defendant  as  guarantor.  No  presenta- 
tion to  the  maker  for  payment  or  notice  of  non-payment  to  Hewitt 
was  shown.  The  court  below  held  the  suit  could  not  be  maintained, 
and  dismissed  tbe  complaint.     Plaintiff  appeals. 

Mason,  J.  —  This  action  was  brought  to  recover  of  tlie  defendant 
tlie  amount  of  two  non-negotiable  notes  of  seventy-five  dollars  each, 
upon  the  following  facts:  One  William  Ryan  made  the  notes  pay- 
able to  defendant  by  name,  and  the  defendant  transferred  the  notes 
to  the  plaintiff  for  value,  and  indorsed  them  over  by  writing  his  name 
upon  the  back.  The  notes  were  not  presented  for  payment  wlien  they 
fell  due,  nor  was  any  notice  of  non-payment  given  to  the  defendant, 
and  the  only  question  in  the  case  is  whether  the  })laintiifs  are  entitled 
upon  tiiese  facts  to  recover  of  the  defendant  the  amount  of  the 
notes.  The  case  of  Richards'  Ex'r  v.  Warritig''  (1  Keyes  R.  575), 
is  an  authority  in  point,  and  decides  the  very  question  in  favor  of 
t':e  plaintiff.  The  case  holds  that  the  holder  may  overwrite  the 
indorsor's  name  with  a  contract  of  guaranty,  or  as  maker  of  the  note. 
That  case  must  be  regarded  as  controlling,  even  should  we  think  the 
i""=or!s  assigned  for  the  decision  unsatisfactory. 

The  judgment  of  the  Supreme  Court  must  be  reversed  and  a  new 
trial  granted,  with  costs,  to  abide  the  event." 

'•'IliiH  was  a  case  of  "  irrffiular   indoraonicnt." — H. 

0  Accord:  Nneelxtr  v.  French.  13  .Met.  (Mass.)  202;  l^retitis.f  v.  Daniclsiyn, 
5  Conn.   175;   Vastte  v.  Caudcc,   16  Conn.  223;   Fortl  v.  Milrhill,   l.")   Wis.   304. 

A  paypo-infI(ir>'cr  in  lilank  of  a  non  nopotiahlc  nofc  l)PC()nu's  iialilc,  not  as 
i'ulorspf.  i)nt  if  at  all  as  ^Miarantor.  In  sonip  states  no  |)rpsuniption  arises 
tint  any  liability  is  nndfitakon.  the  indorsement  heinfr  treated  simply  as  a 
(••an-ifer  or  assiirnment  of  a  common-law  contract.  Slmffslall  v.  McDanicl, 
l.')2  Pa.  St.  .'WIS;  Stoiji  V.  Lamb,  r.2  Midi.  ryi.*").  l?iit  .vidcn.e  ..f  tli.-  tine  con- 
tract is  arlmissihle.  ilhiil.)  .An  indorsement  nf  w  non  iie<;ot  ial)le  note 
"  waivinj^  protest"  is  an  indication  of  an  intention  to  assume  tlie  liiiMIity 
of  ((uarantor.     Firnt   A'.   //.  v.  Falkcnhan.  iM   Calif.    111. 

'Ilie  inilorsir  liecomes  lialde  only  to  liis  immediate  indur^cr.  iiiiil  not  to  a 
remote  indorsi-c.  KruihiU  v.  f'nrkrr,  103  Calif.  31!i.  C(iiiti:i:  Wdnhiiiii  Hank 
V.   Lincoln.  3   Alien    (Ma^s.).   102    (scmhic). 

An  irregular  inrlorser  of  a  non  nepotiahle  note  is  a  guarantor.  Ifichardft' 
Ex'r  V.  Warrinfi.  1  Kcyes  (  N.  V.).  .'iTCi;  McMullcn  v.  Ifaffrrttt.  S!)  N.  V.  4r)0; 
Firnt  \.  B.  v.  liahcock.  04  Calif.  JHl;  Orrick  v.  Colslon.  7  Oratt.  (Va.)  189. 
Spp  on  non-neL'otialilp  notes.  Storv  on  Prom.  Notes,  §§  128-121);  2  Randolph 
on  Comm.  Paper,  S8  U55-U61.  —  II. 
NEOOT.  INSTnUMKNTB  — 46 


722  CHECKS.  [AKT.    XVII. 

U.  Checks. 

1.  Check  Distinguished  prom  Bill  of  Exchange. 

§321  HAKIUISON  v.  NU'OLET  NAT.  BANK. 

41  Minnesota,  488.  —  188». 

Appeal  by  plaintill"  from  an  order  of  the  District  Court  for  Hen- 
nepin I'ounty,  KV'a.  .).,  presiiling,  sustaiiiin<f  a  (icimirrer  to  the  com- 
plaint.     The   action    was   to   recover   $'^0,U()U   (hiniages   for   that   the 
defendant,  on  April  14,  1888,  and  before  the  maturity  thereof,  did 
"  falsely,    wrongfully,   and   maliciously "   cause   to   be   protested   the 
following   instrument,   which   had   been   indorsed   and   forwarded   to 
defendant  for  collection,  tliereby  injuring  ])laintiff's  credit,  etc.: 
45  Washington  Ave.,  South, 
Habkison,  the  Tailor. 
$199.92.  MiNNKAi'OLis,  Minn.,  Mch.  27,  1888. 

On  April  14th  pay  to  the  order  of  E.  Harrison  one  hundred  and  ninety-nine 
92-100  dollars. 

J.  T.  Harbison. 
To  Citizens'  Bank. 
Minneapolis,  Minn. 
No.  2,884. 

Mitchell,  J.  —  This  appeal  presents  the  question  whether  a  writ- 
ten order  on  a  bank  or  banker  to  pay  a  sum  of  money  at  a  day  subse- 
quent to  its  date,  and  subsequent  to  the  date  of  its  issue,  is  a  "  check," 
or  a  "  bill  of  exchange,"  and  hence  entitled  to  grace.  The  question 
is  one  which  has  given  rise  to  considerable  discussion  and  some 
conflict  of  opinion. 

About  all  the  law  there  is  on  it,  as  well  as  all  the  arguments  on 
each  side,  will  be  found  in  Morse,  Bank  (3d  ed.),  §  381  et  seq.  The 
two  principal  authorities  holding  such  an  instrument  a  check  are  In 
re  Brown  (2  Story,  502),  and  Champion  v.  Gordon  (70  Pa.  St.  474). 
Both  of  these  are  entitled  to  great  weiglit,  but  they  stand  almost 
alone;  the  supreme  courts  of  Rhode  Island  {Westminster  Bank  v. 
Wheaton,  4  R.  I.  30),  and  perhaps  of  Tennessee,  being,  so  far  as  we 
know,  the  only  ones  which  have  adopted  the  same  views.''  All  other 
courts  which  have  passed  upon  the  question,  as  well  as  the  text- 
writers,  have  almost  uniformly  laid  it  down  that  such  an  instrument  is 
a  bill  of  exchange,  and  that  an  essential  characteristic  of  a  check  is 
that  it  is  payable  on  demand.  This  was  finally  settled,  after  some  con- 
flict of  opinion,  in  New  York, —  the  leading  commercial  state  of  the 
Union,  —  in  the  case  of  Bowen  v.  Newell,  several  times  before  the 
courts,  5  Sandf.  32G;  2  Duor,  .584;  8  N.  Y.  190,  and  13  N.  Y.  290, 
64  Am.  Dec.  550.     (See,  also,  Morrison  v.  Bailey,  5  Ohio  St.  13,  64 


TSee  also  Way  v.  Towle,  155  Mass.  374.  —  H. 


II.    1.]  DISTINGUISHED    FROM    BILLS.  723 

Am.  Dec.  632;  Woodruff  v.  Merchants'  Bank,  25  Wend.  673;  Minturn 
V.  Fischer,  4  Cal.  35 ;  Bradley  v.  Delaplaine,  5  Har.  [Del.]  305 ; 
Georgia  National  Bank  v.  Henderson,  46  Ga..  487;  Ivory  v.  Bank  of 
State  of  Mo.,  36  Mo.  475,  88  Am.  Dec.  150;  Work  v.  Tatman,  2  Houst. 
304;  Hawley  v.  Jette,  10  Or.  31;  2  Daniel  Neg.  Inst,  §§  1573-1575; 
Morse,  Bank.,  supra.) 

Nearly  every  definition  of  a  check  given  in  the  books  is  to  the 
effect  not  only  that  it  must  be  drawn  on  a  banjv  or  banker,  but  that 
it  must  be  payable  on  demand.  (1  Rand.  Com.  Paper,  §  8;  Byles, 
Bills,  13;  2  Daniel,  Neg.  Inst.,  §  1566;  1  Edw.  Bills,  §  19;  Bigelow, 
Bills  and  N.,  116;  Chalm.  Dig.  Bills  and  N.,  art.  254;  Shaw,  Ch.  J., 
in  Bullard  v.  Randall,  1  Gray,  605 ;  Bouv.  Law.  Diet. ;  Burrill,  Law 
Diet.)  Occasionally  the  expression  is  used  "payable  on  presenta- 
tion," but  evidently  —  except  perhaps  in  Story  on  Bills  —  as  synony- 
mous with  "  payable  on  demand." 

As  the  question  is  a  new  one  in  this  state,  w^e  would  not  feel  com- 
pelled to  follow  the  majority  if  the  better  reasons  were  with  the 
minority.  Perhaps  the  weightiest  argument  in  favor  of  holding  such 
an  instrument  a  check  is  the  practical  one  advanced  by  Sharswood,  J., 
in  Champion  v.  Gordon,  supra,  viz.,  that  if  held  to  be  a  bill  of  ex- 
change the  holder  might  immediately  present  it  for  acceptance,  and  if 
not  accepted  he  could  sue  the  drawer,  or  if  accepted  it  would  tie  up 
the  drawer's  funds  in  the  hands  of  the  bank,  and  thus,  in  either  case, 
frustrate  the  very  object  of  making  it  payable  at  a  future  day.  In 
answer  to  this,  it  may  be  said  that  the  drawer,  if  lie  wished,  could 
very  easily  avoid  such  consequences  by  inserting  appropriate  provisions 
in  the  instrument.  On  the  other  hand,  if  we  hold  that  an  instrument 
not  payable  on  demand  may  be  a  check,  we  are  left  without  any  defi- 
nite or  precise  rule  by  which  to  determine  when  the  paper  is  a  check, 
and  when  a  bill  of  exchange.  The  fact  that  it  is  drawn  on  a  bank  is 
not  alone  enough  to  distinguish  a  clicck  fiom  a  bill  of  exchange,  for 
nothing  is  better  settled  than  thai  a  hill  of  exchange  may  be  drawn 
on  a  banker.  Neither  will  tlic  fad  fliai  ilif  maker  writes  it  on  a 
"blank  check"  be  any  test,  for  the  kind  of  paper  it  is  written  on 
cannot  control  the  import  and  legal  effect  of  ils  words.  Neither  can 
the  fpiestion  whelher  it  is  drnwn  iigainst  a  previous  deposit  of  funds 
by  the  drawer  with  the  draw(!e  furnish  any  criterion,  for  nothing  is 
clearer  than  that  a  bill  of  exchange,  as  well  as  a  check,  can  be  drawn 
agninst  such  a  dejmsit,  and  that  an  instrument  may  be  a  check 
although  the  drawer  has  no  funds  in  the  hands  of  the  drawee. 
Neither  will  it  do  to  say  that  if  it  is  entitled  to  grace  it  is  a  bill,  but 
if  not  entitled  to  grace  it  is  a  check,  because  the  legal  character  of 
the  instrument  has  first  to  be  determined  before  it  can  be  known 
whetlior  or  not  it  is  entitled  to  grace.  In  short,  if  we  omit  from  the 
definition  of  n  check  the  element  of  it«  being  piiv;d)le  on  demand, 
bankers    and    business    men    are    left    without   any    definite    rule    by 


^]^4  OllKCKS.  [aUT.    Wll. 

wliicli  to  govern  tlieir  ai'tioii  in  a  inalliT  where  siinplieily  and  pre- 
cision of  rule  are  especially  di'siralile.  It  niiglit  be  expedient  to 
euaet,  as  has  been  done  in  New  ^'u^k  ami  suiiie  oIIkt  slates,  that  all 
clieeks,  bills  of  exehaiige,  or  dral'ls,  ap})eai'ing-  on  llieir  I'ace  to  be 
drawn  on  a  bank  or  banker,  wlu'tlier  ])ayal)le  on  a  specified  day  or 
any  number  of  days  after  date  or  sight,  shall  be  payable  on  the  dav 
named  in  the  instrument  without  grace;  or,  what  might  be  better 
still,  to  abolish  days  of  grace  altogether  as  a  usage  wliich  has  already 
long  outlived  the  condition  of  lliings  out  of  which  it  had  its  ori- 
gin. But  this  is  a  matter  for  legislatures  and  not  for  courts.  We 
are  therefore  of  opinion  that  the  better  I'ule  is  to  hold  that  such  an 
instrument  is  a  bill  of  exchange,  and  hence  entitled  to  grace.  We 
may  add  that  it  is  always  desirable  tluit  the  decisions  of  the  courts 
should  be  in  accord  with  the  business  usages  and  customs  of  the 
country.  Such  usages  are  entitled  to  special  weight  on  a  question 
like  this,  for  tlie  whole  matter  of  grace  on  bills  and  notes  had  its 
origin  in  the  usage  of  bankers.  And,  so  far  as  we  are  advised,  the 
general  practice  of  bankers  in  this  state  has  been  to  treat  instruments 
like  this  as  bills  of  exchange  and  not  checks. 

Counsel  for  respondent  suggests  that,  even  if  w^e  hold  that  pay- 
ment of  this  paper  was  demanded  and  protest  made  prematurely,  yet 
the  action  of  the  court  below  in  sustaining  the  demurrer  to  the  com- 
plaint should  be  afBrmed  on  other  grounds,  viz.,  that  the  act  of  pro- 
testing, etc.,  was  the  act  of  the  notary  and  not  of  the  bank;  that 
the  protest  could  not  have  damaged  the  financial  standing  of  the 
plaintiff  because  the  certificate  of  the  notary  shows  on  its  face  that 
it  was  done  before  maturity ;  also,  that  the  instrument,  being  of 
doubtful  classification,  involving  a  legal  question  on  which  courts 
differed,  the  defendant  would  not  be  liable  for  an  honest  mistake  of 
law.  "\Miatever  force  there  might  be  in  these  suggestions,  either  by 
way  of  defense  or  in  mitigation,  we  think  they  are  unavailing  in  sup- 
port of  a  demurrer  to  a  complaint  which  alleges  that  the  defendant 
"  falsely,  wrongfully  and  maliciously  caused  "  the  paper  to  be  pro- 
tested for  non-payment,  and  notices  of  protest  sent  out,  and  which 
also  shows  that  such  notices  —  which  were  presumably  what,  if  any- 
thing, injured  plaintiff's  standing  and  credit  —  contained  nothing 
indicating  that  payment  was  prematurely  demanded. 

Order  reversed.^ 


«A  7)Ost-dated  check  is  to  be  distinf^uishod  (outside  of  Mass.,  Pa.,  and 
R.  I. ) ,  from  a  check  payable  by  its  terms  after  the  date  of  issue.  2  Daniels, 
§§  1577-1578;  Crauford  v.  West  Hide  Bank,  100  N.  Y.  56.  A  post-dated 
check  is  to  be  treated  sis  if  issued  on  the  day  of  its  date.  Frazier  v.  Troid's, 
PHnting,  Etc.,  Co.,  24  Hun,  281,  90  N.  Y.  678.  — H. 


II.    <;.]  PKKSKNTMKNT,  ^2o 

2.  Presentment  of  Check. 
(a)  Effect  uf  delay  uyun  drawer's  liability. 
^  322  GRANGE  v.  REIGH. 

93  Wisconsin,  552. —  1896. 

Action  against  the  drawers  of  a  ctieck.  Defendants,  after  bank- 
ing hours  on  July  <iO,  drew  and  delivered  to  plaintiff  in  Milwaukee, 
where  plaintiif  resided,  a  cheek  for  $1,311  upon  the  South  Side 
Savings  Bank,  located  in  Milwaukee.  The  check  was  not  presented 
on  July  21,  during  all  of  which  day  the  bank  was  open  and  would 
have  paid  the  check  had  it  been  presented.  The  bank  did  not  open 
after  July  21,  by  reason  of  whieh  the  check  was  not  paid.  Judgment 
for  defendants. 

Marshall,  J. —  The  settled  law  applicable  to  the  facts  of  the 
case  is  that,  if  a  per.son  receives  a  check  on  a  bank,  he  must  present 
it  for  payment  within  a  reasonable  time,  in  order  to  preserve  his 
right  of  recourse  on  the  drawer  in  case  of  non-payment  by  the 
drawee ;  ®  and  that,  when  such  person  resides  and  receives  the  check 
at  the  same  place  where  such  bank  is  located,  a  reasonable  time  for 
such  presentation  reaches,  at  the  latest,  only  to  the  close  of  banking 
hours  on  the  succeeding  day,  evcludinff  Sunday?  and  holidays.  (Tiede- 
man,  Cora.  Paper,  §  443;  2  Daniel,  Neg.  Inst.,  §§  1590^  1591,  and 
cases  cited;  Lloyd  v.  Oxborne,  92  Wis. -93.)  Plaintiff  failed  to  com- 
ply with  the  law  in  this  respect ;  hence  defendants  were  discharged 
from  all  liability  to  answer  for  the  default  of  the  bank.  Such  was 
the  decision  of  the  trial  court,  and  it  must  be  affirmed. 

By  the  Court.  —  Judgment  affirmed.* 


»  It  was  held  in  heicis,  Hubbard  d  Co.  v.  Montgomery  Supply  Co.,  59  Va. 
75,  that  failure  to  presont  a  check  does  not  bar  recovery  from  the  drawer, 
if  the  time  intervening  between  'delivery  thereof  and  the  failure  of  the  bank, 
is  not  suflTicient  for  presentment  by  the  exercise  of  such  dilioence  as  the  law 
requires,  citing?  Cox  v.   Itt)onc,  8  \\.  V'a.  500.  —  C. 

'  But  delay  which  occasions  no  loss  to  the  drawer  will  not  dischar^'e  the 
drawer;  in  this  respect  a  cheek  differs  materially  from  a  bill  of  exchanj,'e. 
Syracuse,  etc.,  R.  R.  v.  Collins,  57  N.  Y.  G-Jl;  Woodin  v.  Frazce.  .18  N.  Y. 
Super.  Ct.  190;  Coyswell  v.  Sammja  Hank,  59  N.  II.  43;  Bull  v.  Hank,  123 
U.  8.  105;  2  Mor'-e  on  Ranks,  §  421;   2  Daniel  on  Ne},'.  Inst.,  §   1587. 

A  banker's  draft,  that  is  a  check  or  draft  by  one  bank  upon  another,  need 
not  be  presentcfl  with  the  same  promptitude  as  the  cheek  of  an  individual:  it 
is  intended  to  circulate  for  a  limiterl  period.  Hull  v.  Hank,  123  U.  S.  105; 
2  Daniel,  §    Kl'ina. 

The  rule  of  diliyenee  as  to  notice  of  dishnniir  and  tin-  rules  as  to  excuses  for 
delay,  etc.,  are  the  same  a«  in  the  cane  of  bills  ami  notes.  2  Daniel.  §§  1596- 
1698;   2  Morse,  §  428. 

An  indorser  of  a  check  is  entitle<l   to  due   presentment  and   notice,  and  the 


726  CHECKS.  [aim.    XVII. 

§322  MOSKOWITZ  V.  DEUTSCll. 

46  MiSCELLA.NKous    (N.   V.  Si:i\  C't.,  Ari-.  T.)    003.  —  ISX-f). 

Judgment  for  i)l;iiiitiir  ami  (Icrrndants  appeal. 

O'Cou.M.XN,  J.  —  Tlie  de'loiulanls  luadi'  a  check  to  one  Goldben^ 
under  date  of  September  2d.  On  tlie  lollowini;  day  the  payee  repre- 
sented to  the  defendants  that  lie  had  lost  this  check,  whereupon  pay- 
ment thereof  was  stop})ed  at  the  hank,  and  live  or  six  days  later  he 
received  from  the  defendants  another  check  for  the  same  amount, 
wiiicii  was  duly  cashed.  A  day  or  two  after  September  12th,  the 
original  check  of  September  2d  with  a  "  1  "  inserted  before  the  "  2," 
making  the  date  September  "  12,"  was  indorsed  over  to  the  plaintiff 
by  Goldberg,  and  cashed.  The  jjlaiiilill'  now  sues  the  drawers,  and 
the  defense  is  a  general  denial  and  forgery.  That  the  date  of  this 
check  has  been  altered  by  Goldberg,  or  at  his  instance,  is  too  clear 
for  dispute.  Such  an  alteration  is  material,  constitutes  forgery,  and 
destroys  the  validity  of  the  check,  except  as  provided  by  section 
205  of  the  Negotiable  Instruments  Law  (Laws  1897,  p.  745,  c.  G12), 
which  declares  that,  "  when  an  instrument  has  been  materially  al- 
tered and  is  in  the  hands  of  a  holder  in  due  course,  not  a  party  to 
the  alteration,  he  may  enforce  payment  thereof  according  to  its 
original  tenor."  If  it  be  assumed,  therefore,  as  the  court  below  has 
found,  that  the  plaintiff  is  an  innocent  bolder  for  value  in  due 
course,  he  may  assert  such  rights  as  are  conferred  by  the  check  as 
it  was  before  the  alteration,  We  then  have  a  case  where  a  check 
dated  September  2d  is  cashed  by  the  plaintiff'  and  presented  for  pay- 
ment more  than  10  days  thereafter.  As  all  the  parties  resided,  and 
the  bank  was  situated  in  the  city  of  New  York,  the  delay  in  the 
presentment  of  the  check  was  unreasonable,  and  was  sutficient  to 
discharge  the  defendants  as  drawers  from  liability  thereon  to  the 
extent  of  the  loss,  if  any,  incurred  by  them  in  consequence  of  the 
delay.  But  the  only  way  in  which  a  drawer  of  a  check  can  be  ex- 
posed to  injury  by  such  delay  is  where  the  bank  becomes  insolvent 
subsequent  to  the  delivery  of  the  check  and  prior  to  its  presentment. 
Eaton  &  Gilbert  on  Commercial  Paper,  630,  and  cases  cited;  Andrus 
V.  BradJey  (C.  C.)  102  Fed.  54,  affirmed  107  Fed.  196.  The  loss 
Buffered  by  the  defendants  must  be  attributed  not  to  delay  in  the  pre- 
sentment of  the  check,  but  to  their  imprudent  reliance  on  the  false  and 
fraudulent  representations  of  the  payee.    Before  giving  the  new  check, 

question  as  to  whethor  he  is  injured  by  the  delay  seems  immaterial.  Murray 
V.  Judah,  6  Cow.  (N.  Y.)  484;  Mohawk  Bank  v.  Brodcrick,  10  Wend.  (N.  Y.) 
304;  Kirkpatrick  v.  Purycar,  93  Tenn.  409;  2  Morse  on  Banks,  §  422.  The 
samp  rules  of  dilipence  apply  as  in  the  case  of  the  drawer.  Gifford  v.  Hardell, 
88  Wis.  538;  Nmith  v.  Janes.  20  Wend.  (N.  Y. )  192;  Carroll  v.  Sweet,  128 
N.  Y.  19.  —  H.     [See  cases,  post,  pages  734-743.  —  C] 


II,    2,]  PBESENTMENT.  727 

the  defendants  might  have  insisted  upon  full  indemnity  from  Gold- 
berg, and  thus  escaped  the  loss  of  which  they  now  complain.  By 
their  conduct,  Goldherg  found  it  possible  to  perpetrate  a  fraud,  and 
the  consequences  of  their  misplaced  conlidenee  in  him  should  be  borne 
by  them,  and  not  visited  upon  the  plaintiff,  an  innocent  party  to  the 
transaction.  Upon  the  facts,  the  plaintiff  was  entitled  to  judgment. 
Judgment  affirmed,  with  costs. 

All  concur. 


§  322  GKEGG  v.  BEANE. 

69  Vermont,  22.— 1895. 

Gkneral  assumpsit  by  the  firm  of  Gregg  &  Co.,  against  J.  H. 
Beane.  Defendant  pleaded  the  general  issue,  payment,  and  notice 
of  special  matter.  There  was  a  trial  by  the  court.  Plaintiffs  had 
judgment,  and  defendant  excepts. 

MuNSON,  J.  —  The  plaintiffs  claim  to  recover  the  amount  of  a 
check  drawn  in  their  favor  by  the  defendant  on  S.  M.  Dorr's  Sons, 
private  bankers  at  Bristol,  Vt.,  and  mailed  them  in  payment  of  an 
indebtedness.  The  check  was  received  by  the  plaintiffs  at  their  place 
of  business  in  Trumansburg,  N.  Y.,  on  the  9th  of  August,  and  was 
forwarded  on  the  same  day  to  the  First  National  Bank  of  Ithaca, 
N.  Y.,  for  collection.  On  the  lUth  of  August  the  bank  at  Ithaca 
mailed  the  check  for  collection  to  its  reserve  agent,  the  Fourth  Na- 
tional Bank  of  New  York  city.  This  bank  received  it  on  the  11th  of 
August,  and  on  the  12th  mailed  it  for  collection  to  the  Merchants' 
National  Bank  of  Burlington,  one  of  the  banks  through  which  it 
made  its  collections  in  Vermont.  The  ]3th  was  Sunday.  The 
Burlington  bank  received  the  check  on  the  morning  of  the  lUh,  at 
an  hour  which  did  not  permit  of  its  being  sent  to  Bristol  by  the 
morning  mail  of  that  day.  The  banking  house  of  S.  M.  Dorr's  Sons 
closed  its  doors  on  the  11  th,  at  10  o'clock  in  the  forenoon. 

It  is  found  tliat  21  hours  is  required  for  the  transmission  of  mail  be- 
tween Trumansburg  and  Bristol ;  and,  in  the  absence  of  any  statement 
as  to  the  hours  of  departure  and  arrival,  it  iniisj  be  assumed  from  this 
general  findiriu'  lliat  a  letter  mailed  in  Trumansburg  to  a  corres- 
Txirnlent  in  I'>ristol  would  be  received  on  tlie  following  day.  Tliere 
is  no  special  finding  in  regard  to  mails  from  Ithaca,  but  it  is  evident 
from  its  location  and  connections  that  if  is  within  the  facts  found  in 
regard  to  Trumansburg.  It  appear^  llicn  iliat.  if  flic  Ithaca  bank 
had  maih'd  the  check  directly  to  some  one  in  liristol,  it  would  have 
been  received  on  the  11th,  and  would  have  l)een  present»'d  by  the 
12th,  and  paid.  No  claim  inconsistent  with  this  view  is  made  in 
argument. 


^28  CHECKS.  [AUT.    XVII. 

It  is  found  tliat,  in  collt^t'tinj^'  a  (.heck  in  the  usual  way,  tlie  payee 
deposits  it  in  a  local  bank,  and  that  the  local  bank  sends  it  to  its 
reserve  bank  in  Hoslon,  New  York,  Albany,  or  'J'roy,  and  that  the 
reserve  bank  sends  it  to  its  I'orrespoiulent  baidv  nearest  the  bank  on 
which  the  check  is  drawn,  and  that  the  correspondent  bank  sends 
it  to  the  drawee.  It  is  found,  liowever,  that  in  some  cases  a  reserve 
bank  receiving  a  check  for  collection  sends  it  directly  to  the  bank 
on  which  it  is  drawn;  but  it  is  also  found  that,  if  this  course  had 
been  pursued  in  the  pi'(>sent  instance,  flic  check  would  not  lia\»' 
reached  Bristol  in  due  course  of  mail  until  after  the  suspension.  It 
is  further  found  that,  in  collecting  this  check,  the  plaintiffs  pursued 
the  usual  and  ordinary  course,  and  that  there  was  not  in  that  course 
any  unusual  or  unnecessary  delay. 

The  plaintiffs  claim  that  the  finding  of  the  court  below  that  this 
check  was  forwarded  for  collection  in  the  usual  way  is  conclusive 
upon  the  question  of  diligence.  But  this  cannot  be  so,  unless  it  be 
considered  that  any  change  of  method  which  grows  into  a  settled 
practice  of  itself  works  a  modification  of  the  law.  It  can  hardly  be 
claimed  that  custom  is  so  exclusively  the  test  of  diligence  that  the 
adoption  of  a  particular  practice  by  any  class  of  business  men  leaves 
nothing  for  the  determination  of  the  court.  When  the  custom  of 
one  period  has  resulted  in  the  adoption  of  a  definite  legal  rule,  the 
development  of  a  new  custom  will  not  effect  a  modification  of  the 
rule  in  advance  of  judicial  sanction.^  The  case  shows  the  manner  in 
which  this  check  was  forwarded  for  presentment,  and,  when  the  facts 
are  found,  due  diligence  is  a  question  of  law. 

The  rule,  in  its  most  general  statement,  requires  the  payee  of  a 
check  to  present  it  for  payment  with  reasonable  diligence.  But  the 
law  goes  further  than  this  general  statement,  and  determines  what 
reasonable  diligence  is  under  ordinary  circuTTistances.  When  the  case 
presents  only  the  simple  facts  of  time,  location,  and  stated  means  of 
communication,  the  question  of  liability  is  to  be  determined  by  an 
application  of  the  more  definite  rule.  It  is  only  when  the  case  pre- 
sents special  circumstances  which  are  claimed  to  warrant  further  delay 
that  the  court  is  left  without  other  guidance  than  the  general  re- 
quirement. This  case  discloses  nothing  in  the  nature  of  an  excuse 
for  delay. 

It  is  well  settled  that  a  check  must  be  presented  to  the  bank  on 
which  it  is  drawn  if  the  bank  be  in  the  same  place  with  the  holder, 
or  forwarded  by  mail  if  the  bank  be  in  another  place,  by  the  next 
secular  day  after  it  is  received,  and  that  the  depositing  of  the  check 
in  a  local  bank  for  collection  does  not  give  the  holder  the  benefit  of 
an  additional  day.     So  this  check  w^as  forwarded  neither  earlier  nor 


2  But  .see  I'lover  iiaviny.-^  Bank  v.  Moodie,   135  Iowa,  GSo,  punl,  p.  735.  —  C. 


II-    2.]  PEESENTMENT.  729 

later  than  the  law  required;  and  the  controversy  is  confined  to  the 
question  whether  it  was  forwarded  in  the  proper  manner. 

As  presented  by  the  findings,  the  question  is  whether  the  local 
bank  was  justified  in  forwarding  the  check  through  its  New  York 
correspondent.  The  defendant  sustained  no  harm  from  the  course 
taken  by  the  New  York  bank  in  sending  it  to  Burlington.  It  is  said 
in  Daniel  on  Negotiable  Instruments  (§  1592)  that,  when  the  payee 
ii^ceives  a  check  from  the  drawer  in  a  place  distant  from  the  place 
where  the  bank  on  which  it  is  drawn  is  located,  it  will  be  sufficient 
if  he  forward  it  by  post  to  some  person  in  the  latter  place  on  the 
next  secular  day  after  it  is  received,  and  if  the  person  to  whom  it  is 
tiius  forwarded  present  it  for  payment  on  the  day  after  it  has 
reached  him  by  due  course  of  mail.  If  this  be  accepted  as  a  correct 
statement  of  the  rule,  it  would  seem  not  to  permit  the  collection 
through  a  correspondent  so  remote  as  to  delay  the  presentment  a 
day  beyond  the  time  so  allowed.  It  is  true  that  the  rule  is  some- 
times stated  to  be  that  the  check  should  be  forwarded  for  presenta- 
tion on  the  day  after  it  is  received,  and  that  the  agent  to  whom  it 
is  forwarded  must  in  like  manner  present  it,  or  forward  it,  on  the 
day  after  he  receives  it.  This  phraseology  might  seem  to  contemplate 
the  collection  of  a  check  by  means  of  several  agents.  But  statements 
regarding  the  forwarding  of  a  check  by  successive  holders  will  or- 
dinarily be  found  to  refer  to  checks  dra-wn  for  the  purpose  of  being 
put  in  circulation,  or  to  questions  arising  between  indorser  and  in- 
dorsee where  a  check  given  in  payment  has  been  diverted  from  its 
propor  use.  Statements  applicable  to  such  cases  must  not  be  taken 
to  indicate  that  the  requirement  of  diligence,  as  between  pavee  and 
drawer,  will  be  satisfied  by  a  regular  transmission  upon  successive 
days,  if  an  impropor  ntimber  of  agents  he  employed. 

The  rule  is  ordinarily  stated  to  he  that  the  payee  or  the  local  bank 
receiving  it  for  collection  must  forward  it  directlv  to  the  place  of 
payment.  It  is  said  in  Byles  on  Bills  that  the  bank  receiving  it  for 
collection  cannot  postpone  the  time  of  presentment  by  circulating  it 
through  agents  or  branches  of  the  bank.  In  Mmilr  v.  Brnvti  (4 
liiiig.  X.  C.  2GC,),  the  right  of  a  branch  offiro  of  ilu.  piaintifT  bank  to 
send  through  the  home  office,  in  accordance  with  the  custom  of  the 
f)ank,  was  considered  and  denied. 

We  do  not  find  that  any  modification  of  the  rule  as  l)(>fore  stated 
has  beon  rerognizcd  in  recent  caseu.  Tn  Hntil-  v.  Millrr  {?>!  Nob. 
500),"  the  qupsfion  was  as  to  fho  liability  of  fhe  pavee  on  his  indorse- 
ment to  the  bank.  The  cherk  was  deposited  on  Safnrdav.  tho  .Tist 
day  of  May.  and  was  drawn  on  a  hank  lorafod  at  rourfland.  ??  milefl 
distant  from  the  bank  of  deposit,  and  accessible  by  two  dailv  mails. 


»  Afflrmpd  on   mhoarinp,  4.1  Xeb.   701.  —  H. 


730  CHECKS.  [AKT.    XVII. 

On  receiving  the  check,  the  Bank  of  Wymore  mailed  it  to  a  bank  in 
St.  Joseph,  Mo.,  for  collertion,  and  this  bank  mailed  it  to  a  bank  in 
Omaha  for  collection,  and  tiie  latter  bank  mailed  it  to  the  bank  on 
which  it  was  drawn.    The  court  said  the  evidence  did  not  show  that 
this  method  of  presentment  was  in  accordance  v/ith  any  custom  of 
bankers,  but  said,  further,  tliat,  if  such  a  custom   had  been  shown, 
it  would  not  have  relieved  the  bank  from  liability.     Without  under- 
taking to  lay  down  any  general  rule,  the  court  said  that,  in  this  case, 
Tuesday,  J  vine  3d,  would  have  been  a  reasonable  time  within  which 
to  make  presentment.     This  was  in  accordance  with  the  rule  as  stated 
bv  Danie.. 
'in  Gijford  v.  Ilardell  (88  Wis.  538),  a  check  indorsed  by  the  de- 
fendant was  delivered  to  the  plaintitf's  agent  at  Dousman  on  July 
17th,  and  was  at  once  mailed  to  the  plaintiff  at  New  Richmond,  who 
received  it  on  the  18th,  and  at  once  delivered  it  to  a  local  bank  for 
collection.    This  bank  had  no  correspondent  in  Milwaukee,  and  imme- 
diately  mailed   the   check   to   its   correspondent   in    Chicago.      From 
Chicago  it  was  forwarded  to  Milwaukee,  and  presented  on  the  21st. 
If  the  check  had  been  sent  directly  to  Milwaukee  from  New  Rich- 
mond, it  would  have  arrived  in  time  for  presentation  on  the  20th, 
and  would  have  been  paid.     The  trial  court  held   that  sending  the 
check  for  collection  by  way  of  Chicago  was  not  reasonably  diligent, 
and  directed  a  verdict  for  defendant.     On  appeal  the  judgment  was 
sustained,  the  court  saying  that,  when  the  defendant  delivered  the 
check  at  Dousman,  he  had  a  right  to  expect  that  the  plaintiiT  or 
his  agent  would   present  it  for  payment  within   a   reasonable  time, 
instead  of  which  it  was  sent  to  New  Richmond,  several  hundred  miles 
northwest  of  Milwaukee,  and  then  sent  back  through  Milwaukee  to 
Chicago,  and  from  there  returned  to  Milwaukee.     The  court  then 
stated  how  a  check  should  be  forwarded  and  presented  in  such  cases, 
its  rule  corresponding  to  that  given  by  Daniel.     The  rule  is  similarly 
stated  in  Holmes  v.  Roe  (62  Mich.  10*9). 

In  First  National  Banl  of  Grafton  v.  Buckhannon  Bank  (80  Md. 
475),  the  plaintiff  bank,  located  at  Grafton,  W.  Va.,  received  on  the 
12th  of  January,  in  payment  of  a  balance  due  it,  a  check  on  J.  J. 
Nicholson  &  Sons,  of  Baltimore,  and  on  the  same  day  forwarded  it 
for  collection  to  its  correspondent  bank  in  Philadelphia.  The  Phila- 
delphia bank  received  it  on  the  13th,  and  at  once  mailed  it  to  its 
correspondent  bank  in  Baltimore.  This  bank  received  it  on  the  14th, 
and  presented  it  to  the  drawee  on  the  same  day.  The  court  sustained 
this  presentment,  on  the  ground  that  the  Grafton  hank,  having  sent 
out  the  check  one  day  sooner  than  was  necessary,  had  it  in  Baltimore 
for  presentment  on  the  day  required,  notwithstanding  its  transmission 
throu?h  Philndolphia. 

Wp  think  that  if  thi«  nilo  of  commercial  law,  stated  in  the  various 
text-books,  and  affirmed  by  these  recent  cases,  is  to  be  modified  m 


n.    2.]  PRESENTMENT.  731 

derogation  of  the  rights  of  drawers  of  checks,  it  should  be  done  by 
legislative  enactment.* 

Judgment  reversed,  and  judgment  for  defendant.' 


§  322        WEST  BRANCH  STATE  BANK  v.  HAINES. 

135   Iowa,   313.—  1907. 

Action  at  law  to  recover  upon  a  promissory  note.  Judgment  for 
defendant,  and  plaintiff  appeals. 

Weaver,  C.  J.  The  making  and  delivery  of  the  note  sued  upon  is 
admitted  by  the  defendant,  but  he  denies  the  plaintiff's  right  to  re- 
cover thereon  on  the  following  grounds :  He  alleges  that  said  note, 
with  $200  in  cash,  was  delivered  by  him  to  the  plaintiff  in  payment 
or  exchange  for  a  draft  or  check  drawn  by  the  plaintiff  on  Oilman, 
Son  &  Co.,  of  New  York  city,  under  the  following  circumstances : 
Defendant  had  entered  into  a  contract  for  the  purchase  of  land  in 
the  vicinity  of  Ortonville,  Minn.,  and  to  avoid  a  forfeiture  of  such 
contract  he  was  required  to  be  ready  to  pay  the  sum  of  $2,600  thereon 
upon  the  8th  day  of  October,  1902,  or  as  soon  thereafter  as  the  seller 
was  able  to  present  an  abstract  showing  good  title  to  the  land.  On 
the  near  approach  of  said  date  there  was  a  prospect  that  the  seller 
would  be  delayed  for  a  time  in  making  the  proper  showing  of  title, 
and  defendant,  as  he  alleges,  was  advised  by  the  plaintiff  hank  and 
its  officers  that  it  was  better,  for  the  protection  of  his  own  interests, 
that  he  avoid  any  appearance  of  default  on  his  part  and  have  the 
amount  of  the  agreed  payment  forwarded  to  Ortonville,  ready  to  be 
delivered  to  the  seller  on  the  day  named  or  as  soon  thereafter  as  the 
abstract  of  title  should  he  perfected.  To  that  end  he  says  the  said 
bank  on  October  7,  1902,  issued  to  him  a  check  or  draft  on  Oilman, 
Son  &  Co.,  of  New  York  city,  for  the  sum  of  $2,000,  in  consideration 
of  which  he  then  and  there 'paid  said  bank  $200  in  money  and 
executed  the  note  now  in  suit.  Said  draft  or  check,  it  is  claimed,  was 
issued   by  the  hank   with  the  express   knowledge  and   understanding 

«  Laws  of  Vt.,  1806.  No.  .18:  "  Tn  nrdor  to  hold  the  makor.  indorsor.  puRT- 
iintor.  or  surety  of  any  ohfck  or  draft  dcpositnd  with  or  forwarded  to  any 
individual  or  hank  for  poll«Ttion,  or  ownpd  by  any  inrlivid\ial  or  bank,  it 
shall  bo  HnlTiriont  for  said  individnal  <>r  bank  to  forward  tlio  same  in  tlic  iisnal 
commcrrial  way  now  in  use,  according  to  the  repiilar  conrsp  of  bn.siness,  and 
the  same  shall  ho  considorcd  dtjo  diliponco  in  tho  polloction  of  such  phook  or 
draft."  —  H. 

s  Thoro  is  somo  authority  for  tho  propo.sition  that  the  usual  or  rustomary 
method  of  forwarding  may  bo  safely  tisod,  even  thouph  it  is  rirrtiitous. 
Wallarr  v.  Aqry.  4  Mason  (T^  R, )  330:  ."i  Th.  118;  f^mith  v.  Jnnrs.  20  Wond. 
(N.  Y.)  103:  Tnulnr  v.  Sip.  30  N.  .1  T,.  2S4.  291.-11.  [See  Plover  Sav.  Bk. 
▼.  Hoodie,  135  Iowa,  685,  pnnt,  p.  735. — C] 


732  CHECKS.  [art,    XVII. 

that  its  presentation  for  payiin'iit  was  likely  to  be  delayed  a  few  days 
beeauso  of  the  matters  abo\o  related,  and  was  })roiiipLly  forwarded  to 
Ortonville,  where  it  was  reeeived  on  October  !),  l!)()v\  Seven  days 
thereafter,  and  liel'm-e  the  sale  and  transfer  of  the  hind  hatl  been 
perfected,  and  before  any  ]»reseiitation  of  said  cheek  or  demand  u\i.n\v 
for  its  payment,  (lilnian.  Son  &  Co.,  being  insolvent,  made  an  assign- 
ment in  bankruptcy.  It  is  furtiier  alleged  that,  when  the  insolvency 
and  bankruptcy  of  said  drawee  was  discovered,  said  check  was  pre- 
sented to  the  plaintiff  bank  for  payment,  and  payment  thereof  was 
refused,  thus  causing  an  entire  failure  of  the  consideration  of  the 
note  in  suit.  It  is  further  alleged  that  at  and  prior  to  the  issuance 
of  said  check  or  draft  the  plaintiff  bank  knew  that  Gilman,  Son  &  Co., 
were  insolvent  and  liable  to  suspend  payment  at  any  time,  but  fraudu- 
lently concealed  such  fact  and  information  from  the  defendant.''  The 
court  having  refused  to  set  aside  the  verdict  of  the  jury  in  defendant's 
favor,  a  reversal  of  the  judgment  is  sought  in  this  court  upon  grounds 
hereinafter  considered.     *     *     * 

According  to  the  general  tenor  of  tlie  testimony  a  draft  purchased 
and  forwarded  from  West  Branch  to  Ortonville,  Minn.,  on  October 
7th,  and  forwarded  thence  without  intermediate  negotiation  to  New 
York,  would  ordinarily  be  presented  to  the  drawee  somewhere  from 
October  12th  to  October  14th.  Taking  the  average  of  these  dates, 
a  delay  of  about  three  days  had  occurred  when  the  correspondent 
closed  its  doors.  Now,  while  it  is  true  that  the  court  may  sometimes 
determine  the  reasonableness  or  unreasonableness  of  delay  in  present- 
ment of  a  negotiable  instrument  as  a  matter  of  law,  the  question  is 
ordinarily  one  of  fact.  As  between  tlie  drawer  and  payee  in  this  case, 
the  question  whether  the  delay  was  reasonable  depends  upon  circum- 
stances disclosed  in  evidence.  Tf  the  bank  knew  that  appellee  desired 
to  send  the  draft  to  Ortonville,  to  be  there  held  for  a  few  days  for 
the  completion  of  the  land  purchase,  and  issued  the  paper  to  him 
for  that  purpose,  then  appellant  can  ,claim  no  advantage  from  the 
fact  that  it  was  not  forwarded  to  New  York  for  payment  on  the  same 
or  following  day,  provided,  of  course,  that  such  delay  was  reasonably 
necessary  for  the  accomplishment  of  the  known  purpose  for  winch  it 
was  obtained.  Obviously  this  is  a  question  for  the  jury  to  consider 
and  pass  upon,  in  view  of  all  the  proved  facts  and  the  ordinary  course 
and  methods  of  business.  Bank  drafts  or  bills  of  exchange  differ 
from  ordinary  bank  checks,  in  that  the  latter  usually  contemplate 
practically  immediate  presentation  for  payment.  This  is  especially 
true  when  the  check  is  drawn  upon  a  bank  in  the  town  or  city  where 
both  drawer  and  payee  reside.  On  the  other  hanH,  a  bank  draft,  bill, 
or  check  upon  a  distant  bank,  used  as  a  means  of  transmission  of 

«  For  the  court's  holrlinc  on  this  proposition,  see  the  extract  from  this 
case  printed  in  note  8,  ante,  p.  522.  —  C. 


II.    2.)  PKESENTMEXT.  733 

funds  between  different  sections  of  the  country,  is  more  usually  than 
otherwise  negotiated,  and  passes  through  various  hands,  and  serves 
the  purpose  of  perhaps  many  persons  before  final  presentment.  For 
instance,  a  resident  of  Iowa  may  send  a  New  York  draft  to  a  creditor 
in  San  Francisco,  and  the  latter  may  indorse  it  to  his  own  creditor 
in  Chicago,  and  the  latter  in  turn  indorse  it  to  his  creditor  in  New 
York,  who  indorses  it  to  his  local  bank,  which  presents  it  to  the  dr-^-  oe 
for  payment.  Sent  directly  from  the  place  of  its  issuance,  such  draft 
would  have  been  presented  within  from  two  to  four  days  of  its  date; 
but  by  the  circuitous  route  we  have  described  its  transmission  requires 
ten  days  or  more.  Yet  no  one,  we  think,  would  contend  for  the  pro- 
position that  a  delay  in  presentment  thus  occasioned  would  work  a 
discharge  of  the  drawer.  Of  course,  if  any  person  to  whom  the  bill 
is  indorsed  fails  to  promptly  negotiate  and  pass  it  along  on  its  course 
to  final  presentation,  and  loss  follows,  he  alone  must  bear  it,  unless 
the  delay  has  been  occasioned  with  the  express  or  implied  consent  of 
the  drawer.  If  a  person,  being  about  to  set  out  upon  an  extended 
visit  to  a  distant  state,  and  wishing  to  carry  his  funds  in  bank  drafts 
to  be  negotiated  from  time  to  time  as  he  may  need  the  money,  applies 
to  his  banker,  who  issues  the  desired  paper,  knowing  the  purpose  for 
and  the  manner  in  which  it  is  to  be  used,  we  think  it  unquestionable 
that  the  risk  of  loss  by  the  insolvency  of  the  drawee  is  not  shifted 
from  the  drawer  to  the  payee  simply  because  tiie  latter  does  not  put 
the  bills  in  immediate  course  of  collection. 

So  in  the  case  before  us  it  is  claimed  by  the  appellee,  and  there  is 
evidence  tending  to  uphold  his  contention,  that  the  appellant  issued 
the  draft  to  be  sent  by  the  former  to  Ortonville,  knowing  it  was 
expected  or  liable  to  bo  there  held  temporarily  for  the  completion  of 
the  transfer  of  the  land  which  he  w-as  purchasing.  The  delay  was 
not  80  great  that  we  can  say  it  was  manifestly  lieyond  the  contempla- 
tion of  the  parties.  Such  being  our  view  of  the  merits  of  the  case, 
we  have  to  say  that  thf  appellant's  motions  for  a  directed  verdict  were 
correctly  overruled,  and  tlio  cause  was  yiroporly  submitted  to  the  jury. 
As  bearing  upon  the  case  presented,  see  Story  on  Bills,  §§  478-473 ; 
1  Daniel,  Neg.  Tnsts.  (r,th  Ed.)  4fifi-ir,0;  2  Daniel,  Nog.  "insts.  (nth 
Ed.)   1.^)ft.')a:  Mmilrlivs  v.  Charles,  7fi  111.  30.5. 

Most  of  tho  authorities  cited  to  us  by  the  aftpcUant  have  direct 
reference  to  tlie  measures  which  the  payee  of  a  bill  must  take  in  order 
to  charge  an  indf)rser  —  rules  which  are  not  always  e(|iially  applicable 
to  the  drawer.  Otlier  authorities  called  to  our  attention  are  not  in- 
consistent with  the  conclusion  reached  by  us.  We  do  not  attempt  to 
determine  the  weight  or  preponderance  of  the  evidence.  That  was  the 
province  of  the  jury  alone.  The  finding  was  adverse  to  the  plaintiff, 
and  we  are  not  at  liberty  to  set  it  aside. 

The  judgment  of  the  District  Court  is  afTirmed. 


734  CHECKS.  [ART.    XVII. 

(6)   Effect  of  delay  upon  indorscr's  liability. 
§  322  START  v.  TUPPER. 

81  Vebmont,   19. —  1908. 

Judgment  for  plaintiff  and  defendant  appeals. 
MuNsox,  J.  On  tlie  22m\  of  August,  1!)0G,  the  defendant,  the 
payee  of  the  check  in  suit,  delivered  it  to  the  plaintiff,  duly  indorsed, 
in  payment  of  a  pre-existing  indebtedness  of  less  amount  and  received 
the  difference  in  cash.  The  check  was  dated  August  twentieth,  and 
was  drawn  on  a  bank  in  Melrose,  Mass.  The  plaintiff  held  it  six  days 
before  forwarding  it  for  collection.  It  was  presented  and  protested 
for  want  of  funds  September  fourth.  August  twenty-fourth  was  the 
last  day  on  which  payment  would  have  been  made.  The  case  states 
that  tlie  defendant  is  sued  as  indorser. 

Most  of  the  facts,  including  those  above  recited,  were  shown  by  an 
agreed  statement.  The  evidence  before  the  jury  was  with  reference 
to  what  "  the  usual  commercial  way  now  in  use "  required  of  the 
bank  through  wliich  the  check  was  forwarded,  and  when  the  check 
would  have  been  presented  for  payment  if  it  had  been  received  by  the 
collecting  bank  on  the  twenty-third  of  August,  and  been  forwarded 
in  the  way  required.  Several  exceptions  were  taken  to  the  admission 
and  rejection  of  testimony.  The  defendant  rested  without  offering 
evidence  and  moved  for  a  verdict,  and  his  motion  was  overruled  on 
the  ground  that  the  defendant  was  not  damaged  by  the  plaintiff's 
neglect,  inasmuch  as  the  check  would  not  have  been  paid  if  forwarded 
in  due  course.  The  plaintiff  then  moved  for  a  verdict  on  the  ground 
indicated,  and  a  verdict  was  ordered  accordingly,  to  which  the  de- 
fendant excepted. 

It  is  not  necessary  to  consider  the  exceptions  relating  to  the  evi- 
dence. The  agreed  statement  shows  a  failure  to  forward  in  due 
course,  and  this  is  decisive  of  the  case  presented.  The  considerations 
on  which  the  holder  of  a  check  drawn  without  funds  is  permitted  to 
excuse  his  neglect  as  against  the  drawer,  are  not  ap{)licable  to  an  in- 
dorser. The  drawer  is  presumed  to  know  the  insufficiency  of  the  fund, 
while  the  indorser  is  entitled  to  rely  on  its  sufficiency.  The  drawer  is 
the  one  primarily  liable,  and  prompt  presentment  and  notice  of  non- 
payment may  enable  the  indorser  to  secure  himself.  The  indorser's 
liability  is  impliedly  conditioned  on  this  being  done,  and  a  failure 
therein  will  discharge  him,  even  though  presentment  in  due  course 
would  have  been  unavailing.  In  default  of  presentment  and  notice, 
an  indorser  can  be  charged  only  by  affirmative  proof  that  he  knew 
when  he  passed  the  check  that  there  were  or  would  be  no  funds  in 
the  bank  to  meet  it.    Daniel  Neg.  Inst.  1587,  1596,  1646;  Humphries 


n.    2.]  PEESENTMENT.  735 

V.  Bid-veil,  Litt.  297;  Carroll  v.  Sweet,  128  N.  Y.  19;  see  Nash  v. 
Harrington,  2  Aik.  9.^ 

Judgment  reversed  and  cause  remanded." 


§  322  PLOVER  SAVIXGS  BAXK  r.  MOODIE. 

135   Iowa,   685.  —  1907. 

Weaver,  J.  On  ^March  8,  1003,  one  C.  F.  Scholer,  who  was  a  de- 
positor in  the  Greenville  Bank,  doing  a  banking  business  at  Green- 
ville, Clay  county,  Iowa,  made  and  delivered  to  one  Claude  Heath- 
man  his  check  on  said  bank  payable  to  the  order  of  said  Heathman 
for  the  sum  of  $50;  and  thereafter  on  ^larch  12,  1903,  said  Scholer 
made  and  delivered  to  said  Heathman  another  siimlar  check  on  the 
same  bank  for  the  further  sum  of  $50.  On  or  about  the  last-men- 
tioned date  Heathman  indorsed  and  delivered  both  checks  to  the 
appellant.     On  Friday,  March  13,  1903,  near  the  close  of  business 

"  "  The  dispute  in  this  case  is  between  the  indorsee  and  the  indorsers  of 
a  check.  The  following  rules  of  the  law  merchant  fixing  the  rights,  duties, 
and   liabilities  of   indorsee  and   indorser  each   to   the  other     .  are  well 

settled:  The  undertaking  of  the  indorser  of  a  check  is  that,  if  not  paid  on 
presentation  within  a  reasonable  time,  he  will  pay  it,  provided  he  is  properly 
notified.  Such  reasonable  time  for  presentation  and  demand  for  payment 
is  admitted  to  be  within  the  day  following  the  indorsement.  The  indorsee, 
as  between  himself  and  the  indorser,  undertakes  to  demand  payment  within 
the  day  following  the  indorsement,  and,  if  payment  is  not  made,  to  give 
due  notice  of  dishonor.  This  is  his  sole  duty,  and  he  does  anything  else  at 
his  peril.  2  Danipl  on  Negotiable  Instruments  (5th  Ed.),  §  1601;  People  ex 
rel.  Port  Chester  Sat-^nps  Bank  v.  Crowirell,  102  N.  Y.  477.  The  fact  that 
there  are  no  funds  in  the  account  against  which  the  check  is  drawn  does 
not  relieve  the  holder  from  presentation  ami  notice  of  dishonor  to  the  in- 
dorser, unless  it  aj)pears  that  the  indorser  knew  it.  2  Daniel  on  Negotiable 
Instruments  (5th  Kd.).  §  1596;  1  Morse  on  Banks  and  Banking  (4th  Ed.). 
§  262.  subd.  8.  Nor  are  the  rights  of  the  indorser  changed  becaii-e  he  s)ifTpred 
no  apparent  damage  by  reason  of  failure  to  demand  payment  and  give  notice 
of  dishonor  to  him  within  the  required  time.  Mnhnxrk  Itnnk  v.  Firoderiek,  13 
Wend.  (N.  Y.)  1.3.3:  Tiedeman  on  Commercial  Paper,  §  442:  Goufih  v.  Slants. 
13  Wend.  (N.  Y. )  540:  First  \at.  Hank  of  Wymore  v.  Mitler.  37  Neb.  .500." 
Mc.Alvay.  C  .J.,  in  First  Xat.  Bank  of  Detroit  v.  Currie,  147  Mich.  72.  77.-0 

"This  case  is  reported  in  15  L.  N.  R.  213.  with  the  following  note:  "The 
general  rule  that  the  failure  to  present  a  check  for  payment  wilhin  a  reason- 
nblp  time  relenses  the  indorser  from  liability  thereon,  even  though  present- 
ment in  due  time  would  have  been  tinavailing  and  he  was  not  prejiidieed  by 
the  failure  to  precent  in  due  time,  is  discussed  in  a  note  to  the  case  of 
Kirkpatriek  v.  Puryenr.  22  I..  R.  A.  7R5  f03  Tenn.  4001.  The  only  case, 
besides  the  Start  case,  bearing  on  the  precise  question,  decided  since  the 
publication  of  the  note  just  mentioned,  is  that  of  Trnrers  v.  T.  .If.  Rinelnir  rf 
Co..  122  Til.  .App.  203.  in  which  the  same  rule  is  approved.  See  also  2  Morse, 
Banks  and  Banking.  4th  ed.  §  422;  2  Dan.  Neg.  Inst.,  5th  ed.  §  1696."  — C. 


73ff  CHECKS.  [AHT.    XVII. 

hours,  tlie  appellant  indorsed  and  delivered  the  eheeks  to  the  appellee 

bank    wliieli    was   iloing   l)ut;ino8s   at   IMomt,    in    Toialiontas   county, 
Iowa,  and  received   in  e.\clian;::e  (herel'or  a  n.  rlilicate  ol'  deposit  lor 
$100   wliit'h   was   afterward    ])ai(l.      While   (he   towns  of    Plover   and 
Greenville  are  but    I.')  miles  aparl  tliey  air  oii  dilTerent  lines  of  rail- 
way, ami  the  course  of  the  nuiils  betwiH'ii  them  is  (piite  indirect,  and 
had   the   appellee   forwarded   the  checks  by    letter   to   the   Greenville 
Bank  on  Saturday  they  would  probably  not  have  icnehed  their  destina- 
tion until  after  bankiiiLT  hours  on   Monday,  March   Kith.     Iristead  of 
pending  them  direct   to  (Ireenville,  the  appellee,  followin<]:  its  custo- 
mary'method   in  such  matters,  sent  the  checks  to  its  (correspondent, 
the  Des  Moines  Savings  Rank  at  Des  Moines,  Iowa,  by  the  fii-st  mail 
in  that  direction  on  Saturday,  March  14th.    On  Monday,  March  16tb, 
the  Des  Moines  Savings  Bank  forwarded  the  checks  to  their  corres- 
poiulent  the   Citizens'   State   Bank   at   Spencer,   Clay  county,   Iowa, 
where  they   were   received  on   March   17th.      On   the  same  day  the 
Citizens'  State  Bank  turned  tlie  checks  over  to  the  Citizens'  National 
Bank  of  Spencer,  which  was,  the  local  correspondent  of  the  Green- 
ville Bank.    On  the  following  day,  March  18th,  the  Citizens'  National 
Bank  forwarded  them  direct  to  the  Greenville  Bank.     The  daily  mail 
from  Spencer  to  Greenville  docs  not  leave  until  some  time  in  the  after- 
noon, and  if  the  checks  reached  Greenville  on  March  18th,  as  they 
doubtless  did,  it  was  after  banking  hours,  and  were  not  received  by 
the  bank  until   the   morning  of   March   19th.      Prior  to   this   date, 
probably  about  March  IGth  or  17th,  the  drawer  bad  stopped  payment 
on  the  checks  claiming  that  they  had  been  procured   from   bim   by 
fraud,  and  acting  upon   this  notice  the   Greenville  Bank  on   March 
10th  declined  to  honor  them,  and  caused  them  to  be  duly  protested. 
Thereupon,  the  appellee  instituted  this  action  at  law  to  recover  upon 
tbe  appellant's  indorsement  of  the  checks.     The  appellant  answered 
denying  liability  upon  said  indorsement  because  of  appellee's  alleged 
negligence   in   presenting  the  checks   for  payment.      Other   defenses 
pleaded  are  not  urged  in  argument,  and  we  need  iiot  consider  them. 
In  addition  to  these  matters  it  was  also  shown  in  evidence    without 
substantial  dispute,  that  tbe  niethoil  adoi)ted  by  appellee  v.,m\  hy  the 
several  correspondents  mentioned   in  forwarding  the  paper   for   pre- 
sentation and  demand  of  payment  was  in  accordance  with  the  general 
custom   prevailing   among   banks   in   dealing   with   checks   drawn    (it 
other  banks  not  doing  business  in  the  same  city  or  town,  and  cashed 
by  the  receiving  bank.     No  evidence  was  offered  tending  to  show  that 
either  of  the  banks,  receiving  these  checks  after  their  indorsement  by 
appellant,  failed  to  forward   them   on   their  way  on   the  day  of  the 
receipt  or  on  the  following  day,  except  possibly  in  the  case  of  the  Des 
Moines   Savings  Bank,  and   the   day  there   intervening,   if  any,  was 
Sunday.    At  the  close  of  the  testimony  oflPcred  on  tbe  trial,  the  court 
sustained  a  motion  to  direct  a  verdict  for  the  plaintiff  for  the  amount 


II.    2.]  PRESENTMENT.  737 

of  the  checks  with  interest,  and  from  the  judgment  entered  on  such 
directed  verdict  the  defendant  appeals. 

The  single  question  to  be  determined  is  whether  this  record  pre- 
sents a  case  in  wliich  a  verdict  for  the  defendant,  if  one  had  been 
returned,  could  properly  be  permitted  to  stand.  Counsel's  contention 
in  support  of  the  appellant's  position  is  based  upon  two  propositions. 

1.  It  is  said  that  in  failing  to  forward  the  checks  by  the  most 
direct  route  from  Plover  to  Cireenville,  and  by  electing  to  send  them 
by  a  more  circuitous  route  through  the  hands  of  correspondent  banks, 
appellee  occasioned  an  unreasonable  delay  in  the  presentation  of  the 
checks  to  the  drawee  for  payment,  and  thereby  discharged  the  appel- 
lant from  liability  as  an  indorser  thereon.  By  the  terms  of  the 
negotiable  instrument  statute  a  bank  check,  in  the  ordinary  form,  is 
classed  as  a  bill  of  exchange  payable  on  demand.  Code  Supp.  lUO'-i, 
§  3060-al85.^  By  the  same  statute  it  is  provided  that  to  charge  the 
indorser  of  a  bill  of  exchange  payable  on  demand,  presentation  to 
the  drawee  and  demand  of  payment  shall  be  deemed  sufficient  if  made 
within  a  reasonable  time  after  its  issue,  or  after  the  last  negotiation 
of  such  bill.  Code  Supp.  190'^,  §  3060-371.^  It  is  also  further  pro- 
vided that,  in  determining  what  is  a  "  reasonable  time  "  within  the 
meaning  of  this  act,  regard  must  be  had  to  the  nature  of  the  instru- 
ment, tlie  usage  of  the  trade  or  business,  if  any,  with  respect  to  such 
instruments,  and  the  facts  of  the  particular  case.  Code  Supp.  1902, 
§  3060-3193.=^  Contrary  to  the  requirement  for  notice  to  the  indorser 
of  tlie  dishonor  of  a  check  or  bill  upon  presentation  for  payment 
(Code  Supp.  1902,  §  3000-31 03 ),3  the  holder  of  the  indorsed  paper 
is  not  held  to  any  fixed  or  invariable  limit  of  time  in  which  to  make 
such  presentment  and  demand,  lie  is  required  to  act  with  reason- 
able diligence  and  promptitude  taking  into  consideration  the  nature 
of  the  instrument,  the  usages  of  the  business  world  and  the  peculiar 
facts,  if  any,  attending  the  particular  transaction  in  hand. 

With  this  rule  as  our  stamlard,  we  are  clearly  of  the  opinion  tliat 
the  record  presents  nothing  to  support  a  finding  that  the  delay,  if 
any,  in  presenting  the  checks  for  payment  was  chargeable  to  negli- 
gence on  i)art  of  the  apf)ellce.  It  was  shown  by  the  evidence  with- 
out controversy  —  indeed,  it  is  a  matter  of  common  knowledge  — 
that,  by  the  system  to  which  the  handling  of  such  business  has  been 
reduced,  the  innumerable  checks  and  bills  received  by  the  banks  scat- 
tered all  over  the  country  flow  in  concentrating  currents  to  distribut- 
ing banks,  whence  they  go  out  to  correspondent  banks  at  or  near  the 
city  or  town  where  the  drawee  banks  are  located,  for  collection.     To 


IN.  Y..  §  .321.  — C. 

>N.  Y.,  §  131.  — C. 

»N.  Y.,  j;  4.  — C. 

«N.  Y..  ?§  174-17.1. —  r. 

NROOT.  INHTHnMBNTfl  —  47 


MS  CHECKS.  [art.  xvti. 

hold  that  the  time  between  the  issue  of  fi  eherk  upon  a  distant  ])ank 
and  its  presentation  for  jiavmoiit  l\v  this  inolliod  is  unreasonable,  and 
serves  to  discbarge  the  indorscr,  would  not  only  tend  to  create  disas- 
ti'ous  confusion  in  this  most  inii)ortaiit  brancli  of  business,  but  to  a 
disregard  of  the  statute  which  makes  the  usage  in  such  business  one 
of  the  standards  by  wliicli  the  reasona])lenesfl  of  the  time  of  presenta- 
tion for  payment  is  to  he  determined.  Again,  as  disclosed  by  the 
testimony,  the  transaction  under  consideration  was  not  a  simple  matter 
of  collecting  checks  deposited  witli  the  a])pellee  for  that  purpose.  The 
checks  were  negotiated  by  tlie  a])pcllant  to  tiic  appellee  who  jjaid  full, 
value  therefor.  The  appellee  indorsed  the  checks  to  the  Des  Moines 
Savings  Bank,  receiving  credit  upon  its  deposit  account  with  the 
latter  for  the  full  amount  as  for  a  deposit  of  so  much  cash.  In  other 
words,  the  checks  were  negotiated  by  the  a])pellee  to  the  Des  Moines 
Savings  Bank,  and  under  the  statute  already  quoted  (Code  Supp. 
1902,  §  .3060-a71)  reasonable  time  for  presentation  and  demand  is 
to  be  reckoned  from  the  last  negotiation  of  the  paper.  Checks  are  an 
almost  universal  substitute  for  money.  They  pass  from  hand  to  hand, 
bank  to  bank,  and  city  to  city,  and,  within  reasonable  limits,  it  may 
be  said  that  no  matter  how  long  they  remain  outstanding,  so  long  as 
one  negotiation  promptly  follows  another  and  the  checks  are  in  fact 
in  circulation  the  statute  requires  us  to  hold  that  the  indorser  is  not 
legally  prejudiced  by  the  consequent  delay  in  their  presentation  for 
payment.  Indeed,  Avhile  at  common  law  it  is  generally  held  that  when 
one  receives  a  check  payable  at  a  distant  hank  reasonable  diligence 
requires  him  to  forward  it  for  presentation  not  later  than  the  next 
business  day  thereafter,  yet  it  is  equally  well  settled  that  this  rule 
is  not  always  one  of  imperative  obligation,  but  is  at  times  made  to 
give  way  by  reason  of  circumstances  which  sufficiently  rebut  any  pre- 
sumption or  inference  of  negligence  on  part  of  the  holder.  Coal  Co.  v. 
Bowman,  60  Iowa,  158.  And,  among  other  circumstances  having  a 
bearing  upon  this  question,  the  general  course  of  business  has  always 
been  recognized  as  important.  Guelich  v.  Banl-,  56  Iowa,  434;  Frei- 
berg V.  Cody,  55  Mich.  108;  Bridgeport  Bank  v.  Dyer,  19  Conn.  136. 
Thus,  even  without  the  statute  it  would  be  extremely  doubtful  whether 
a  verdict  for  the  appellant  upon  the  ground  here  contended  for  could 
be  upheld  ;  and  with  it,  we  think,  the  correctness  of  the  ruling  of  the 
trial  court  thereon  is  not  open  to  serious  question.     *     *     * 

3.  Error  is  assigned  upon  the  ruling  of  the  trial  court  refusing  to 
permit  the  appellant  to  testify  to  his  want  of  knowledge  of  the  custom 
of  banks  with  respect  to  the  manner  of  transmitting  checks  for  pay- 
ment. To  this  exception  we  think  it  a  sufficient  answer  that  want  of 
knowledge  by  one  who  negotiates  and  indorses  a  check,  as  to  the 
usage  of  banks  relating  to  its  presentation  for  payment,  cannot  prevent 
the  application  of  the  statute  which  makes  such  usage  a   fnctor  in 


II.  2.]  peese>;tment.  739 

determining  whether  due  diligence  has  been  shown.  So,  also,  it  may 
be  said  that  the  usage  or  custom  here  relied  upon  is  not  one  of  mere 
private  or  local  character,  but  one  of  general  observance  in  the  bank- 
ing business  and  as  such  will  be  presumed  to  be  known  by  all  persons 
dealing  with  such  institutions.  See  12  Cyc.  p.  1044.  Appellant  knew 
that  the  checks  were  negotiable  in  character  and  as  such  were  liable 
to  pass  from  one  indorser  to  another  in  their  transmission  to  the  bank 
of  payment,  and  when  he  negotiated  them  he  must  be  held  to  have 
done  so  with  reference  to  the  usual  and  ordinary  manner  in  which 
such  business  is  transacted,  and  to  have  consented  to  presentation, 
demand  of  payment  being  made  in  tlie  manner  which  generally  pre- 
vails among  prudent,  well-conducted  banks.  Had  he  negotiated  them 
to  a  merchant  or  farmer  or  other  individual  who  in  turn  negotiated 
them  to  the  appellee  bank,  appellant  being  sued  upon  his  indorsement 
would  not  be  heard  to  deny  knowledge  of  the  usage  of  banks  with 
respect  to  such  business,  and  we  cannot  see  that  such  want  of  knowl- 
edge would  be  of  any  more  avail  in  a  case  like  the  present  one  where 
he  indorses  the  paper  direct  to  the  bank.  His  contract,  implied  from 
his  indorsement,  was  that  if,  u])on  presentation  and  demand  within  a 
reasonable  time,  the  checks  wore  dishonored,  and  due  notice  given 
thereof,  he  would  make  them  good  to  his  indorsee,  and  it  can  make 
no  difference  whether  he  did  or  did  not  understand  what  in  law 
would  be  held  a  reasonable  time  for  such  presentment.  Other  ques- 
tions argued  are  ruled  by  those  already  discussed,  and  we  need  not 
further  consider  them.  Of  course,  we  are  not  to  be  understood  as 
holding  that  banks  arc  at  liberty  to  ado]it  any  usage  or  manner  of 
business  they  see  fit,  and  escape  all  imputation  of  negligence  for  n^sult- 
ing  losses  to  those  with  whom  they  may  deal.  Tt  is  reasonable  to  hold 
that  checks  must  go  forward  for  pn>sentation  with  due  regard  to  the 
interest  of  the  drawers  and  indorsors,  and  if  banks  adopt  unreason- 
ably circuitous  routes  and  nicthods  whcrcbv  loss  results  they  should 
bear  the  burden,  but,  ordiiuirily,  the  natural  caution  which  is  en- 
gendered l)y  self-interest  will  be  sufficient  to  insure  promptness  and 
dispatch  in  the  dischargf;  of  duties  of  this  nature.  Where,  however, 
there  is  reasonal)le  ground  u|)on  which  to  base  the  charge  of  negli- 
gence, the  case  should  go  1o  llic  jury  under  ]tro[)cr  instructions. 

In  the  instant  case  we  find  notliing  to  supporl  a  finding  of  this 
nature,  and  the  judgment  of  (hf  District  T'ourt  is  afTirmed. 

Suj)pJftiirn/nl  njiitiimi  nti   rrhrnriufj. 

VvM  C'niiiwi.  In  his  petition  for  rehe!lrinL^  the  appellant  insists 
that  the  opinion  banded  down  upon  the  original  Bul)mission  of  this 
eauso  orronenu=Iv  cites  Code  Supp.  1002,  §  .'KXJO-ji'M ,  as  applicable 
to  the  presentation  for  payment  of  bank  checks,  wbrii  in  fact  the  rule 
there  prescribed  is  intended   to  apply  only  to  drafts  or  hills  of  ex- 


740  CHECKS.  [art.    XVII. 

change  as  clistinc:uishe(l  from  cheeks,  and  tliat  tlie  hitter  are  governed 
solely  by  the  provisions  of  Code  Supp.  1902,  §  aOGO-alSG.*  The 
section  first  named  provides  that  presentnient  of  a  bill  of  exchange 
will  be  sutVk'iont  if  made  within  a  reasonable  time  after  the  last  nego- 
tiation thereof,  while  the  section  last  named  provides  that  a  check 
must  be  presented  within  a  reasonable  time  after  its  issue.  Whether 
the  lanjruage  of  the  last  cited  section  of  the  statute  has  the  effect  to 
exclude  bank  checks  from  the  elTect  of  the  former  it  is  not  necessary 
for  us  to  decide  at  this  time,  for,  if  we  were  to  a(loi)t  the  appellant's 
view  in  this  respect,  it  could  not  work  a  reversal  of  the  case  before 
us.  Both  sections  allow  a  reasonable  time  for  the  presentation,  and, 
where  the  check  is  drawn  upon  a  bank  located  at  a  place  distant  from 
the  place  of  its  delivery  to  the  payee  or  indorser,  a  presentment 
promptly  made  by  mail  through  other  banks  in  the  ordinary  and  usual 
course  pursued  in  such  business  will  be  held  as  a  matter  of  law  to 
have  been  made  within  a  reasonable  time. 

The  petition  for  rehearing  is  therefore  overruled. 


§  322  CARROLL  v.  SWEET. 

128  New  York,  19.—  1891. 

Andrews,  J.  The  indorsement  and  transfer  by  the  defendant  to 
the  plaintiff  of  the  check  of  Woodruff  operated  as  provisional  pay- 
ment only  of  so  much  of  the  antecedent  debt  owing  by  the  defendant 
to  the  plaintiff.  There  was  no  agreement  that  it  should  be  taken  in 
absolute  satisfaction  of  the  debt,  and,  in  the  absence  of  such  an  agree- 
ment, the  intendment  of  law  is  that  it  was  conditional  payment  only. 
II ill  v.  Beeoe.  13  X.  Y.  566;  Bradford  v.  Fox,  38  N.  Y.  289.  The 
debt  remained  until  discharged  by  payment  of  the  check,  or  by  such 
dealing  with  the  check  by  the  plaintiff  as  would,  in  judgment  of  law, 
convert  what  was  originally  a  provisional  payment  into  an  absolute 
one.  The  check  was  dated  August  22,  1887,  and  was  drawn  on  the 
Asbury  Park  National  Bank,  and  was  on  the  same  day  indorsed  and 
delivered  by  the  defendant  to  the  plaintiff  at  the  place  where  the  bank 
was  located.  The  plaintiff,  on  accepting  the  check,  assumed,  as  be- 
tween himself  and  the  defendant,  an  obligation  to  present  the  same 
to  the  bank  for  payment  within  the  time  prescribed  by  the  law  mer- 
chant, —  that  is  to  say,  not  later  than  the  next  day  after  its  date,  — 
and,  if  refused,  to  protest  the  same,  and  give  notice  of  non-payment. 
Sntiih  V.  Janes,  20  Wend.  192.  Tt  was  not  presented  until  the  Slst 
of  August,  nine  days  after  it  was  received  by  the  plaintiff.  The  de- 
fendant was  by  such  delay  discharged  from  liability  as  indorser  of 

*N.  Y.,  §  322. —  C. 


II.   2.]  PRESENTMENT.  741 

the  check,  irrespective  of  any  question  of  loss  or  injury.*  Present- 
ment in  due  time,  as  fixed  by  the  law  merchant,  was  a  condition  upon 
performance  of  which  the  lial)ility  of  the  defendant  as  indorser  de- 
pended, and  this  delay  was  not  excused  although  the  drawer  of  the 
check  had  no  funds,  or  was  insolvent,  or  because  presentment  would 
have  been  unavailing  as  a  means  of  procuring  payment.  Bank  v. 
Brodericlc,  10  Wend.  304;  Gough  v.  Staats,  13  Wend.  549.  A  dif- 
ferent rule  obtains  as  between  the  holder  and  drawer  of  a  check.  As 
between  them  presentment  may  be  made  at  any  time,  and  delay  in 
presentment  does  not  discharge  the  liability  of  the  drawer,  unless  loss 
to  him  has  resulted.  Little  v.  Banh,  2  Hill,  425.  The  action  here  is 
not  upon  the  indorsement  of  the  defendant,  but  upon  the  original 
indebtedness.  If  the  discharge  of  the  defendant's  liability  as  indorser 
discharges  also  his  liability  as  debtor  for  the  original  debt,  the  judg- 
ment must  on  that  ground  be  reversed.     *     *     * 

The  court  in  this  case  directed  a  verdict  for  the  plaintiff,  and  in  this 
we  think  there  was  error.  It  cannot  be  doubted  that  if  there  was  evi- 
dence tending  to  show  that  the  delay  in  presenting  the  check  to  the 
Asbury  Park  Bank  prevented  its  collection,  or  from  which  the  jury 
nuirht  find  that  the  whole  or  any  part  of  the  debt  owing  by  the  drawer 
of  tlie  check  to  the  defendant,  for  which  the  check  was  given,  was  lost 
by  reason  of  the  delay  in  tlie  presentment,  or  by  dealings  between  the 
plaintiff  and  the  drawer,  in  respect  to  the  check,  without  the  assent 
of  the  defendant,  the  case  should  have  been  submitted  to  the  jury. 
To  the  extent  of  the  injury,  the  law  would  treat  the  omission  to  make 
due  presentment  as  tantamount  to  pavmont. 

The  facts  most  favoraldo  to  the  defendant  need  to  be  stated.  "Wood- 
ruff, the  maker  of  the  check,  was,  when  the  check  was  given,  con- 
ducting a  hotel  at  Asbury  Park,  and  the  parties  to  the  action  were 
guests  at  his  house.  The  defendant  was  indebted  to  the  plaintiff  for 
dentistry  work,  and  the  former,  who  resided  in  Xew  York,  had  loaned 
money  to  Woodruff  for  which  the  check  was  given,  and  on  the  same 
day  the  defendant  received  the  check  he  delivered  it  to  the  plaintiff 
on  his  debt.  Woodruff  had  an  account  with  the  Asbury  Park  Na- 
tional Rank.  On  the  day  of  the  date  of  the  check  the  bank  charged 
to  Ills  account  a  demand  note  held  by  the  bank  against  him  for  $500, 
but,  so  far  as  appears,  without  any  notice  to  Woodruff,  and  this  ren- 
dered his  bank  account  overdrawn.  Woodruff  was  in  embarrassed 
circumstances,  but  was  in  tlie  daily  receipt  of  about  $000  from  his 
business.  TTo  used  part  of  the  receipts  for  current  expenses,  without 
depositincr  them,  and  botween  the  22d  and  31st  of  August  he  de- 
posited about  $noo  in  the  bnnk  to  the  credit  of  his  account,  and  the 
inference  in  that  it  was  applied  in  part  to  pay  the  $500  note,  and  ii 


».^e^  Afhi  V.  nnnJe  nf  FrnrxfviHr.  124  Wio.  7.1.  at,  pnpp  7R.  and  extract  fron 
FHrat  Nat.  Bank  v.  Currie,  147  Mich.  72,  in  note  7,  ante,  p.  735.  —  C. 


748  CHECKS.  [art.    XVII. 

part  to  pay  turrent  checks  drawn  liy  W Dodiulf.  On  (he  22d  of  August, 
the  chiy  on  whicli  Woodruirs  ilu'ck  to  tlie  det'eiulant  is  dated,  and 
after  it  had  been  intlorsed  to  the  plaintilf  l)y  the  defendant,  WoodrulT, 
who  had  been  informed  of  the  transfer,  re(juested  the  phuntitl  to 
accomniodate  him  by  holding  the  iherk  a  few  days,  stating  as  a  reason 
that  he  was  pressed  in  the  payment  of  his  at-eounts,  to  which  request 
the  plaintiff  assented,  lie  asked  tlie  plaintiff  to  let  him  know  when 
he  wished  to  use  the  cheek,  as  he  would  then  })rovido  for  it.  Woodruff 
testified  that  he  had  money  in  his  office  sufruient  to  pay  the  check, 
and  would  have  paid  it  at  any  moment,  had  payment  been  insisted 
upon ;  that  he  was  in  the  receipt  of  about  $()()()  a  day,  and  that  he 
redeemed  a  number  of  other  checks  which  went  to  protest  at  this 
time;  that,  two  or  three  days  after  the  conversation  of  the  22d  of 
August,  he  spoke  to  the  plaintiff  again,  and  the  plaintiff  informed 
him  that  he  had  sent  the  check  west.  Woodruff  said  to  him  that  he 
regretted  it  very  much,  as  he  wislied  to  make  provision  for  the  check. 
The  cashier  of  the  bank  testified  that  there  were  no  funds  to  meet 
the  check,  and  that  it  would  not  have  been  paid  if  it  had  been  pre- 
sented any  time  after  the  23d  of  August.  On  August  31st,  Woodruff, 
who  was  behind  in  his  rent,  was  dispossessed  from  the  hotel  premises, 
and  his  business  was  closed,  and  he  then  w^as  and  now  is  insolvent. 
Tt  may  be  conceded  that  the  only  obligation  upon  the  plaintiff,  as 
between  him  and  the  defendant,  was  to  present  the  check  at  the  bank 
for  payment  witliin  the  time  prescribed  l)y  law,  and,  if  payment  was 
refused,  to  have  the  same  protested,  and  notice  of  non-payment  given 
to  the  defendant.  Tf  he  had  performed  this  duty,  the  defendant  would 
have  been  apprised  of  the  default;  and  he  would  have  had  an  oppor- 
tunity to  take  such  measures  as  he  could  to  secure  payment  from 
Woodruff.  One  of  the  objects  of  requiring  prompt  notice  to  be  given 
to  indorsers  and  other  parties  secondarily  liable  on  commercial  paper, 
in  case  of  default,  is  that  they  may  have  an  opportunity  to  secure 
themselves.  Checks  are  supposed  to  be  drawn  against  funds  of  the 
drawer,  and  prima  facie,  where  it  is  shown  that  the  drawer's  account 
was  not  good,  the  inference  of  injury  from  non-presentment  would 
be  rebutted.  But  where,  as  in  this  case,  it  is  shown  that  the  maker 
of  the  check  was  solicitous  that  it  should  be  paid  ;  that  he  had  the 
means  of  payment  at  command,  and  would  have  provided  for  or  liiiid 
the  check  if  payment  had  been  insisted  upon  ;  that  the  holder  was 
apprised  of  the  facts,  and,  for  the  accommodation  of  the  maker,  re- 
frained from  presenting  the  check,  and  presentation  was  delayed 
until  open  insolvency  of  the  maker  occurred,  and  he  became,  by  the 
change  of  circumstances,  unable  to  provide  for  the  check,  —  it  can- 
not be  said,  we  think,  that  there  was  no  legal  evidence  of  injury  to 
be  submitted  to  the  jury.  The  plaintiff,  instead  of  taking  the  usual 
oourse,  undertook  to  'l"ril  wifii  f'"^  r.-'pi.-pr  nf  the  flir-r-lc  in  di^rr-gard 
of  his  primary  obligation  to  the  defendant.     It  was  for  the  jury  to 


II.    3.]  CERTIFICATION.  745 

pass  upon  the  circumstances,  and  to  find  whether  tlie  conduct  of  the 
plaintiff  imposed  a  pecuniary  injury  upon  the  defendant.  To  the 
extent  of  such  injury  the  law  adjudges  that  the  debt  of  the  plaintiff 
has  been  paid.  The  judgment  below  should  be  reversed,  and  a  new 
trial  granted,  with  costs  to  abide  the  event.     All  concur." 


3.    Certification  of  Check. 

(a)   Effect  upon  Drawer's  Liability, 

§  324  MINOT  V.  RUSS. 

HEAD  V.  HORN  BLOWER. 
156  Massachusetts,  458.  —  1892. 

Field,  C.  J.  —  The  first  case  is  an  appeal  from  a  judgment  ren- 
dered by  the  Superior  Court  for  the  defendant,  on  his  demurrer  to 
the  declaration.  The  defendant,  on  October  2'J,  1891,  drew  a  check 
on  the  Maverick  National  Bank,  payable  to  the  order  of  the  plaintiff, 
and,  being  informed  by  the  plaintiff  that  the  check  must  be  certified 
by  the  bank  before  it  would  be  received,  the  defendant  on  the  same 
day  presented  the  check  to  the  bank  for  certification,  and  the  bank 
certified  it  by  writing  on  the  face  of  the  check  the  following: 
"  Maverick  National  Bank.  Pay  only  through  Clearing-House.  J. 
W.  Work,  Cashier.  A.  C.  J.,  Paying  '^Feller."  After  it  was  certi- 
fied, the  check  was,  on  Saturday,  Oct.  'M,  1891,  delivered  by  defend- 
ant to  the  plaintiffs,  for  a  valuable  consideration.  The  declaration 
alleges  that  the  bank  stopped  payment  on  ^fonday  morning,  Novem- 
ber 'I,  1891,  "before  the  commencemenl  of  business  hours  on  that 
day,"  and  that  on  that  day  payment  was  duly  demanded  of  the  bank, 
and  notice  of  non-payment  was  duly  given  to  the  defendant. 

The  second  case  is  an  appeal  from  a  judgment  rendered  for  the 
defendants  by  the  Superior  Court,  on  an  agreed  statement  of  facts. 
On  Saturday,  October  31,  1891,  the  defendants  drew  tlieir  check  on 
the  Maverick  National  Baidc,  payable  to  the  order  of  the  plaiiitifTs, 
and  delivered  it  to  them  in  payment  of  stocks  bought  by  the  defend- 
ants of  the  plaintiffs.  The  check  was  received  too  late  to  he  de- 
posited by  the  plaintiffs  for  collection  in  season  to  }>e  carried  to  the 
clearing-house  on  that  day,  but  during  banking  hours  on  that  day 
the  plaintiffs  presented   the  check  to  the   Maverick   National    Bank 

•  Rpp  Manitoba  Mnrtt^nqr  ami  Invrstmmt  Cnmpnntt.  liniitrd  v.  TFri«.»,  18 
S.  n»k.  <5n,  rpportcd  in  5  A.  &  K.  .\nn.  (as.  8r.8.  wiUi  notf  pntitlrd.  "  Dis- 
ehftrgp  of  (ipl)tf)r  by  crrditor's  ncglijjfnco  in  presenting  check  of  third  per- 
son for  payment."  —  C. 


744  rTTP.OKS.  [aut.  XVII. 

for  certification,  and  the  bunk  certified  it  by  writing  or  stiunping  ou 
its  face  the  following:     "  Mavericic  National   Hank.     CertiUed.     Pay 

only  tiirougli  Clearing-House.     C.  C.  Domett,  A.  Cashier.     , 

Paying  Teller." 

At  that  time  the  defendants  had  on  deposit  sufficient  funds  to  pay 
tlie  check,  and  the  bank  on  certification  charged  to  the  defendants' 
account  the  amount  of  the  check,  and  credited  it  to  a  ledger  account 
called    certified    checks,    in    accordance   with    their    uniform    custom. 
After  certifii'Ution,  the  plaintiffs,  on  the  same  day,  deposited  tlie  check 
in  the  Hamilton   National    Hank   for  collection.     It  is  agreed   that 
if  the  check  had  been  presented  for  payment  on  Saturday,  in  l)anking 
hours,  it  would  have  been  paid;  but  the  Maverick   National   Bank 
transacted  no  business  after   Saturday,  and  on   Sunday  the  Comp- 
troller of  the  Currency  placed  a  national  bank  examiner  in  charge, 
and  the  bank  was  put  into  the  hands  of  a  receiver.     The  clearing- 
house  on   November   2   refused   to   receive   checks   on   the   Maverick 
National  Bank,  and  the  check  was  on  that  day  duly  presented  for 
payment,  and  due  notice  of  non-payment  was  given  to  the  defendants. 
Each  of  the  checks  was  in  the  ordinary  form  of  check  on  a  bank, 
and  was  payable  on  demand,  and  no  presentment  for  acceptance  or 
certification  was  necessary.     In  a  sense,  undoubtedly,  a  check  is  a 
species  of  bill  of  exchange,  and  in  a  sense  also  it  is  a  distinct  com- 
mercial instrument;  but  according  to  the  general  understanding  of 
merchants,   and   according  to  our  statutes,   these   instruments   were 
checks,  and  not  bills  of  exchange.     "  A  check  is  an  order  to  pay  the 
holder  a  sum  of  money  at  the  bank,  on  presentment  of  the  check 
and    demand    of    the   money;    no   previous    notice    is    necessary,    no 
acceptance  is  required  or  expected,  it  has  no  days  of  grace.     Tt  is 
pa /able  on  presentment  and  not  before."      (Bnllard  v.   Randall,  1 
Gray,  605,  606.)      The  duty  of  the  bank  was  to  pay  these  checks 
when  they  were  presented  for  payment,  if  the  drawers  had  sufficient 
funds  on  deposit.    The  bank  owed  no  duty  to  the  drawers  to  certify 
the  checks,  although  it  could  certify  them  if  it  saw  fit,  at  the  request 
of  either  the  drawers  or  the  holders,  and  if  it  certified  them  it  be- 
came bound  directly  to  the  holders,  or  to  the  persons  who  should 
become  the  holders.     In  either  case,  the  bank  would  charge  to  the 
account  of  the  drawer  the  amount  of  the  check,  because  by  certifi- 
cation it  had  become  absolutely  liable  to  pay  the  check  when  pre- 
sented.    When  a  check  payable  to  another  person  than  the  drawer 
is  presented  by  the  drawer  to  the  bank  for  certification,  the  bank 
knows  that  it  has  not  been  negotiated,  and  that  it  is  not  presented 
for  payment,  but  that  the  drawer  wishes  the  obligation  of  the  bank 
to  pay  it  to  the  holder  when  it  is  negotiated,  in  addition  to  his  own 
obligation.     But  when  the  payee  or  holder  of  a  check  presents  it  for 
certification,  tbf  bank  knows  that  this  is  done  for  the  convenience 
or  security  of  the  holder.     The  holder  could  demand  payment  if  he 


n.    3.]  CERTIFICATION.  745 

chose,  and  it  is  only  because,  instead  of  payment,  the  holder  desires 
certiiitation,  that  tlie  bank  eertilies  the  check  instead  of  paying  it. 
In  one  case  the  bank  certifies  the  check  for  the  use  or  convenience 
of  the  drawer,  and  in  the  other  for  the  use  or  convenience  of  the 
holder.  In  the  present  cases  tlie  checks  were  seasonably  presented  to 
the  bank  for  payment,  and  on  the  facts  stated  the  defendants  would 
be  liable  unless  the  certification  discharged  them  from  liability. 

It  is  argued  that  the  certification  of  a  clieck,  whereby  the  bank 
becomes  absolutely  liable  to  pay  it  at  any  time  on  demand,  discharges 
the  drawer,  because  it  is  said  that  tlio  clieck  then  becomes  in  effect  a 
certificate  of  deposit ;  and  it  is  also  argued  that  the  certification  is 
in  effect  only  an  acceptance  of  a  bill  of  exchange,  and  that  if  pay- 
ment is  duly  demanded  of  the  bank  and  refused,  and  notice  of  non- 
pavment  duly  given,  the  drawer  is  held.  So  far  as  the  question  has 
been  considered,  it  has  been  decided  that  the  certification  of  a  bank 
check  is  not,  in  all  respects,  like  the  making  of  a  certificate  of 
deposit,  or  the  acceptance  of  a  bill  of  exchange,  but  that  it  is  a  thing 
sui  generis,  and  that  the  effect  of  it  depends  upon  the  person  who,  in 
his  own  behalf,  or  for  his  own  ])enefit,  induces  the  bank  to  certify 
the  check.  The  weight  of  authority  is,  that  if  tlie  drawer  in  his 
own  behalf,  or  for  his  own  benefit,  gets  his  check  certified,  and  then 
delivers  it  to  the  payee,  the  drawer  is  not  discharged ;  but  that  if 
the  payee  or  holder,  in  his  own  behalf  or  for  his  own  benefit,  gets  it 
certified  instead  of  getting  it  paid,  then  the  drawer  is  discharged. 
{Born  v.  First  Xatiotml  BanJr,  123  Ind.  78;  Rounds  v.  Smith,  42  111. 
245;  Brown  v.  Lccl-ie,  43  111.  407;  Andrews  v.  German  National 
Bank,  9  Heisk.  211  :  First  National  Banl-  v.  Lrach,  52  N".  Y.  350; 
Boyd  V.  Nasniith,  17  Ont.  40;  Essex  Count j/  Bank  v.  Bank  nf  Mon- 
treal, 7  Biss.  103;  First  National  Bank  v.  Whitman.  0^  U.  S.  343, 
345;  Metropolitan  National  Batik  v.  Jones.  27  N.  E.  T?ep.  533;  Con- 
tinental National  Bank  v.  Cornhanser.  37  111.  App.  475;  National 
Cnmmerrial  Bank  v.  Miller,  77  Ala.  1  fiH  :  Larsen  v.  Breeue.  12  Col. 
4H0;  Mutual  Nalinval  Bank  v.  Bntge.  28  Tia.  An.  033;  Morse  on 
Banking,  §§  41  1,  415.)  We  are  of  opinion  that  this  view  of  the  law 
fPHts  on  .sound  reasons.  Tf  it  hn  true  thnt  the  existing  methods  of 
doing  bnsines.-<  make  the  use  of  ccrfidi'i]  checks  necessary,  the  persons 
who  receive  them  can  always  re')iiire  thorn  to  bo  cortitiod  before  de- 
livery. If  llioy  rocoivo  thorn  uncertified  nnd  then  present  the?ii  to 
the  hank  for  certification  instead  of  payment,  tlie  certification  should 
he  considorod  as  discharging  the  drawer. 

It  may  also  bo  said,  that  in  the  second  case  the  cortificntion 
amounted  to  an  exir-nsion  of  the  time  of  pjiynient  at  the  ref|iiest  of 
the  payees,  without  the  consent  of  the  drawers.  Before  the  cortifi- 
ration  the  drawcfH  could  have  requestod  the  payees  to  present  the 
chock  for  pavment  on  Saturdnv.  or  could  theinsolvos  have  drawn 
out  the  money  and  paid  the  chock.     After  certification  the  amount 


746  CIIKCKS.  [aut.   xtii. 

of  tlio  chock  no  longer  stood  to  the  credit  of  ihc  lii-awcrs,  :ind  tlie 
payee:?  had  accepted  an  obligalion  of  the  bank  In  p.i}-  only  lluoiigli 
the  clearing-house,  which  couhl  not  happen  before  tlie  following 
Monday. 

The  result  is  (lial  in  (!;c  fli-st  I'ase  the  judgment  is  reversed,  and 
the  denuirrer  overruled,  ni^l  in  the  second  case  the  judgment  is 
affirmed. 

So  ordered.'' 


§324     TIMES  8(}rA'M':  .\rTOMOTMTK  TO.  v.  EUTHERFORD 
NATIONAL  HANK. 

77   New  Jersey  Law    ((t.   Euii.  &  Ait.)    049.^1909. 

GuMMERE,  C.  J.  One  Purdy,  beiii'jj  desirous  of  purchasing  a 
second-hand  automobile,  employed  Millard  Ashton,  an  auton:obile 
salesman,  to  assist  liini  i;i  mnking  a  proper  selection.  Ashton  took 
him  to  the  salesroom  of  the  Times  Square  Automobile  Company,  and, 
after  looking  over  its  stock,  l*urrly,  with  Asliton's  approval,  selected 
a  car,  the  price  of  which  was  .$()()(),  and  gave  bis  check  on  the  Ruther- 
ford National  Bank  for  the  purchase  price.  The  check  was  drawn 
to  the  order  of  Ashton,  who  indorsed  it  and  delivered  it  to  the  manager 
of  the  automobile  company.  Immediately  after  receiving  it,  the  auto- 
mobile company  sent  it  by  special  messenger  to  the  banking  house  of 
the  Rutherford  National  Bank  with  a  request  that  it  be  certified. 
This  re()uest  was  com])lied  with.  Afterward,  when  the  check  was 
presented  for  payment,  the  bank  refused  to  honor  it,  upon  the  ground 
that  it  had  received  instructions  from  Purdy  not  to  pay  it.  The 
automobile  company  thereupon  brought  suit  against  the  bank  on  its 
contract  of  ceitification.  The  defendant  adiiMlted  that  it  had  certified 
the  check,  and  that  it  did  so  at  (he  request  of  the  plaintiff,  the  holder 
thereof,  but  sought  to  justify  its  refusal  to  pay  upon  the  ground  that 
Purdy  had  been  induced  to  purchase  the  car  by  fahe  representations 
made  by  the  manager  of  the  plaintiff  a^  to  it^  condition  and  value. 
It  was  contended  on  behalf  of  the  plaintilf  lliat  tlii^  defense  was  not 
open  to  the  defendant.  It  wn=,  however,  admitted  over  its  objeetion. 
At  the  close  of  the  case  plaintiff  asked  for  a  direction  of  a  verdict  in 
its  favor.  Thi<;  request  was  refused,  the  case  was  pent  to  the  iury, 
and  a  verdict  in  favor  of  the  defendant  was  rendered.  The  plaintiff 
now  seeks  a  reversal  of  the  judcrment  entered  upon  that  verdict,  on 
the  ground  that  its  request  for  a  direction  in  its  favor  should  have 
been  complied  with. 

The  effect  of  the  certification  of  a  check  by  the  bank  upon  which 


7S(>p  .5  Am.  &  Enir.  Encyc.  L.   (2^1  ed.)   pp.  1055-1056.  —  H, 


II.    3.]  CERTIFICATION.  747 

it  is  drawn  depends  upon  wliether  it  is  done  at  the  request  of  the 
drawer  or  ut'  the  iiolder.  When  a  check  is  prebeuted  by  the  drawer 
for  certification,  tlie  bank  knows  that  it  has  not  yet  been  negotiated, 
and  tliat  the  drawer  wishes  the  obligation  of  the  bank  to  pay  it  to 
the  hokler,  when  it  is  negotiated,  in  addition  to  his  own  obligation. 
A  certification  under  such  circumstances  does  not  operate  to  dis- 
charge the  drawer  (Minot  v.  Huss,  156  Mass.  460,  5  Amer.  &  Eng. 
Ency.  of  Law,  1056)  ;  and  so  long  as  the  drawer  remains  undis- 
charged, such  a  defense  as  that  set  up  in  the  present  case  is  open  both 
to  him  and  to  the  bank.  But  when  the  certification  by  the  bank  is 
done  at  the  request  of  the  bolder,  the  effect  is  radically  different.  The 
transaction,  then,  is  virtually  this:  The  bank  says:  "That  check 
is  good ;  we  have  the  money  of  the  drawer  here  ready  to  pay  it ;  we 
will  pay  it  now,  if  you  will  receive  it."  The  holder  says:  "No,  I 
will  not  take  the  money  now;  you  may  retain  it  for  me  until  the 
check  is  presented  for  payment."  The  bank  replies,  "  Very  well,  we 
will  do  so."  First  Nat.  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  353. 
The  result  is  to  discharge  the  drawer  from  any  further  liability  on 
the  check  (Negotiable  Instrument  Act  April  4,"  1902,  §  188  «  [P.  L. 
p.  614]),  and  to  substitute  a  new  contract  between  the  holder  and 
the  bank  by  the  terms  of  which  the  money  called  for  by  the  check 
is  transferred  from  the  account  of  the  drawer  to  the  account  of  the 
bolder.  In  contemplation  of  the  law  the  obligation  of  the  bank  to 
the  holder,  when  the  certification  is  at  his  request,  is  the  same  as  if 
the  funds  had  been  actually  paid  out  by  the  bank  to  him,  by  him 
redeposited  to  his  own  credit,  and  a  ccrtificfite  of  deposit  issued  to 
him  therefor.  5  Anicr.  &  Eng.  Ency.  of  Law,  1055;  Dan.  on  Neg. 
Tnst.,  §  160.3. 

The  defendant,  in  refusing  payment  of  Purdy's  check,  apparently 
considered  tbat  it?  obligation  to  the  bolder  was  no  greater  tbnji  if 
its  certification  had  been  made  at  Purdy's  request.  Tt  fnilnd  to  realize 
tbat  its  act  operated  as  a  payment  of  the  check,  so  far  as  Purdy  was 
concprncd.  and  transferred  tlie  moneys  whicb  it  called  for  to  the 
account  of  tbe  plaintilT.  The  sitiiation  was  the  same,  so  far  as  the 
flefendant  was  concerned,  as  if  l*urdy  bad  paid  cash  to  tbe  plaintiff 
for  tbe  car  whieh  be  bad  purebnsed,  and  the  plaintiff  had  then  de- 
jMKited  the  cash  in  the  defendant's  bank.  Ilavinir  acceptecl  the  plain- 
tiff's money,  and  iss\ied  to  him  a  certificate  of  deposit  therefor,  it 
<lid  not  concern  tbe  defendant  from  whom,  or  how,  or  under  what 
circumstances  the  money  bad  bee?i  obtained.  Its  contract  required 
it  to  pay  the  amount  of  the  dej)osit  to  the  plaintiff,  or  its  order,  and 
it  could  not  avoid  its  obliiration  to  do  so  by  slu)wing  that  the  plaintiff 
had  fraudulently  obtainerl  the  money  which  it  had  deposited  with  the 
defendant. 

•  V.  Y..  S  324. —  r. 


718  CHECKS.  [ART.    XV  If 

Tlio  defense  interposed  should  h.ivc  boon  overruled,  and  a  verdict 
direiled  fur  the  planiiill.  'i'hi'  jud^ineiit  undiT  review  will  |)e  re- 
versed.* 


(b)   Effect  iipnn  indorser's  Jiability. 
§  324  FIRST  NATIONAL  BANK  OP  DETROIT  v.  CURRIE, 

ET.  AL. 
147  Michigan,  72.— 1007. 

Defendants  were  in  partnership  as  brokers  in  Detroit.  On  Febru- 
ary 5,  l'^02,  they  bought  in  their  owji  name  from  a  firm  of  brokers 
in  New  York  city  certain  bonds  for  Frank  C.  Andrews,  one  of  their 
customers.  In  part  payment  of  these  bonds  Andrews,  on  February 
6,  gave  them  his  check  for  $50,000,  drawn  on  the  City  Savings  Bank, 
Detroit,  payable  to  their  order.  They  indorsed  this  check  to  the; 
plaintiff  bank  and  deposited  it  in  the  plaintiff  bank  to  their  credit. 
Plaintiff  sent  the  Andrews  check  to  the  City  Savings  Bank  for  certi- 
fication. It  was  returned  certified,  and  plaintiff  then  wired  $50,000 
to  New  York  to  the  credit  of  the  defendants.  The  certified  check 
was  on  February  7  presented  by  the  plaintiff  to  the  City  Savings 
Bank  for  payment,  and  upon  payment  being  refused  it  was  protested 
and  notice  of  dishonor  duly  given  to  defendants.  Andrews'  account 
at  the  City  Savings  Bank,  both  when  the  check  was  certified  and  when 
payment  was  demanded,  was  overdrawn  more  than  $900,000. 

In  an  action  against  defendants  for  money  had  and  received,  a 
verdict  was  directed  for  plaintiff  for  the  amount  of  the  check,  with 


•  Tn  Blake  v.  HnmUton  Dime  Fiarim/s  liavk  Co.,  79  Oh.  St.  189.  C.  G.  Rlake 
&  Co.  drew  a  check  on  the  Franklin  Bank  payable  to  the  order  of  (".  G.  Blake. 
Blake  had  the  check  certified  by  the  Franklin  Bank,  and  then  indori^ed  the 
check  to  one  Werbel  in  payment  for  a  horse.  Werbel  indorsed  the  check  and 
deposited  it  in  the  TIamilton  Dime  Savin^r''  Bank  Go.,  and  was  given  credit  for 
it  on  the  books  of  the  bank.  The  Hamilton  Dime  Savings  Bank  sent  the  check 
to  a  correspondent  bank  for  collection,  and  it  was  protested  for  non-fJayiiK'nt 
for  the  reason  "  Payment  stopped."  The  TIamilton  Dime  Savings  Bank  sned 
the  Franklin  Bank  on  the  che-^k  and  Blake  wa^  substituted  as  defendant. 
Blake  answered  that  he  had  been  induced  to  purchase  the  horse  and  deliver 
the  check  by  the  false  and  fraudulent  representations  of  Werbel.  Tn  adirining 
a  judgment  for  i)laintifT  the  court  held  that  (fjnoting  the  syllabus),  "The 
object  of  certifying  a  check  is  to  ennble  a  holder  to  u«e  it  as  money.  The 
drawer  or  indorser  of  a  certified  check  cannot,  after  its  delivery,  revoke  it  or 
stop  payment  upon  it  bv  notice  to  the  drawee  not  to  pay,  and  a  bank  that  has 
received  a  certified  check  for  deposit,  and  has  credited  the  depositor  with  the 
amount  of  it,  is  a  hona  fide  holder  and  may  enforce  payment  of  it  notwith- 
standing it  may.  before  payment  to  the  depositor,  have  received  notice  that 
the  check  was  fraudulently  obtained  by  the  depositor."  Criticised  in  22  Harv. 
Law  ReT.  448   (April,  1909).  — C. 


II,    3.]  CEKTIFICATION.  749 

interest.     Defendants   appeal,   contending  that   the   court   erred   in 
directing  such  a  verdict,  for  the  following  reasons : 

"  1.  That  the  certification  of  the  check  for  plaintiff  at  its  request 
was  equivalent  to  payment,  and  operated  to  release  them  as  indorsers. 

"  2.  That  plaintiff,  on  presenting  the  check,  elected  to  take  certifi- 
cation, which  is  the  obligation  of  the  drawee  bank  to  pay,  and  deferred 
formal  presentation  of  the  certified  check  for  payment  until  the  next 
day.  Had  it  demanded  payment  instead  of  certification,  or  upon 
certification,  as  it  should,  the  check  would  either  have  been  paid  or 
dishonored.  If  dishonored,  the  plaintiff  would  not  have  remitted 
[the  $50,000  to  Xew  York],  and  the  bonds  would  not  have  been 
delivered,  but  remained  in  defendants'  control.  Whether  paid  or  not, 
neither  party  would  have  lost  anything.  So  that  plaintiff's  failure 
to  demand  payment  at  the  time  of  certification  caused  the  loss,  and 
defendants  cannot  be  held  therefor." 

McAi.v.w,  C.  J.  *  *  *  The  important  question  in  the  case  at 
bar  is  whether  certification  of  a  check  on  presentation  by  the  indorsee, 
though  there  are  no  funds,  is  equivalent  to  payment.  As  a  general 
proposition  we  think  it  is,  as  to  both  the  maker  and  indorser.  2 
Daniel  on  Negotiable  Instruments  (5th  ed.),  §  1604,  and  cases  cited. 
The  rules  of  the  law  merchant  are  inflexible  and  arbitrary,  and  neces- 
sarily so.  An  indorser  may  always  insist  that  the  conditions  requisite 
to  make  his  undertaking  enforceable  shall  he  strictly  complied  with; 
namelv,  presentation  for  payment  and  notice  of  dishonor.  As  to  the 
indorsee  the  certifying  bank  is  bound  by  estoppel  where  he  has 
changed  his  position  or  parted  with  value  on  the  strength  of  the  cer- 
tification. BrooMyn  Trust  Co.  v.  Toler,  65  Hun  (N.  Y.),  187,  138 
N.  Y.  675,  and  cases  cited. 

In  this  case  plaintiff  parted  with  no  value  before  certification,  but, 
relying  upon  the  certification,  transferred  $50,000  to  New  York.  We 
find,  then,  that  as  between  the  plaintiff  and  the  bank  there  was  a  new 
and  enforceable  contract  created  by  the  certification  of  the  check. 
r)rdinarily  there  would  be  no  question  but  that  such  condition  re- 
leased the  indorsers.  In  this  case,  however,  it  is  claimed  that,  al- 
though the  check  had  not  been  presented  for  payment,  but  for  ccrii- 
flcation,  yet  upon  it  as  certified  payment  was  demanded,  and  the 
flieck  was  protested,  and  notice  duly  given  within  the  time  which 
the  same  wouhl  have  been  given  had  the  check  been  presented  for 
payment  instead  of  certification,  and  because  defendant  indorsers 
have  suffered  no  loss  by  reason  of  certification,  and  are  in  no  different 
position  than  if  sueh  payment  had  been  demanded,  therefore  they  are 
not  release<l  ns  indorsers.  The  elaim  that  no  loss  has  occurred  to 
defendants,  which  we  think  is  not  supported  by  the  facts  in  the  case, 
can  he  eliminated,  for  the  reason  that  the  liability  of  the  indorser 
is  not  predicated  upon  his  loss.  See  cases  cited,  siipro.  The  case 
relierl    upon   by  plaintiff  to  sustain   its  contention,  and   also  by  the 


7r)0  CHECKS.  [akt.  xvii. 

court  in  dirating  ihc  verdict,  is  Irriny  Ihiid-  v.  ]]'('!  he  raid,  36  N.  Y. 
3;).").  Wo  think  the  casi's  ;ur  (listinuuisliitliK".  In  tluii  case  ilie  note 
lijul  boon  tlisoountoil  by  tlie  indorsors,  who  roix'ived  the  proceeds  at 
the  time.  It  was,  therefore,  a  coini)letod  transaction  l)etween  the  in- 
dorsers  and  the  indorsee.  The  iiulorsot',  a  l)ank,  jiresented  the  note 
when  due  at  tlie  baidc  whoro  it  was  payable  and  had  it  certified.  Ijatcr 
in  the  day  the  corlifyin,-,'  bank  discovered  that  tlioro  were  no  ruiids 
to  pay  the  note,  and  before  3  o'clock  P.  M.  notified  the  holding  bank, 
which  refused  to  recognize  the  notice.  The  certifying  bank  then 
took  up  the  note,  presented  it  at  its  own  counter,  protested  it,  and 
notified  the  indorsers.  The  certifying  bank  siumI  the  indorsers. 
The  case  recognizing  the  well-established  doctrine  that  a  baidv  is 
estopped  from  denying  its  certification  of  a  note  as  good 
where  the  presenting  l)ank  relies  upon  its  accuracy  and  fails  to  protest 
the  note  for  non-payment  and  thus  releases  the  indorsers, 
holds  that,  where  the  mistake  in  certification  is  discovered,  and  notice 
given  to  the  presenting  bank  in  time  to  make  a  re-presentalioi;  a  id 
charge  the  indorsers,  the  certifying  bank  is  discharged  from  further 
liability,  and  that  the  certifying  bank  in  this  case  took  the  note  as  a 
purchaser  and  acquired  the  rights  of  a  holder  and  could  maintain 
its  action  against  the  indorsers.  The  discounting  bank  received  no- 
tice of  the  mistake  before  it  in  any  way  changed  its  position.  It 
had  not  parted  with  value  or  released  the  indorsers  on  the  strength 
of  the  certification,  otherwise  the  certification  would  have  been 
binding. 

Tn  the  case  af  bar  plaintiff  parted  with  value  on  the  strength  of 
the  certification.  No  enforceable  contract  was  entered  into  l)etween 
the  parties  to  this  suit  because  plaintiff  never  parted  with  value 
relying  upon  the  indorsement.  As  between  the  certifying  bank  and 
the  plaintiff  there  could  be  no  revocation  by  the  bank.  There  was 
no  claim  of  mistake  on  the  part  of  tlie  certifying  bank  or  any  at- 
tempt to  revoke  its  certification.  If  the  certification  was  in  law  a 
fraud,  it  w'as  the  fraud  of  Andrews  and  the  certifying  bank,  of  which 
neither  of  the  parties  to  this  suit  had  knowledge.  The  presentment 
of  the  certified  check  to  the  certifying  bank,  and  iis  non-payment, 
was  the  repudiation  by  the  })ank  of  its  independent  contract  of  certifi- 
cation made  with  the  plaintifi".  This  check  as  it  was  when  the  in- 
dorsers parted  with  it  to  the  indorsee  was  -never  presented  for  pay- 
ment. Tlie  certification  was  made  without  the  knowledge  or  consent 
of  the  indorsers.  Applying  to  this  case  the  decision  in  the  Wetherald 
case,  so  far  as  it  has  any  hearing  upon  the  questions  here  involved, 
it  is  authority  for  holding  that  the  certifying  bank  could  not  avoid 
liability  on  its  certification,  for  the  reason  that  plaintilT  bad  parted 
with  value  on  the  strength  of  it. 

It  was  urged  in  the  trial  court,  and  is  urged  in  tliis  court,  <hat 
the  certification  of  the  check  in  the  absence  of  funds  did  not  operate 


II.    3.]  CERTIFICATION.  751 

to  release  the  maker  from  his  liability  thereon,  and  therefore  the  iu- 
dorsers  can  occupy  no  better  position  than  the  maker  and  are  not 
released  and  upon  this  theory  the  trial  court  decided  the  ease.  No 
authorities  arc  cited  to  us  and  wc  have  been  al)lc  to  hnd  none  which 
support  this  proposition.  As  already  stated,  it  is  a  general  rule  of 
law  that  where  the  holder  of  a  check  procures  its  certification  by  the 
bank  upon  which  it  is  drawn,  the  drawer  and  all  parties  thereto  are 
discharged.  The  relations  of  the  different  parties  to  a  check  and 
the  nature  of  tlieir  contracts  have  already  been  sufficiently  stated. 
The  certification  is  an  entirely  new  and  different  contract.  By 
it  the  certifying  bank  becomes  the  primary  debtor.  The  holder  has 
released  the  maker  and  indorsers  and  voluntarily  accepted 
the  obligation  of  the  certifying  bank.  It  is  not  unlawful  for  one 
to  draw  checks  upon  an  overdrawn  account.  Neither  is  it  unlawful 
for  the  bank  to  pay  such  a  check  and  to  charge  the  amount  thereof 
against  the  drawer.  In  such  case,  as  in  any  other  case,  the  holder 
who  obtains  a  certification  has  elected  to  accept  the  obligation  of  the 
bank  instead  of  cash.  So  far  as  the  drawer  is  concerned  the  check  is 
paid  because  the  holder  by  securing  certification  obtained  what  he 
desired  as  payment.  The  bank  had  been  directed  to  pay  cash,  and 
when  the  holder  obtained  what  he  preferred  to  cash,  it  was  none  the 
less  a  payment.  The  rule  which  releases  the  maker  and  indorsers  of 
a  check  upon  certification  procured  by  the  holder,  is  not  predicated 
upon  the  presence  of  funds  in  the  hands  of  the  certifying  bank,  but 
upon  the  principle  that  such  certification  operates  as  payment,  dis- 
charging the  maker  whose  contract  has  been  fulfilled,  and  the  in- 
dorser  who  was  the  guarantor  of  such  fulfillment.  If,  in  considering 
this  proposition  of  law,  the  question  of  what  relation  may  have  been 
created  between  the  bank  and  the  maker  in  case  of  a  certification  in 
the  absence  of  funds  is  eliminated  as  a  factor,  the  correctness  of  our 
reasoning  is  in  our  judgment  conclusive.  The  insolvency  of  the 
certifying  bank  after  the  certification  is  a  circumstance  which  is  likely 
to  disturb  our  judgment  of  the  legal  question,  because  it  occasioned 
this  suit.  That  fact  is  entirely  immaterial  to  the  question,  the  rights 
of  the  parties  having  been  fixed  before  that  insolvency  was  known, 
and  they  were  utterly  ignorant  of  its  possibility.  Our  conclusion  is, 
therefore,  that  the  general  rule  applies  to  this  case  and  di.scliarges 
the  drawer  as  well  as  the  indorsers,  notwithstanding  the  absence 
of  funds. 

Upon  the  undisputed  facts  in  this  rase  the  defendants  were  en- 
titled, as  a  niafter  of  law,  to  an  instructed  verdict  in  fheir  favor.  The 
court  was  in  error  in  not  granting  their  request  to  that  effect. 

The  judgment  is  reversed  and  a  new  trial  ordered.     All  concur.  • 


•  Thi«  ra«p  is  reported  with  notcg  on  thp  pffort  of  cprtifirRtinn  of  chrrk  on 
thp  liability  of  drawrr  or  indor«««r  in  9  L.  N.  S.  fiHS,  Ilfl  Am.  Rt.  Rep.  .I.T?, 
and   in   11    A.  &  E.  Ann.  Can.  241.  — C. 


752  CHECKS.  [ART.    XVII. 

4.  Drawee  not  Li.vhlk  to  Moldkh:  A  Check  is  not  an  Assign- 
ment OF  Funds. 

§325  RANK  OF  THE  REPUBLIC  v.  MILLARD. 

10  Wali.ack  (IT.  S.)   152.—  1869. 

In  krkok  to  tlie  Supreme  Court  of  the  District  of  Columbia,  the 

case  ht'ing  this :  — 

Millard,  a  i'a[)tain  in  tlii'  military  service  of  the  United  States,  was 
in  1865,  on  leaving  the  service,  a  creditor  of  the  government  for 
$859,  arrears  of  pay  as  captain.  In  settlement  of  this  account  the 
proper  paymaster  of  the  army  drew  and  issued  a  check  for  that  sum 
upon  the  National  Bank  of  the  Republic,  a  depositary  of  public 
money  and  financial  agent  of  the  United  States,  for  the  custody, 
transfer,  and  disbursement  of  the  government  funds,  having  funds 
for  the  payment  of  the  check. 

The  bank,  as  testimony  tended  to  show,  had  once  paid  the  check 
on  a  forged  indorsement  of  Millard's  name.  Ascertaining  and  ex- 
posing the  forgery,  and  recovering  possession  of  the  check,  Millard 
now  presented  the  same,  demanding  payment  to  himself.  This  pay- 
ment the  bank  refused  to  make.  Thereupon  he  sued  it,  declaring 
on  a  special  count  on  the  transaction,  and  also  on  a  general  count 
for  money  had  and  received  by  the  bank  to  his  use. 

On  the  trial  the  bank  requested  the  court  to  charge,  "  that  unless 
the  jury  were  satisfied  from  the  evidence  that  it  accepted  the  check 
in  favor  of  the  plaintiff,  or  his  assignees,  or  promised  to  pay  the  same 
to  the  plaintiff,  or  his  assignees,  he  was  not  entitled  to  recover." 
But  the  court  refused  so  to  charge,  and,  verdict  and  judgment  having 
gone  against  the  bank,  it  brought  the  case  here  on  error;  the  ques; 
tions  here  argued  and  considered  being:  1st.  The  general  one, — 
whether  the  holder  of  a  bank  check  could  sue  the  bank  for  refusing 
payment  in  the  absence  of  proof  that  it  was  accepted  by  the  bank  or 
charged  against  the  drawer.  2d.  If  not,  whether  the  fact  existing 
in  this  particular  case,  that  the  check  was  on  a  national  bank  (a 
public  depositary  of  the  government  funds)  by  an  officer  of  the  gov- 
ernment, in  favor  of  a  public  creditor,  varied  the  general  rule. 
Mr.  Justice  Davis  delivered  the  opinion  of  the  court. 
The  only  question  presented  by  the  record  which  it  is  material  to 
notice  is  this:  Can  the  holder  of  a  bank  check  sue  the  bank  for 
refusing  pavment,  in  the  absence  of  proof  that  it  was  accepted  by 
the  bank,  or  charged  against  the  drawer? 

It  is  no  longer  an  open  question  in  this  court,  since  the  decision 
in  the  cases  of  The  Marine  Bank  v.  The  Fulton  Bank  (2  Wallace, 
252),  and  of  Thompson  v.  Riggs  (5  Id.  663),  that  the  relation  of 


II.  4.]  dbawee's  liability  to  holder.  753 

banker  and  customer,  in  their  pecuniary  dealings,  is  that  of  debtor 
and  creditor.  It  is  an  important  part  of  tlie  business  of  banking  to 
receive  deposits,  but  when  they  are  received,  unless  there  are  stipu- 
lations to  the  contrary,  they  belong  to  the  bank,  become  part  of  its 
general  funds,  and  can  be  loaned  by  it  as  other  money.  The  banker 
is  accountable  for  the  deposits  which  he  receives  as  a  debtor,  and  he 
agrees  to  disi-harge  these  debts  by  honoring  tiie  checks  which  the 
depositors  shall  from  time  to  time  draw  on  him.  The  contract 
between  the  parties  is  purely  a  legal  one,  and  has  nothing  of  the 
nature  of  a  trust  in  it.  This  subject  was  fully  discussed  by  Lords 
Cottenham,  Brougham,  Lyndhurst,  and  Campbell,  in  the  House  of 
Lords,  in  the  case  of  Foley  v.  Hill  (2  Clark  and  Finnelly,  28),  and 
they  all  concurred  in  the  opinion  that  the  relation  between  a  banker 
and  customer,  who  pays  money  into  the  bank,  or  to  whose  credit 
money  is  placed  there,  is  the  ordinary  relation  of  debtor  and  creditor, 
and  does  not  partake  of  a  fiduciary  character,  and  the  great  weiglit 
of  American  autiiority  is  to  the  same  effect. 

As  checks  on  bankers  are  in  constant  use,  and  have  been  adopted 
by  the  commercial  world  generally  as  a  substitute  for  other  modes 
of  payment,  it  is  important,  for  the  security  of  all  parties  concerned, 
that  there  should  be  no  mistake  about  the  status,  which  the  holder 
of  a  check  sustains  towards  the  bank  on  which  it  is  drawn.  It  is 
very  clear  that  he  can  sue  the  drawer  if  payment  is  refused,  but  can 
he  also,  in  such  a  state  of  case,  sue  the  bank?  It  is  conceded  that 
the  depositor  can  bring  assumpsit  for  the  breach  of  tiie  contract  to 
honor  his  checks,  and  if  the  holder  has  a  similar  right,  tben  the 
anomaly  is  presented  of  a  right  of  action  upon  one  promise,  for  the 
same  thing,  existing  in  two  distinct  persons,  at  tlie  same  time.  On 
principle,  there  can  be  no  foundation  for  an  action  on  the  part  of  the 
holder,  unles.s  there  is  a  privity  of  contract  betw(>en  him  and  the 
bank.  How  can  there  be  such  a  privity  when  the  baidv  owes  no  duty 
and  is  under  no  obligation  to  the  holder?  The  holder  takes  the 
cherk  on  the  credit  of  the  drawer  in  the  belief  tbat  he  has  funds  to 
meet  it,  but  in  no  sense  can  tbe  bank  be  said  to  be  connected  with 
the  transaction.  If  it  were  true  that  there  was  a  privity  of  contract 
between  the  banker  and  holder  when  the  check  was  given,  the  bank 
would  be  obli^^e(|  to  [>av  tlie  check,  altliougli  the  drawer,  before  it 
was  pre«eiited,  bad  conntermanded  it,  and  altboiigh  otlier  checks, 
flrawn  after  it  was  issued,  but  before  paynient  of  it  was  denuinded, 
had  exhausted  the  funds  of  the  depositor.  If  such  a  result  should 
follow  the  giving  of  chocks,  it  is  easy  to  see  tbat  bankers  would  be 
comp<dled  to  abandon  altogether  the  business  of  keeping  deposit 
accounts  for  their  customers.  If,  then,  the  hank  did  not  contract 
with  the  holder  of  the  check  to  pay  it  at  the  time  it  was  Gfiven,  how 
can  it  be  said  that  it  owes  any  duty  to  the  liohler  until  the  check  is 

NEOOT.   INPTRUMENT8  —  48 


754  CHECKS.  [art.  xvn. 

presented  aiul  luoopled  ?  Tlie  right  of  the  depositor,  as  was  said  by 
au  emiueut  judge  ((.Jardiuer,  J.,  Chapman  v.  White,  2  Seldeu,  417),  is 
a  chose  in  at-tion,  and  his  cheek  does  not  transfer  the  debt,  or  give  a 
lieu  upon  it  to  a  third  person  without  the  assent  of  the  depositary. 
Tliis  is  a  well  established  principle  of  law,  and  is  sustained  by  the 
English  and  American  decisions.  {Chapman  v.  White,  2  Selden, 
412;  Buticnvorth  v.  Feck,  5  Bosworth,  :U1 ;  Ballard  v.  Randall,  1 
Gray,  fi05;  Harker  v.  Anderson,  21  Wendell,  373;  Dykers  v.  Leather 
Manufaduring  Co.,  11  Paige,  616;  National  Bank  v.  Eliot  Bank,  5 
American  Law  Register,  711;  Parsons  on  Bills  and  Notes,  edition 
of  1863,  pp.  59,  60,  61,  and  notes;  Parke,  Baron,  in  argument  in 
Bellamy  v.  Majorihanks,  8  English  Law  and  Equity,  522,  523;  Whar- 
ton V.  Walker,  4  Barnwell  &  Cresswell,  163;  Warwick  v.  Rogers,  5 
Manning  &  Granger,  374;  Byles  on  Bills,  chapter  "Check  on  a 
Banker;"  Grant  on  Banking,  London  edition,  1H56,  96.) 

The  few  cases  which  assert  a  contrary  doctrine,  it  would  serve  no 
useful  purpose  to  review. 

Testing  the  case  at  bar  by  these  legal  rules,  it  is  apparent  that  the 
court  below,  after  the  plaintiff  closed  his  case,  should  have  instructed 
the  jury,  as  requested  by  the  defendant,  that  the  plaintiff,  on  the 
evidence  submitted  by  him,  was  not  entitled  to  recover.  The  de- 
fendant did  not  accept  the  check  for  the  plaintiff,  nor  promise  him 
to  pay  it,  but,  on  the  contrary,  refused  to  do  so.  If  it  were  true, 
as  the  evidence  tended  to  show,  that  the  bank,  before  the  check 
came  to  the  plaintiff's  hands,  paid  it  on  a  forged  indorsement  of  his 
signature,  to  a  person  not  authorized  to  receive  the  money,  it  does 
not  follow  tliat  the  bank  promised  the  plaintiff  to  pay  the  money  again 
to  him,  on  the  presentation  of  the  check  by  him  for  payment. 

It  may  he,  if  it  could  be  shown  that  the  bank  had  charged  the 
check  on  its  books  against  the  drawer,  and  settled  with  him  on  that 
basis,  that  the  plaintiff  could  recover  on  the  count  for  money  had 
and  received,  on  the  ground  that  the  rule  ex  cequo  et  bono  would  be 
applicable,  as  this  bank,  having  assented  to  the  order  and  communi- 
cated its  assent  to  the  paymaster,  would  be  considered  as  holding 
the  money  thus  appropriated  for  the  plaintiff's  use,  and  therefore, 
under  an  implied  promise  to  him  to  pay  it  on  demand. 

It  is  hardly  necessary  to  say,  that  the  check  in  question  having 
been  drawn  on  a  public  depositary,  by  an  officer  of  the  government, 
in  favor  of  a  public  creditor,  cannot  change  the  rights  of  the  parties 
to  this  suit.  The  check  was  commercial  paper,  and  subject  to  the 
laws  which  govern  such  paper,  and  it  can  make  no  difference  whether 
the  parties  to  it  are  private  persons  or  public  agents.  {The  United 
States  V.  Bank  of  Metropolis,  15  Peters,  377.) 

As  soon  as  the  deposit  was  made  to  the  credit  of  Lawler  as  pay- 
master, the  bank   was  authorized  to  deal   with   it  as   its  own,  and 


11.     1.]  DKAWKe's    LIABIUTV    TO    HOLDER.  755 

Locame  an&weiable  to  Lawler  for  the  debt  in  the  same  manner  that 
it  woukl  ha\e  been  liad  the  deposit  been  placed  to  his  personal  credit. 
Judijmeut  reversed  and  a  venire  de  novo  awarded.^ 


§  325  VAN  BUSKIHK  v.  STATE  BANK  OF  EOCKY  FORD. 

35   COLORAUO,    142. —  1905. 

Mr.  Justice  C.vmpijell  delivered  the  opinion  of  the  court. 

The  parties  are  each  doing  a  separate  banking  business  in  the 
same  town.  A  ciieck  drawn  on  tiie  appellant  hy  one  of  its  depositors 
was  by  tlie  payee  presented  for  payment  to  the  appellee.  Appellee 
telephoned  to  appellant  asking  if  the  check  was  good,  and  was  in- 
formed tliat  it  was  "good,"  or  "all  right."  This  was  the  extent  of 
the  information  given,  and  there  was  no  promise  by  appellant  that 
it  would  accept  or  pay  the  check  unless  tlie  information  given  is,  in 
hiw,  that  jtroinise.  A])|)('Ilee  then  paid  tlie  check  upon  the  strength 
of  the  foregoing  reply  to  its  (piestion,  but  otherwise  would  not  have 
cashed  it.  A  '(ew  minutes  thereafter  the  drawer  appeared  before  the 
drawee  (appellant)  and  stopped  payment,  of  which  appellant  imme- 
fliatcly  advised  the  ap|)ellee.  Afterwards,  and  on  the  same  day, 
when  apjiellce  presented  the  check,  duly  indorsed,  to  appellant  for 
payment,  the  latter  refu.-^ed  to  pay  it  because  it  had  been  directed  by 
its  depositor  not  to  do  so,  although  at  the  time  the  drawer  had  and 
still  has  with  appellant  sulTicicnt  funds  for  such  ])ayment. 

'I'hcreujjon  this  action  was  brought  by  appellee  against  a])j)ellant 
to  recover  the  amount  of  the  check,  upon  the  ground  that  ap])ellant 
had  pronn'-'cd  to  ])ay  it.  'IMie  trial  court  submitted  the  case  to  the 
jiiiy  up(»n  the  tlieory  tliat  the  cau.se  of  action  stated  in  the  complaint, 
setting   up  the    foregoing   facts,   was   based    uj)on   an   implied    parol 

«  Afcord:  Sorthrrn  Tnisl  Co.  v.  Ifoiirrs.  fiO  Minn.  208;  Fimt  .V.  /?.  v.  f'laik. 
i:{»  N.  V.  .SfiS;  Covrrt  v.  Khnrlrn.  4R  Ohio  St.  fifi;  Northumhrrland  linnk  v. 
Mr.Uirhurl.  lOii  I'ii.  St.  4r,0:  .'".  .Am.  &  Kn<j.  Ennyc.  L.  (2n(l  cA.) ,  p.  1001. 
(  oiitra:  Muiin  v.  ISurrh.  25  III.  35:  Fonnrr  v.  Smith,  31  Noh.  107;  <9i;)iwif)H.v 
V.  Hank.  41  Sn.  (  ar.  177;  (lonlon  v.  Miirhlrr,  34  F-n.  Ann.  004;  2  Morse  r>n 
l'iink«,  §!5  4n0-53S.  Wliijc  tin*  presumption  i><  tlint  no  nssi^nmont  ari^fs  from 
fill'  j;iviii'_'  of  a  cliitck,  yi't  this  is  controlhvj  hy  the  actual  intention  of  tho 
liiirtie.H.  If  it  in  ayrfrd  that  the  j)ay<'e  shall  have  nn  assi^Mimcnt  of  a  fund 
or  any  portion  of  a  funil.  he  is  in  the  ordinary  j)osition  of  nii  as^iffixe  and 
may  enforce  his  riirht-*  hy  ap[iropriale  action  in  law  or  er|uify.  Fourth  t^frrrt 
linnk  V.  YariHry,  105  I'.  S.  034:  liintry  v.  I'hnrnix  Hnnk.  83  N.  Y.  318;  Cnntrit 
V.  First   \.  «.,  01   X.  Y.  2(5;   First   \.   H.  v.  Clark.  134  N.  Y.  308.-11. 

(.•\ccor<l:  l.iivr  V.  .\ritiiinrr  Stork  Fxrhanqr,  5  Tnd.  Terr.  ( U.  S.  C't.  App. ) 
202.  reported  with  notp  in  5  A.  fi  E.  Ann.  Cns.  183:  Clark  v.  Toronto  Hank, 
72  Knn.  1.  reported  with  notes  in  2  T..  N.  S.  83.  and  in  115  Am.  St.  Rep.  173. 

Contra:   Turner  v.  Uut  Hprinyn  .\at.  Hank.  1«  S.  IJak.  498.  —  C] 


7^)6  CHECKS.  I  AKT.    XVIL. 

promise  to  pay.  The  verdiet  and  judgment  were  Tor  tlie  plaiutilF, 
and  the  defendant  appeals. 

The  two  cliief  points  relied  upon  hy  defendant  helow  (appellant 
here)  are  (1)  that  under  our  Negotiable  Instruments  Law  passed  in 
1897  (Session  Laws  18'J7,  p.  210),  an  action  will  not  lie  in  favor 
of  the  holder  of  a  check  against  the  drawee  imless  and  until  the 
same  is  accepted  or  certified  by  the  drawee,  wliith  acceptance  or 
certification  must  be  in  writing;  and  (2)  that  if  a  parol  acccplance 
or  promise  to  pay  is  binding,  no  such  promise  was  established  by 
the  evidence. 

1.  The  courts  of  England  and  America  liave  often  held  that,  at 
the  common  law,  though  many  of  the  rules  and  principles  applicable 
to  bills  of  exchange  apply  to  bank  checks,  the  two  kinds  of  instru- 
ments are  not  identical.  Regardless  of  the  common  law  rights  of 
the  parties  under  the  facts  of  this  case,  we  think  there  can  be  no 
doubt  as  to  the  correctness  of  appellant's  leading  contention  that, 
under  our  Negotiable  Instruments  Law,  the  drawee  of  a  check  is 
not  liable  to  the  holder  unless  and  until  he  accepts  or  promises  to 
pay  the  same,  and  such  assent  to  his  liability  must  be  in  writing. 
Section  126  ^  of  our  act  defines  a  bill  of  exchange  as  "  an  uncondi- 
tional order  in  writing  addressed  by  one  person  to  another,  signed 
by  the  person  giving  it,  requiring  the  person  to  whom  it  is  addressed 
to  pay  on  demand  or  at  a  fixed  or  determinable  future  time  a  sum 
certain  in  money  to  order  or  to  bearer."  Section  185^  reads:  "A 
check  is  a  bill  of  exchange  drawn  on  a  bank  payable  on  demand. 
Except  as  herein  otherwise  provided,  the  provisions  of  this  act  ap- 
plicable to  a  bill  of  exchange  payable  on  demand  apply  to  a  check." 

At  the  common  law  a  bill  of  exchange  payable  on  demand  need 
not  be  presented  for  acceptance.  Indeed,  strictly  speaking,  there  is 
no  such  thing  as  acceptance  of  a  check  in  the  ordinary  sense  of  tlie 
term  ;  yet  by  consent  of  the  holder  the  drawee  bank  may  enter  into 
an  engagement  quite  similar  to  that  of  acceptance  by  certifying  the 
check  to  be  good,  instead  of  paying  it.  2  Daniels  on  Negotiable  In- 
struments (4th  ed.),  §  1601  ;  sec.  14.3  of  our  act.*  A  chock  is  a 
species  of  bill  of  exchange,  viz.,  that  particular  kind  of  a  hill  which 
is  drawn  on  a  bank  and  payable  on  demand.  Under  our  act  it  need 
not  be  presented  for  acceptance  unless  it  contains  an  express  stipula- 
tion to  that  effect.    Sec.  143. 

Before  the  passage  of  our  Negotiable  Instruments  Law  this  court 
had  ruled,  in  accordance  with  the  weight  of  authority,  that  a  right 
of  action  does  not  exist  in  favor  of  the  holder  of  a  check  against 
the  drawee  bank  where  there  has  been  by  the  latter  no  acceptance 

IN.  Y.,  §  210. —  C. 
»N.  Y.,  §  321.  — C. 
«N.  v.,  §  240. —C. 


II.  4.]  deawee's  liability  to  holder.  757 

or  promise  to  pay.  Culo.  ^at.  Bank  v.  Bueltcher,  5  Colo.  185;  reaf- 
firmed in  Buettcher  v.  Culo.  Aat.  Bank,  15  Colo.  1(J.  Our 
statute  has  expressly  so  enacted.  See.  18L»."'  The  same  eases  at  least 
tacitly  recognized  the  doctrine  that  such  acceptance  or  implied  promise 
might,  in  the  absence  of  a  statute  to  the  contrary,  be  proved  by  parol 
testimony,  but  this  doctrine  is  abrogated  by  our  statute  as  we  pro- 
ceed to  show.  According  to  this  statute,  though  all  bills  of  exchange 
are  not  checks,  yet  as  a  check  is  therein  expressly  said  to  be  a  bill  of 
exchange  drawn  on  a  bank  and  payable  on  demand,  every  check  is  a 
bill,  that  is,  it  is  a  species  of  a  bill.  So  that,  though  a  check  need 
not  be  presented  for  acceptance  in  order  to  render  the  parties  thereto 
liable,  still  as  the  check  itself  does  not  operate  as  an  assignment 
of  any  part  of  the  fund  to  the  credit  of  the  drawer  with  the  bank, 
and  the  drawee  bank  is  not  liable  to  the  holder,  unless  and  until 
it  accepts  or  certifies  the  check  (sec.  189),  and  as  (sec.  185)  except 
as  in  the  act  otherwise  provided  all  of  its  provisions  applicable  to  a 
bill  of  exchange  payable  on  demand  apply  to  a  check,  and  as  no  con- 
trary provision  for  the  acceptance  of  or  promise  to  pay  a  check  has 
been  made,  the  provision  applicable  to  a  bill  of  exchange  that  ac- 
ceptance or  certification  when  made  must  be  in  writing  applies  also 
to  a  check.  There  being  no  pretense  in  this  case  that  the  promise  to 
pay  or  certification  or  acceptance  of  the  check  sued  upon  was  in 
writing,  the  holder  was  not  entitled  to  sue  the  bank  upon  it. 

There  are  distinctions  between  an  action  on  a  bill  or  check  as  an 
accepted  l)ill  and  one  founded  on  a  breach  of  promise  to  accept. 
Boyre  v.  Edwards,  1  Peters,  1 11  ;  Henrietta  Xat.  Bank  v.  Slate  Xat. 
Bank,  80  Tex.  648.  But  we  do  not  consider  that  such  distinctions 
are  important  here.  This  action  was  based  upon  a  parol  promise  to 
pay  the  chock.  Acceptance  of  a  bill  at  common  law  and  under  our 
statute  is  merely  the  signification  by  the  drawee  of  his  assent  to  the 
order  of  the  drawer.  The  legal  meaning  of  an  acceptance  is  that  the 
acceptor  engages  to  pay  the  instrument  according  to  the  tenor  of  his 
acceptance.  In  otlior  words,  it  is  a  promise  to  pay.  Session  Laws 
1897,  sees,  f;--',  1.".'-':  1  Diini.ls  on  Negotiable  Instruments  (Ith  ed.), 
§  475.  This  action  is  one  by  a  holder  of  a  cheek  against  the  drawer 
based  upon  a  j)arol  promise  of  tiie  latter  to  pay,  and  it  cannot  l)e 
maintained. 

2.  It  is  well  to  observe  that  this  is  not  an  action  to  recover  money 
lost  by  the  fraud  or  wrongdoing  of  another,  and  if  such  were  the 
cause  of  action  pleaded  Ibe  evidence  would  not  support  it.  The  only 
claim  made  by  plaintiff  is  that  the  information  which  the  ai)pellant 
gave  in  response  to  an  iiupiiiy  was,  in  legal  effect,  a  promise  to  y)ay 
the  check  when  the  same  was  presented  for  that  purpose.  There  is 
no   pretense   that   the   information    given    was    false;    it   is   conceded 

6N.  Y.,  §  325.  — C. 


7Jt>  CHECKS.  [AKT.    XVII. 

that  the  antwcr  to  ])laiuliir"s  iiujuiry  on  wliicli  the  proiuiso  reals 
was  true;  henee  tliere  is  preseul  lieiv  no  element  of  an  action  ex 
delictu. 

In  tluis  disposing  ol'  the  ease  upon  the  i^iound  (hat  a  promise 
sueh  as  is  here  relied  upon  must  l)e  in  willing-,  we  are  relieved  of 
the  neeessity  of  considering  whether  the  mere  oi'al  statement  l)y  tiie 
drawee  bank  tliat  a  check  drawn  upon  it  is  "good  "  or  "all  right" 
gives  rise  to  an  action  in  favor  o\'  one  who  parts  with  moni^y  upon  the 
faith  of  it. 

The  judgment  should  he  reversed  and  the  cause  remanded,  with 
instructions  to  the  trial  courl   io  disnuss  ihe  action. 

Reversed. 

Chief  Justice  (i.arhri!T  and  Mk.  Justice  Steele  concur. 


5.  FoKGEU  OR  Kaiskl)  CiiRCKs:  Hecipkocal  Obligations  of  Bank 

AND  Depositor. 

§  326  «       CRTTTEN^  v.  CHEMICAL  NATIONAL  BANK. 
171  New  York,  219.— 1902. 

Appeal  from  a  judgment  of  the  Appellate  Division  of  the  Supreme 
Court  in  the  first  judicial  department,  affirming  a  judgment  in  favor 
of  plaintiff  entered  upon  the  report  of  a  referee. 

CuLLEN,  J.  —  The  plaintiffs  kept  a  large  and  active  account  with 
the  defendant,  and  this  action  is  to  recover  an  alleged  balance  of  a 
deposit  due  to  them  from  the  hank.  The  plaintiffs  had  in  their  em- 
ploy a  clerk  named  Davis.  It  was  the  duty  of  Davis  to  fill  u])  the 
cheeks  which  it  might  be  necessary  for  the  plaintiffs  to  give  in  the 
course  of  business,  to  make  corresponding  entries  in  the  stubs  of  the 
check  book  and  present  the  checks  so  prepared  to  Mr.  Critten,  one  of 
tlie  plaintiffs,  for  signature,  together  with  the  bills  in  payment  of 
which  they  were  drawn.     After  signing  a  check  Critten  would  place 

«Tlii.s  st'ction  was  added  to  the  New  Yori<  Negotiable  Instriiincnts  Law  by 
Laws  of  1904,  ch.  287,  and  to  tlie  New  Jersey  Neyotiabie  Instrunients  Law 
by  Laws  of  190S,  cli.  21.5.  Mr.  Crawford  criticizes  its  incorporation  into  the 
Negotiable  Instruments  Law.  "  It  does  not  seem  to  be  {germane  to  the 
Negotiable  Instruments  Law,  and  would  more  properly  have  been  enacted 
as  an  amendment  to  the  15anking  Law.  If  the  statute  is  to  be  amended  by 
adding  provisions  outside  of  its  proper  scope,  it  will  soon  become  such  a 
piece  of  patchwork,  that  there  will  be  a  demand  for  its  rey)eal."  Craw.  Neg. 
Inst.  Law,  .3rd  ed.,  p.  181.  While  Critten  v.  Chemical  National  Bank,  re- 
ported lierein,  was  decided  prior  to  the  enactment  of  this  statutory  provision, 
nevertheless  the  principles  of  law  laid  down  in  this  case  will  doubtless  be 
carefully  considered  when  the  question  as  to  what  is  the  proper  construction 
of  the  statute  comes  before  the  New  York"  courts.  —  C. 


II.    5.]  FORGED  OR  RAISED   CHECKS.  759 

it  and  the  bill  in  an  envelope  addressed  to  the  propei 
party,  seal  the  envelope  and  put  it  in  the  mailing  drawer.  During 
the  period  from  September,  1897,  to  October,  1899,  in  twenty-four 
separate  instances  Davis  abstracted  one  of  the  envelopes  from  the 
mailing  drawer,  opened  it,  obliterated  by  acids  the  name  of  the 
payee  and  the  amount  specified  in  the  check,  then  made  the  check 
payable  to  cash  and  raised  its  amount,  in  the  majority  of  cases,  by 
the  sum  of  $100.  He  would  draw  the  money  on  the  check  so  altered 
from  the  defendant  bank,  pay  the  bill  for  which  the  check  was  drawn 
in  cash  and  appropriate  the  excess.  On  one  occasion  Davis  did  not 
collect  the  altered  check  from  the  defendant,  but  deposited  it  to  his 
own  credit  in  another  bank.  When  a  check  was  presented  to  Critten 
for  signature  the  number  of  dollars  for  which  it  was  drawn  would 
be  cut  in  the  check  by  a  punching  instrument.  When  Davis  altered 
a  check  he  would  punch  a  new  figure  in  front  of  those  already  appear- 
ing in  the  check.  The  checks  so  altered  by  Davis  were  charged  to  the 
account  of  the  plaintiff's,  which  was  balanced  every  two  months  and 
the  vouchers  returned  to  them  from  the  bank.  To  Davis  himself  the 
plaintiff's,  as  a  rule,  intrusted  the  verification  of  the  bank  balance. 
This  work  having  in  the  absence  of  Davis  been  committed  to  another 
person,  the  forgeries  were  discovered  and  Davis  was  arrested  and 
punished.  It  is  the  amount  of  these  forged  checks,  over  and  above 
the  sums  for  which  they  were  originally  drawn,  that  this  action  is 
brought  to  recover.  The  defendant  pleaded  payment  and  charged 
negligence  on  plaintiff's  part,  both  in  the  manner  in  which  the  checks 
were  drawn  and  in  the  failure  to  discover  the  forgeries  when  the 
pass  book  was  balanced  and  the  vouchers  surrendered.  On  the  trial 
the  alteration  of  the  checks  by  Davis  was  established  beyond  con- 
tradiction and  the  substantial  issue  litigated  was  that  of  the  plaintiff's' 
negligence.  The  referee  rendered  a  short  decision  in  favor  of  the 
plaintiffs  in  which  he  states  as  the  ground  of  his  decision  that  the 
plaintiffs  were  not  negligent  either  (1)  in  signing  the  checks  as 
drawn  by  Davis,  or  (2)  in  failing  to  discover  the  forgeries  at  an 
earlier  date  than  that  at  which  they  were  made  known  to  them. 

The  relation  existing  between  a  bank  mikI  a  depositor  being  that 
of  debtor  and  creditor,  the  bank  can  justify  a  payment  on  the  de- 
ftositor's  account  only  upon  the  actual  direction  of  the  depositor. 
"The  questions  arising  on  such  paper  (checks)  between  drawee  and 
drawer,  however,  always  relate  to  what  the  one  has  authorized  the 
otber  to  do.  Tliey  are  not  (piestions  of  negligence  or  of  liability 
of  parties  upon  commercial  paper,  but  are  those  of  authority  solely. 
*  *  *  The  question  of  negligence  cannot  arise  unless  the  deposi- 
tor has  in  drawing  his  check  left  blanks  unfilled,  or  by  some  affirma- 
tive net  of  negligence  has  facilitated  the  commission  of  a  fraud  by 
those  into  whose  bands  the  check  may  come."  (f'rntrfnrd  v.  Wr.<it 
Side  Bank,  100  N.  Y.  50.)     Therefore,  when  the  fraudulent  altera- 


7G0  riiKc'Ks.  [art.  xvii. 

tion  ol"  the  t'luvks  was  provctl,  tlu'  liability  of  the  hank  for  their 
aiiioiint  was  made  out  and  it  was  incumbent  upon  the  defendant  to 
establish  allirmatively  negligence  on  the  plaintills'  part  to  relieve  it 
from  the  consequences  of  its  fault  or  misfortune  in  paying  forged 
orders.  Now,  while  the  drawer  of  a  check  may  be  liable  where  he 
draws  the  instrument  in  such  an  incomplete  state  as  to  facilitate  or 
invite  fraudulent  alterations,*  it  is  not  the  law  thai  he  is  IhjuiuI  so 
to  prepare  the  clieck  that  nobody  else  can  successfully  tamper  with  it. 
(Societe  GencraU  v.  Metropolitan  Bank,  27  L.  T.  [N.  S.]  849; 
Belk-nap  v.  National  Hank  of  North  America,  100  Mass.  380.)  In 
the  present  case  the  fraudulent  alteration  of  the  checks  was  not 
merely  in  the  perforation  of  the  additional  figure,  but  in  the  oblitera- 
tion of  the  written  name  of  the  payee  and  the  substitution  therefor 
of  the  word  "  cash."  Against  this  latter  change  of  the  instrument 
the  plaintitl's  could  not  have  been  expected  to  guard,  and  without 
that  alteration  it  would  have  no  way  profited  the  criminal  to  raise 
the  amount.  Apart,  however,  from  that  consideration,  the  question 
was  clearly  one  of  fact  to  be  determined  largely  by  an  inspection 
of  the  checks  themselves.  They  are  not  produced  before  us,  and  we 
cannot  say  that  the  finding  of  the  referee,  that  the  plaintiff  was  guilty 
of  no  negligence  in  signing  them  in  the  condition  in  which  they 
were  presented  for  signature,  was  without  sufficient  evidence  for  its 
support. 

We  arc  now  brought  to  the  consideration  of  the  finding  of  the 
referee  that  the  plaintiffs  were  not  guilty  of  negligence  in  failing  to 
discover  the  forgeries  after  the  return  of  the  checks  and  the  balancing 
of  the  account  in  the  pass  book.  Preliminarily  we  must  determine 
what  duty  the  depositor  owes  to  his  bank  by  way  of  examination  and 
verification  of  his  checks  and  account,  for  the  learned  counsel  for  the 
respondent  asserts  that  no  such  duty  in  reality  exists.  This  conten- 
tion is  principally  based  on  the  authority  of  Weisser's  Adm'rs  v.  Deni- 
son  (10  X.  Y.  68).  In  that  case  a  depositor  sued  his  bank  for  the 
amount  of  certain  checks  to  which  his  signature  was  forged  by  his 
clerk.  His  pass  book  was  balanced  and  vouchers  returned  at  inter- 
vals as  in  the  present  ease.  At  the  trial  he  recovered  a  verdict  for 
the  full  amount  of  the  forgeries.  On  appeal  the  General  Term  of 
the  Superior  Court  ordered  a  reversal  of  tiie  judgment  unless  the 
plaintiff  would  reduce  his  recovery  to  the  amount  paid  on  the  forged 
checks  prior  to  the  time  when  the  bank  book  was  first  balanced  and 
vouchers  returned.  To  this  reduction  the  plaintiff  assented,  and,  on 
the  defendant's  appeal,  the  judgment  as  modified  was  affirmed  by 
this  court.  In  the  opinions  delivered  by  two  distinguished  judges  the 
doctrine  is  asserted  that  the  depositor  owes  no  duty  to  the  bank  to 

•  But  see  National  Exchange  Bank  v.  Lester,  194  N.  Y.  4G1,  reported  herein 
at  p.  616.  —  C. 


II.    5.]  FORGED  OR  RAISED  CHECKS.  761 

examine  his  pass  book  or  vouchers  with  the  view  to  the  detection 
of  forgeries,  but  the  decision  itself  is  not  authority  for  more  than 
the  proposition  that  the  bank  was  not  relieved  from  liability  for 
forged  checks  which  it  had  paid  before  the  account  was  balanced  by 
the  failure  of  the  depositor  to  subsequently  discover  the  forgeries. 
As  was  said  by  Judge  Johnson  as  to  these  checks,  "  Whatever  loss 
the  bank  has  sustained,  it  has  suffered  from  its  own  negligence  or 
want  of  skill  in  a  matter  as  to  which,  in  the  first  instance,  it  and  it 
only  was  bound  to  exercise  skill  and  diligence.  To  this  loss  no  act 
of  Weisser  has  contributed."  The  question  again  came  before  this 
court  in  the  case  of  Frank  v.  Chemical  National  Bank  of  New  York 
(84  N.  Y.  209).  That  action  was  also  brought  to  recover  the  amount 
of  a  series  of  checks  forged  by  the  depositor's  clerk.  A  recovery  by 
the  plaintiffs  was  upheld,  though  not  on  the  principle  that  the  de- 
positor owed  no  duty  to  his  bank,  but  on  the  ground  that  he  had 
discharged  that  duty.  In  the  opinion  there  delivered.  Judge  Andrews 
said :  "  It  does  not  seem  to  be  unreasonable,  in  view  of  the  course  of 
business  and  the  custom  of  banks  to  surrender  its  vouchers  on  the 
periodical  writing  up  of  the  accounts  of  depositors,  to  exact  from  the 
latter  some  attention  to  the  account  when  it  is  made  up  or  to  hold 
that  the  negligent  omission  of  all  examination  may,  when  injury  has 
resulted  to  the  bank,  which  it  would  not  have  suffered  if  such  examina- 
tion bad  been  made  and  the  bank  had  received  timely  notice  of  ob- 
jections, preclude  the  depositor  from  afterward  questioning  its  cor- 
rectness. But  where  forged  checks  have  been  paid  and  charged  in 
the  account  and  rcturnerl  to  the  depositor,  he  is  under  no  duty  to 
the  bank  so  to  conduct  the  examination  that  it  will  necessarily  lead 
to  the  discovery  of  the  fraud,  [f  he  examines  the  vouchers  personally 
and  is  himself  deceived  by  the  skillful  character  of  the  forgery,  his 
omission  to  discover  will  not  shift  upon  him  the  loss  which  in  the 
first  instance  is  the  loss  of  the  bank."  In  that  case  the  depositor 
compared  the  returned  checks  with  the  stubs  in  the  check  hook,  but 
was  deceived  by  the  fact  that  the  forger  had  abstracted  the  forged 
checks  from  the  package.  In  the  Supreme  Court  of  the  United 
States  and  in  several  of  our  sister  states  the  rule  is  settled  that  the 
depositor  owes  his  bank  the  duty  of  a  reasonable  verification  of  the 
returned  checks.  In  LrnfJier  Mnnufariurers'  Bank  v.  Morgan  (117 
U.  S.  Ofi)  it  was  held  that  a  depositor  is  bound  personally  or  by  his 
agent,  and  with  due  diligence,  to  examine  the  pass  book  and  vouchers, 
and  to  report  to  the  bank  without  unreasonable  d(>lay  any  errors 
which  mny  have  been  discovered  tlierein,  and  that  if  he  fails  to  do 
so  and  the  bank  is  thereby  milled  to  its  prejudice,  he  cannot  after- 
wards dispute  the  correctness  of  the  balance  shown  in  the  pass  book. 
In  Dana  v.  Nnlinnnl  Bank  of  the  Rrpvhiir  (l.?2  Mass.  ir)fi)  the 
Supreme  Tourt  of  Massachusetts  said:  "The  mistake  was  in  the 
payment  of  tlie  money  upon  an  altered  check,  believed  to  be  genuine; 


763  CHECKS.  [ART.    XVII. 

it  was  not  for  the  advantapo  of  tlic  defendant,  and  its  condition  was 
chan^i^ed  by  it.     Tt  was  in  the  eourso  of  dealings  between  tlie  parties 
in  relation  to  which  each  owed  duties  to  the  other.     *     *     *     The 
plaintiffs    (depositors)    owed   to   the  defendant    (bank)    the  duty  of 
exereisinc:  due  diligence  to  give  it  information  that  the  payment  was 
unauthorized;    and   tliis   included   not  only  due   diligence   in  giving 
notii'C  after  knowledge  of  the  forgery,  but  also  due  diligence  in  dis- 
covering it."     In  Myers  v.  Southwestern  National  Bank  {VX\  Penn. 
St.  1 )   it  was  held  that  the  bank  was  entitled  to  have  the  vouchers 
which  it  surrendered  with  the  pass  book  examined,  and  if  rejected 
returned  within  a  reasonable  time,  and  that  if  this  was  not  done  be- 
cause of  the  depositor's  failure  to  perform  his  duty  in  that  regard  he 
should  not  be  permitted  to  recover.    The  same  rule  of  law  obtains  in 
Louisiana  {De  Fariet  v.  Bank  of  America,  23  La.  Ann.  310),  in  Texas 
{^ye^nstein  v.  National  Bank,  69  Tex.  38),  and  in  Alabama  [National 
Bank  v.  Allen,  100  Ala.  476).    The  course  of  dealings  between  banks 
and  their  depositors  is  well  known  and  is  considered  at  length  in  the 
three  cases  first  cited  from  other  jurisdictions.     The  methods  of  de- 
positors in  drawing  checks  on  their  accounts  have  become  much  more 
uniform  than  at  the  time  of  the  decision  in  \Ve,isser  v.  Denison,  supra. 
The  practice  of  taking  checks  from  check  books  and  entering  on  the 
stubs  left  in  the  book  the  date,  amount  and  name  of  the  payee  of 
the  check  issued  has  become  general,  not  only  with  large  commercial 
houses  but  with  almost  all  classes  of  depositors  in  banks.     The  skill 
of  the  criminal  has  kept  pace  with  the  advance  in  honest  arts  and  a 
forgery  may  be  made  so  skillfully  as  to  deceive     not  only  the  bank 
but  the  drawer  of  the  check    as  to  the  genuineness  of  his  own  signa- 
ture.    But  when  a  depositor  has  in  his  possession  a  record  of  the 
checks  he  has  given,  with  dates,  payees  and  amounts,  a  comparison  of 
the  returned  checks  with  that  record  will  necessarily  expose  forgeries 
or  alterations.     It  is  true  that  it  will  give  no  information  as  to  the 
genuine   character   of   the   indorsements,   and   because   the   depositor 
has  no  greater  knowledge  on  that  subject  than  the  bank,  it  owes  the 
bank  no  duty  in  regard  thereto.     (Welsh  v.  German- American  Bank, 
73  N.  Y.  424;   Shipman  v.  Bank  of  the  State  of  New  York,  126  N. 
Y.   318.)      It  is  also  true   that  verification  of  the  returned  checks 
would  not  prevent  a  loss  by  the  bank  in  the  case  of  the  payment  of 
a  single   forged   check  and   probably  not  in   many  cases  enable  the 
bank  to  obtain  a  restitution  of  its  lost  money,     ft  would,  however, 
prevent  the  successful  commission  of  continuous  frauds  by  exposing 
the  first  forgeries.    That  this  is  a  numerous  class  of  frauds  is  apparent 
from  the  number  of  cases  which  we  have  cited,  in  all  of  which  the 
forgerv  was  not  a  single  act,  but  a  series  of  acts  extending  over  a 
considerable  period  of  time,  and  the  crime  was  committed  by  a  clerk 
or  emplovee  of  the  depositor.     Considering  that  the  only  certain  test 
of  the  genuineness  of  the  paid  cheek  may  be  the  record  made  by  the 


II.    5.]  FORGED  OR  RAISED   CHECKS.  763 

depositor  of  the  checks  he  has  issued,  it  is  not  too  much,  in  justice 
and  fairness  to  tlie  bank,  to  require  of  him,  when  lie  has  such  a 
record,  to  exercise  reasonable  care  to  verify  the  vouchers  by  that 
record. 

While  we  hold  that  this  duty  rests  upon  the  depositor,  we  are  not 
disposed  to  accept  the  doctrine  asserted  in  some  of  the  cases  that  by 
negligence  in  its  discharge  or  by  failure  to  discover  and  notify  the 
bank,  the  depositor  either  adopts  the  checks  as  genuine  and  ratifies 
their  payment  or  estops  himself  from  asserting  that  they  are  forgeries. 
Such  a  doctrine  would  be  in  conflict  not  only  with  the  opinions  ren- 
dered in  Weisser  v.  Denison,  supra,  but  against  the  decision  there 
actually  made.  That  authority  has  stood  for  nearly  fifty  years  and 
we  would  not  feel  justified  in  now  overruling  it.  Nor,  if  the  question 
were  an  open  one  in  this  state,  would  we  deem  the  rule  of  estoppel 
or  that  of  ratification  a  just  one.  If  the  depositor  has  by  his  negli- 
gence in  failing  to  detect  forgeries  in  his  checks  and  give  notice 
thereof  caused  loss  to  his  bank,  either  by  enabling  the  forger  to  re- 
peat his  fraud  or  by  depriving  the  bank  of  an  opportunity  to  obtain 
restitution,  he  sliould  be  responsible  for  the  damage  caused  by  iiis  de- 
fault, but  beyond  this  his  liability  should  not  extend.  Tn  the  cases 
cited  from  the  Supreme  Court  of  the  United  Stales,  from  that  of 
Massachusetts  and  that  of  Pennsylvania,  it  is  conceded  that,  if  the 
bank  has  been  guilty  of  negligence  in  paying  the  forged  checks,  then 
the  doctrine  of  ratification  and  estoppel  does  not  apply.  It  seems  to 
us  that  tlie  exception  is  somewhat  inconsistent  with  the  principle  on 
which  the  doctrine  rests.  Moreover,  we  see  no  reason  why  the  bank 
should  be  entitled  to  anything  more  than  indemnity  for  the  loss  the 
depositor's  negligence  has  caused  it.  In  the  present  case,  a  check 
altered  by  Davis  from  the  sum  of  $2'^  to  $()22  was  ])aid  by  the  de- 
fendant to  the  Colonial  Bank,  in  which  Davis  had  deposited  it. 
Against  that  bank  the  defendant  has  ariij)le  recourse.  If  it  were  to 
be  held  that  the  plaint ifTs  were  estopped  liuni  denying  the  genuine- 
ness of  that  check  as  against  the  defendant,  the  iiilter  could  have  no 
claim  against  the  Colonial  jiank,  nor  is  it  clear  that  the  ))laintiffs 
would  have  any  direct  right  of  action  against  thai  hank.  The  Colonial 
Bank  took  the  check  solely  oti  the  resp(>nsil)i!ify  nf  I);i\is.  To  it  the 
plaintiffs  owed  no  duty.  If  the  piaintifTs  mikI  flic  dcfciidant  had 
never  settled  their  accounts  the  Colonial  Bank  couM  liave  had  no 
complaint  against  either  party  for  that  cause.  A  rule  which  might 
operate  to  relieve  that  bank  from  the  li;ii)ility  it  assumed  when  it 
collected  an  altered  check  merely  because  the  piaintifTs  failed  in  their 
duty,  not  to  it,  but  to  a  third  party,  shoiild  not  be  upheld.  Nor 
would  it  operate  justly  in  a  case  in  which  the  hank  had  paid  a  single 
forgery  unless  by  the  depositor's  default  and  delay  the  hank  had  lost 
ite  opportunity  to  secure  restitutioti.  This  question  is  well  discussed 
by  the  Supreme  Court  of  Alabama  in  the  case  of  Naiinval  Bank  v. 


7(!l  CIIKCKS.  [art.    XVII. 

Alh'ti,  supra,  and  we  concur  in  tlie  view  expressed  by  tlmt  court  that 
the  lialijlitv  of  the  depositor  for  nej^lect  of  his  ihity  to  exaiiiiiic  and 
verify  liis  arcouiit  with  the  hank  is  limilcil  to  tlie  daniai^es  sustained 
hy  tht"  l)ank  in  (■onse(]iience  of  sui'ii  ni'i^k'cl. 

In  the  present  ease  Davis  falsified  the  additions  or  totals  at  the 
foot  of  the  pai^es  of  the  eheek  hook.  Hut  with  a  few  exceptions  he 
did  not  alter  the  amounts  expressed  in  the  stubs.  In  no  ease  did  he 
chanije  in  the  stubs  the  name  of  the  payee  of  the  check.  It  is  clear, 
therefore,  tluit  at  all  times  a  comparison  of  the  returned  checks  with 
the  stubs  in  the  cheek  books  would  have  exposed  the  alterations  nuide 
in  the  cheeks.  Of  course,  the  knowledge  of  the  forgeries  that  Davis 
possessed,  from  the  fact  that  he  himself  was  the  forger,  was  in  no 
respect  to  be  attributed  to  the  plaintiffs.  But  we  see  no  reason  why 
they  were  not  chargeable  with  such  information  as  a  comparison  of 
the  checks  with  the  cheek  hook  would  have  imparted  to  an  innocent 
party  previously  unaware  of  the  forgeries.  The  plaintiffs'  position 
may  be  no  worse  because  they  intrusted  the  examination  to  Davis 
instead  of  to  a  third  person ;  but  they  can  be  no  better  off  on  that 
account.  If  they  would  have  been  ehargeal)1e  witli  the  negligence  or 
failure  of  another  clerk  in  the  verification  of  the  accounts,  they  must 
be  equally  so  for  the  default  of  Davis,  so  far  as  the  examination  itself 
would  have  disclosed  the  facts.  We  think  it  plain,  therefore,  that  the 
finding  of  the  referee  that  the  plaintiffs  were  not  negligent  in  the 
examination  of  the  pass  hook  and  vouchers  is  without  evidence  to 
sustain  it,  unless  the  plaintiffs  discharged  their  duty  to  the  defendant 
when  they  committed  the  examination  to  a  proper  clerk  and  were  not 
responsible  for  the  manner  in  which  the  clerk  performed  the  task. 
From  the  language  of  the  report  of  the  learned  referee  it  would  seem 
as  if  this  last  were  the  theory  on  which  liis  decision  proceeded.  We 
do  not  think  it  can  be  sustained.  If  any  duty  rested  on  the  plaintiffs 
we  do  not  see  why  the  ordinary  rule  of  principal  and  agent  or  master 
and  servant,  that  the  principal  or  master  is  liable  for  the  fault  of 
his  servant  or  agent  in  the  master's  business,  did  not  apply.  This  was 
so  held  in  the  case  of  Leather  Manufactnrers'  Bank  v.  Morgan,  supra, 
and  notiiing  to  the  contrary  is  to  be  found  in  Franl-  v.  Chemical 
National  Banl-  of  New  York,  supra.  There  it  is  said :  "  The  alleged 
duty,  at  most,  only  requires  the  depositor  to  use  ordinary  care;  and 
if  this  is  exercised,  whether  by  himself  or  his  agents,  the  bank 
cannot  justly  complain,  although  the  forgeries  are  not  discovered  until 
it  is  too  late  to  retrieve  its  position  or  make  reclamation  from  the 
forger."  In  that  case,  however,  the  question  of  tlic  liability  of  the 
prinr-ipal  for  the  negligence  of  his  clerk  did  not  arise,  for  the  plain- 
tiff made  the  examination  personally.  There  are  exceptions  to  the 
general  rule  of  the  liability  of  the  master  for  his  employee.  But  this 
case  does  not  fall  within  those  exceptions  nor  within  the  principle  on 
which  those  exceptions  are  based. 


n.    5.]  FORGED  OR  RAISED  CHECKS.  765 

These  views  would  render  it  Jiece^sary  to  reverse  the  judgment 
appealed  from  except  for  another  fact  now  to  be  noted.  The  referee's 
report  is  in  the  form  of  a  short  decision  and  on  appeal  it  is  to  be 
presumed  that  all  facts  warranted  by  the  evidence  and  necessary  to 
support  the  judgment  have  been  found.  {Amherst  College  v.  RltcJi, 
151  X.  Y.  283;  Bartlett  v.  (loodrich,  153  N.  Y.  421;  Marden  \. 
Dorthy,  160  N.  Y.  39.)  The  sixth  in  sequence  of  these  forgeries  was 
a  check  of  June  20th,  1898,  for  $12.49,  altered  to  the  sum  of  $112.49, 
with  the  name  of  the  payee  erased  and  "  Cash  "  written  in  the  place 
thereof.  The  teller  of  the  defendant,  who  paid  the  check  and  was 
a  witness  on  its  behalf,  testified  that  the  check  showed  on  its  face 
that  the  word  "  Cash  "  had  been  written  in  the  place  of  the  payee's 
name  over  an  erasure ;  that  the  number  of  dollars  was  also  written 
over  an  erasure;  that  he  did  not  like  the  appearance  of  the  check  and 
that  it  was  in  such  a  mutilated  condition  when  it  was  presented  to 
him  that,  before  paying  it,  he  required  Davis  to  indorse  upon  the 
check  a  receipt  for  its  amount.  That  the  defendant  was  grossly 
negligent  in  paying  the  check  and  has  only  itself  to  thank  for  that 
less  is  apparent.  But  the  effect  of  that  negligence  did  not  cease  with 
the  payment  of  the  check.  The  referee  might  well  have  found  that, 
had  payment  of  the  check  been  refused  or  had  Davis  been. required  to 
obtain  the  indorsement  or  guaranty  of  the  plaintiffs  as  to  its  correct- 
ness, the  forgeries  of  Davis  would  have  been  exposed  and  their  repeti- 
tion would  not  have  occurred.  That  Davis  was  able  to  successfully 
continue  from  this  time  to  his  arrest  a  series  of  forgeries  is  as  fairly 
attributable  to  the  folly  of  the  bank  in  paying  to  a  clerk  a  check  of  his 
employers  which  had  plainly  been  altered  without  making  inquiry  as 
to  the  reason  or  authority  for  the  alteration,  as  it  was  to  any  careless- 
ness of  the  plaintiffs  in  failing  to  detect  the  alteration  when  the  checks 
were  returned  to  them  from  the  bank.  Since  we  have  held  that  the 
question  in  the  case  was  not  one  of  ratification  or  estoppel,  but  that  the 
liability  of  the  f)laintiffs  to  the  bank  was  solely  for  the  loss  caused 
by  their  negligence,  it  is  a  complete  answer  to  the  defendant's  claim 
that  its  own  negligence  contributed  to  the  loss.  The  learned  counsel 
for  the  appellant  contends  that  the  plaintiffs'  cause  of  action  is  not 
based  on  negligence  and  that  the  plaintiffs  cannot  s\ie  on  contract  and 
recover  in  tort.  This  claim  is  without  force.  The  action  uiKpu'stion- 
ably  was  brought  on  contract,  but  it  remains  such.  The  plaintiffs  sue 
for  a  debt  to  which  the  defendant  answers:  We  have  paid  the  money, 
true,  not  according  to  your  directions,  l)ut  in  compliance  with  what 
we  bolievefi  to  be  your  directions,  and  your  negligcnit  conduct  in  your 
duty  towards  us  led  us  into  that  error.  To  which  the  plaintiffs  re- 
join: Your  own  negligence  cf)ntributed  hi  the  loss.  All  this  may 
be  true,  yet  the  plaintiffs  recover  not  in  tort  but  on  contract,  for  the 
allegation  of  negligence  on  the  jiarf  of  the  defendant  is  used  only 
to  defeat  its  claim  for  relief  on  aecnunt  of  the  y)laintiffs'  negligence. 


766  CHKCKS.  (akt.   xvii. 

It  follows  that  under  tlio  authority  of  1F^us«?fr  v.  Denisnn  (supra) 
thv  di'l'i'iiilaiit  iis  not  onlilU'd  to  civdit  I'or  tlic  two  flicfks  paid  hy  it 
boforo  the  account  was  halanccd  and  voiuIk  is  id  iiiiud.  For  the 
third,  fourth  and  fifth  eheck»,  amounting  lo  H:'.!)!),  it  is  entitled  to 
credit,  unless  it  was  guilty  of  negligence  in  tlicir  |iayiiiciil,  a  fact 
which  is  neither  found  hy  the  referee  nor  estahliahed  by  the  evid(!nee. 
For  the  sixtli  check  and  the  subsequent  ones  it  is  not  entitled  to 
credit  because  of  its  negligence  in  paying  the  sixth  check. 

The  judgment  should  be  reversed  and  a  new  trial  granted,  costs 
to  abide  the  event,  unless  the  plaintiffs  consent  to  deduct  fioiii  their 
recovery  the  sum  of  $300  with  interest  from  Novend)er  irjth,  l.S!)!), 
in  which  case  the  judgment,  as  nmdified,  should  be  allirmed,  without 
coBts  of  this  appeal  to  either  party. 

Vann,  J.  (dissenting).  Whether  the  plaintiffs  exercised  reason- 
able care  in  examining  the  checks  returned  as  vouchers  by  the  de- 
fendant was  a  question  of  fact,  and,  as  they  intrusted  the  work  to  a 
competent  agent  and  took  other  precautions,  there  was  evidence  to 
support  the  finding  in  their  favor,  whicli,  aftci-  affirmance  by  the 
Appellate  Division,  is  conclusive  here.  {Amherst  College  v.  liiich, 
151  N.  Y.  282.) 

In  my  opinion  the  judgment  below  should  neither  be  reversed  nor 
modified,  unless  the  court  readies  the  conclusion  tliat  the  plaintiffs 
had  constructive  notice  of  what  their  agent  discovered  in  examining 
the  checks.  The  rule  which  imputes  to  a  principal  knowledge  ac- 
quired by  his  agent  rests  upon  the  presumption  that  the  latter  has 
disclosed  all  the  material  facts  to  the  former.  Tliis  presumption  does 
not  extend  to  a  fact  which,  if  disclosed,  would  subject  the  agent  to 
a  prosecution  for  crime  or  defeat  a  scheme  in  which  he  was  engaged 
to  defraud  his  employer.  {Henry  v.  AUev,  151  N.  Y.  1,  0;  Benedict 
V.  Arnoux,  151  N.  Y.  715,  72S  ;  Bienevsfol-  v.  Ammidnwri.  155  N.  Y. 
47,  60;  Pomeroy  on  Eq.  Jur.  §  675.)  Tlie  dishonesty  of  the  agent 
changes  the  situation,  for  the  necessity  of  concealing  his  dishonest 
acts,  in  order  to  prevent  exposure  and  punisfmient,  destroys  the 
presumfjtion  which  would  otherwise  prevail  that  he  had  made  the 
facts  known  to  his  principal.  A  presumy>tion  must  be  reasonable  or 
it  cannot  exist,  and  it  would  not  be  reasonable  to  expect  one  engaged 
in  executing  a  fraudulent  project  to  make  a  disclosure  which  would 
not  only  defeat  his  purpose  but  would  send  him  to  prison.  Knowl- 
edge is  not  imputable  when  the  agent  is  acting  in  hostility  to  lii=> 
principal,  or  is  engaged  in  perpetrating  or  concealing  a  fraud. 

In  this  case  the  agent  committed  the  furtive  acts  and  knew  all 
about  them  long  before  he  examined  the  vouchers  returned  hy  the 
bank.  TTe  discovered  no  fraud  while  making  that  examination,  for 
he  knew  all  before,  and  could  not  discover  what  Ik'  alreadv  kne*''.  Tic 
found  out  nothing  while  acting  as  agent,  but  only  while  acting  on 


11.    5.]  FORGED  OR  RAISED   CHECKS.  767 

his  own  account.  He  was  still  engaged  in  his  scheme  to  defraud  when 
he  made  the  exauiinatiun,  and  'joncealment  was  as  necessary  tlien  as 
it  had  ever  been.  In  concealing  the  fraud  he  did  not  act  as  agent, 
and  he  was  engaged  in  concealing  the  fraud  all  the  time  after  he 
began  to  carry  on  his  system  of  forgery,  and  was  so  engaged  when  he 
examined  the  checks.  In  Frank  v.  Chemical  Nat.  Bank  (84  N.  Y. 
209)  the  court  said:  "It  was  only  because  Goodheim  was  the 
criminal  that  the  examination  did  not  disclose  to  them  the  forgeries. 
He  was  not  the  plaintiffs'  agent  in  issuing  the  forged  paper,  nor 
was  he  their  agent  in  abstracting  the  false  vouchers  and  falsifying 
the  books,  which  was  done  in  aid  of  his  criminal  purpose.''  If  Good- 
heim, whose  duty  it  was  to  examine  the  vouchers,  discovered  nothing 
imputable  to  the  plaintiffs  in  that  case,  how  could  Davis,  in  examining 
tfie  checks,  make  a  discovery  binding  upon  the  plaintiffs  in  this  case? 
Goodheim  abstracted  the  false  vouchers,  so  that  the  examination 
made  by  himself  and  the  depositor  would  disclose  no  wrong,  except 
by  their  absence,  and  Davis,  whose  duty  it  was  to  use  the  check 
punch,  so  used  it  as  to  leave  sufficient  space  next  to  the  dollar  sign 
in  which  to  subsequently  cut  a  figure  and  thus  raise  the  amount  of 
the  chock.  He  also  changed  the  footings  at  the  bottom  of  the  stub 
page  of  the  check  book  so  as  to  prepare  for  the  examination.  If  what 
Goodheim  did  was  not  binding  on  his  principal,  how  can  we  say  that 
what  Davis  did  was  binding  on  the  plaintiffs?  In  neither  case  can 
the  duties  of  the  dishonest  agent  he  so  separated  as  to  distinguish 
the  fraud  in  concealing  the  forgery  from  the  forgery  itself,  for  each 
act  was  part  of  a  single  scheme.  The  forgery,  the  preparation  for 
concealment  and  the  constant  concealment  were  successive  steps  in 
the  same  transaction.  It  cannot  be  held  that  wliat  Davis  would  liave 
discovered  if  he  had  not  been  the  forger  but  somebody  else,  is  im- 
putable to  the  plaintiffs  without  also  imputing  to  them  knowledge 
of  the  space  lef*  to  punch  out  another  figure,  as  well  as  of  the  false 
footings,  for  these  arts  were  within  the  scope  of  his  employment  as 
murli  as  the  exaniinaiion  of  the  vouchers.  In  every  case  of  successful 
fraud  by  an  agent,  it  is  the  nature  of  the  duties  intrusted  to  him  that 
enables  him  to  perpetrate  the  fraud,  and  it  is  erroneous  reasoning  to 
say  that  if  a  part  of  those  duties  had  been  intrusted  to  another  clerk, 
as  he  wo!ild  have  found  out  the  facfs,  they  must  he  imputed  to  t!i(! 
prineipal,  iK-caiise  the  latter  in  good  faith  assigned  such  duties  to 
the  criminal. 

Under  the  circumstances,  it  cannot  l)e  presumed  that  Davis  dis- 
closed facts  which  an  honest  agent  might  have  discovered  in  looking 
over  the  cliecks,  but  which  the  former  knew  l)efore  the  checks  came  to 
his  hands  for  examination,  without  subverting  the  reason  u})on  which 
the  rule  of  imputed  knowledge  is  founded.  Entertaining  these  views, 
I   nm   compelled   to  di.ssent   from   those  expres.ced    in    tlie   prevailing 


76S  CHECKS.  I  AKT.    XVII. 

opinion,  so  far  as  (licy  are  inconsistent  with  tliis  memorandum,  and 
to  vote  in  favor  of  atlirniani'e. 

Pakkkh,  C\\.  .1.,  IIakjii  r  and  W'kunkh,  JJ.,  foncur  with  ('ullkn, 
,1   ;  M.Mii'iN,  J.,  loneiiis  with  \  A.w,  ,1.;  BAKTLiri  r,  ,).,  takes  no  part. 

Judgment  accordingly.^ 

•  See  long  note  to  tliis  case  in  2  Col.  Law  Rev.  490   (November,  1902). 

See  First  National  linnk  of  Ifichmond  v.  Richmond  Electric  Co.,  106  Va. 
347.  This  case  is  reported  in  7  L.  N.  S.  744,  with  case  note  entitled, 
"  Depositor's  ripht  to  recover  amount  of  forged  or  raised  checks  paid  by 
bank  as  alTcctod  by  the  fact  that  he  intrusted  the  examination  of  vouchers 
to  the  employee  who  was  guilty  of  the  original  fraud."  This  note  contains 
the  following  careful  and  instructive  analysis  of  the  authorities: 

"  Assuming  that  the  depositor  owes  to  the  bank,  and  not  merely  to  him- 
self, the  duty  of  verifying  the  account,  and  examining  the  vouchers  returned 
by  the  bank,  there  are  a  number  of  different  views  .  .  .  affecting  the 
ultimate  question  whether  the  depositor  is  estopped  as  against  the  bank  by 
intrusting  that  duty  to  the  dishonest  employee.  These  views  may  be  formu- 
lated as  follows: 

"  (1)  That,  while  the  depositor  is  not  in  the  first  instance  chargeable  with 
the  dishonest  employee's  knowledge  of  his  own  fraud  in  raising  or  forging 
the  check,  yet,  by  intrusting  the  verification  of  the  account  and  the  examina- 
tion of  the  vouchers  to  that  employee,  he  becomes  chargeable  with  the 
latter's  antecedent  knowledge.  .  .  .  [Citing,  as  in  general  support  of  this 
view.  First  Nat.  Bank  v.  Richmond  El.  Co.,  lOG  Va.  347,  and  First  Nat. 
Bank  v.  Allen,  100  Ala.  476;  as  repudiating  it,  Kenneth  Invest.  Co.  v. 
National  Bank.   103  Mo.  App.  613.] 

"  (2)  That  the  effect  of  intrusting  the  verification  of  the  account  and 
the  examination  of  the  vouchers  to  the  dishonest  employee  is  the  same  as 
if  no  verification  or  examination  had  been  made  at  all.  .  .  .  [Citing 
August  V.  Fourth  Nat.  Bank,  15  N.  Y.  Supp.  139;  and  see  view  presented 
by  the  counsel  for  the  bank  in  the  case  of  Kctmcth  Inryest.  Co.  v.  Nat.  Bank, 
supra,   in   his   request  to  charge.] 

"  (3)  That  the  dutj'  resting  upon  the  depositor  to  verify  the  account  and 
examine  the  vouchers  is  not  a  personal  one.  but  may  be  delegated  to  a 
competent  employee;  and  that  the  fraud,  negligence  or  omission  of  such  em- 
ployee is  not  imputable  to  the  depositor.  In  this  view,  the  depositor  is 
exonerated,  if  he  has  good  reason  to  believe,  and  did  believe,  that  the  em- 
ployee in  question  was  honest  and  competent.  .  .  .  [Citing  as  sustaining 
this  view,  Kenneth  Invest.  Co.  v.  Nat.  Bank,  supra;  Wachsmann  v.  Columbia 
Bank,  8  Misc.  (N.  Y.)  280;  and  Clark  V.  Nat.  iShoe  &  Leather  Bank.  23  App. 
Div.  316  (obiter),  aff'd  in  164  N.  Y.  504;  and  as  at  least  impliedly  sup- 
porting it,  Frank  v.   Chem.  Nat.   Bank,  84  N.  Y.  209.] 

"  (4)  That  the  depositor  who  intrusts  the  verification  of  the  account  and 
the  examination  of  the  vouchers  to  the  fraudulent  employee,  if  in  no  worse, 
is  at  least  in  no  better,  position  than  if  such  duty  had  been  intrusted  to  an 
honest  and  com7>etent  employee.  This  view  assumes  that  the  negligence  or 
omission  of  such  an  employee  would  be  imputable  to  the  depositor; 
In  this  view,  it  is  apparent  that  the  rights  of  the  parties  are  made  to  turn 
upon  the  question  whether  an  honest  and  competent  employee,  not  having 
previous  knowledge  of  the  forgeries  or  other  fraud,  would,  by  the  exercise  of 
reasonable  care,  have  discovered  the  same  by  his  examination  of  the  vouchers. 
,     .     .      [Citing,  as  sustaining  this  view,  Critten  v.  Chemical  Nat.   Bank,  \1\ 


II-    -'">•]  FORGED  OR  RAISED  CHECKS.  'iQB 

§  326     McNEELY  COMPANY  v.  BANK  OF  NORTH  AMERICA. 
221   Pennsylvania,  588.  —  1908. 

Action  by  plaintiff  against  defendant  bank  to  recover  the  amount 
of  checks  alleged  to  have  been  wrongfully  paid  by  the  bank.  From 
an  order  dismissing  exceptions  to  the  report  of  the  referee  in  favor 
of  the  defendant,  plaintiff  appeals. 

Biiowx,  J.  McXeely  Company,  a  corporation,  was  a  depositor  with 
the  appellee,  the  Bank  of  North  America,  and  had  in  its  employ  one 
Charles  S.  Reber,  who  between  April  20,  1897,  and  February  24,  1903, 
forged  the  names  of  payees  on  90  checks  issued  by  it.  *  *  *  The 
fact  that  Reber  had  forged  some  of  the  indorsements  was,  as  stated,, 
discovered  about  January  1,  1904,  and  within  two  or  three  weeks 
thereafter  it  was  known  to  the  appellant  that  a  very  large  number 
of  the  90  forgeries  had  been  committed;  but  no  notice  of  this  was 
given  to  the  bank  until  nearly  three  months  afterwards. 

The  duty  of  a  depositor  in  a  bank,  upon  discovering  that  it  has  paid! 
and  charged  to  his  account  either  a  check  bearing  his  forged  signa- 
ture as  drawer  or  his  check  on  the  forged  indorsement  of  the  payee,, 
is  to  promptly  notify  it  of  the  forgery.  This  notification  is  not  only 
a  duty,  but  it  is  what  a  depositor  will  instinctively  do  on  discovering,, 
upon  the  return  of  his  bank  book  with  canceled  checks  charged  to. 
his  account,  that  there  are  among  them  some  which  he  never  signed 
or  which  were  not  paid  to  the  payees  named  in  them.  This  duty  is 
not  (questioned  by  the  learned  counsel  for  the  appellant.  Their  con- 
tention is  that,  for  the  disregard  of  it,  a  depositor  is  not  to  be  barred 
from  recovering  from  the  bank  what  it  may  have  paid  on  his  forged 
signatures  or  on  the  forged  indorsements  of  payees  named  in  checks 
drawn  by  him,  unless,  by  his  failure  to  promptly  notify  it  of  the 
forgeries,  it  has  lost  rights  over  against  other  parties,  and  the  burden 
is  upon  it  to  prove  such  loss.    Authorities  are  not  wanting  to  support 

N.  Y.  21fl,  (th«*  rasf  tf)  whidi  this  is  a  intfc);  Itaiui  v.  Xational  lUnilc.  WVl 
Mass.   156;     l/.v'rs  v.  Soutlnrc.itern  Sat.  Han/:,   llCl   I'a.    l.| 

"  (?)  Tlic  fifth  view  varies  hut  .Kli>;htly  fidni  the  fourth,  and  in  piac-tieal 
cm^H  it  \f>  with  (lifTuMiIty  to  he  di-if iiif/iiislu'd  tlicrcfroni.  It,  however,  niake.s 
thf  riirhts  of  the  renfieetive  fiarties  turn,  not,  as  in  the  fourth  view,  \i|)on 
the  question  wlietlier  an  pxaniination  of  tlie  vonehers  t)y  an  honest  and  com- 
petent employee  would  have  diselo><ed  the  fraud,  hut  upon  the  (pieHtion 
whether  a  rea>^onahle  sujiervlHion  hy  the  depositor  over  the  fraudulent  em- 
ployee in  the  diseh:ir;.'e  of  tlie  duty  of  examininj,'  the  vonehers  would  have 
diKclnsed  the  forp-ries.  .  .  ."  [Citinir,  an  sustaining  this  view,  l.mlhrr 
Sfnnuf.  Sill.  Hank  v.  Morrinii.  117  T.  S.  !t(5.  and.  as  seemint;  ♦"  «u|iport  it, 
llanhf  v.   fhrsoprnkr  I'.nnh.  r>l    Md.  .'■)<!2.1 

In  (.'eneral  stipport  of  the  fourth  view  alwve  stated,  see  aNo  the  exhaustive 
and  instructive  discussion  f>f  this  snhject  in  Sat.  J)rt(hiinq  Co.  v.  FnrmrrH^ 
Hank.  (!  I'ennewill  (Del.),  680.  See  also  tlie  lon^,'  note  to  this  case  in  7  .Mich. 
Law    Hev.   .'iS    (Xoveml.er,    l'»OS).—  ( •. 

NEOOT.   IN8TRDMBNT8  —  49 


'^70  CHECKS.  [aKT.    XVir. 

this,  but  tlie  rofoivo  iiiul  court  bolow  did  not  follow  them.  Relying 
upon  others,  thoy  lu'ld  Hint  the  plaintiff,  by  reason  of  its  failure  to 
promptly  notify  tiio  bank  of  its  discovery  of  the  forgeries,  could  not 
rei'ovor,  even  tiiougli  tlie  bank  bad  offered  no  evidence  that  it  could 
have  protected  itself  and  the  plaintiflf  had  not  shown  that  it  could 
not  if  prompt  notice  had  been  given. 

The  relation  between  a  bank  and  its  depositor  is  a  contractual  one. 
Its  undertaking  with  its  depositor  is  to  pay  bis  checks,  if  be  has  suffi- 
cient funds  with  it  for  that  purpose,  and  it  assumes  all  the  risk  as 
against  him  of  a  mispayment  in  paying  and  charging  to  his  account 
a  check  which  he  has  not  signed  or  one  which  he  has  signed  bearing 
a  forged  indorsement  of  the  payee.  To  his  account  it  may  not  charge 
such  a  check.  If  it  does,  the  depositor  can  recover  from  it  the  amount 
so  charged.  No  payment  by  a  bank  on  a  forged  signature  of  a  de- 
positor as  drawer  of  a  check  or  on  a  forged  indorsement  of  his  payee 
can  affect  him.  His  right  is  to  get  back  from  the  bank  whatever  he 
has  deposited  with  it,  less  what  has  been  properly  paid  out  on  his 
orders.  The  responsibility  of  the  bank  to  the  depositor  is  absolute, 
and  it  can  retain  no  money  deposited  with  it  by  him  to  reimburse 
it  for  any  mispayment  it  has  made  out  of  such  deposit;  but  it  can 
recover  from  a  forger  responsible  for  the  mispayment,  or  from  those 
who,  by  their  indorsement  of  a  check,  have  vouched  for  previous  in- 
dorsements or  the  genuineness  of  the  signature  of  the  alleged  drawer. 

The  right  of  a  bank  to  recover  from  a  forger,  or  from  those  to 
whom  it  may  have  paid  a  check  bearing  the  forged  signature  of  one 
of  its  depositors,  or  a  forged  indorsement,  is  its  only  remedy  for  the 
fraud  practiced  upon  it  by  the  forgery.  The  depositor's  money  is 
not  affected  by  it,  and,  when  he  is  the  first  to  discover  it,  it  is  not 
reasonable  that  he  should  not  be  required  to  give  prompt  notice  of  it 
to  the  bank,  if  he  intends  to  hold  his  depository  liable  for  the  mis- 
payment, and  this  without  regard  to  what  may  or  may  not  result 
from  a  prompt  effort  to  recover  from  the  party  or  parties  who  may 
be  liable  to  the  bank  for  the  mispayment.  The  depositor  can  gain 
nothing  by  withholding  knowledge  of  the  forgery,  but  the  bank,  if 
kept  in  ignorance  of  it  after  his  discovery  of  it,  may  lose  everything. 
As  soon  as  a  bank  learns  that  it  has  paid  a  check  on  a  forged  signa- 
ture of  a  depositor,  or  on  a  forged  indorsement  on  his  check,  it  is 
its  duty  to  promptly  restore  to  the  depositor's  account  what  was  im- 
properly taken  from  it,  and  its  right  at  the  same  time  is  to  proceed 
against  those  who  wrongfully  got  the  money.  This  right  is  to  pro- 
ceed immediately,  and  to  the  promptness  with  which  a  bank  is  able 
to  exercise  it  recovery  is  often  due.  When  a  depositor  withholds 
from  his  bank  his  knowledge  of  the  forgery,  he  withholds  from  it  this 
right  to  proceed  promptly  for  its  own  protection.  It  may  or  may 
not  be  able  to  recover  from  the  forger  by  promptly  proceeding  against 


II.    5.]  FORGED  OR  RAISED  CHECKS.  771 

him,  but  its  right  is  to  try  by  so  proceeding;  and,  when  one  of  its 
depositors  discovers  that  it  has  innocently  sustained  a  loss,  he  ought, 
not  only  in  all  good  conscience,  but  as  a  legal  duty,  to  notify  it  at 
once  of  its  mistake ;  for  by  withholding  from  it  what  he  has  dis- 
covered he  can,  as  just  stated,  gain  nothing,  but  it  may  lose  all.  A 
forger  may  be  insolvent  or  beyond  the  reach  of  civil  or  criminal  pro- 
cess, but,  by  prompt  proceedings  against  him,  others  may  become  in- 
terested in  him  and  come  to  his  assistance,  who  after  delay  may  not 
do  so.  This  incident  to  a  bank's  right  to  promptly  proceed  against  a 
forger  is  not  to  be  overlooked.  Whenever  a  depositor  knowingly 
withholds  from  it  knowledge  without  which  it  cannot  so  proceed  in 
an  effort  to  protect  itself,  he  ought  to  be  regarded,  when  he  comes  to 
enforce  alleged  rights  against  it,  as  having  withheld  from  it  a  sub- 
stantial right,  without  regard  to  wliat  might  or  might  not  have  re- 
sulted from  a  prompt  exercise  of  that  right.     *     *     *  » 

Other  questions  raised  by  the  appellant  need  not  be  considered  in 
view  of  tlie  correct  conclusion  of  the  court  below  that  its  delay  in 
giving  the  appellee  notice  of  the  forgeries  bars  its  right  to  recover. 

The  assignments  of  error  are  all  overruled  and  the  judgment  is 
affirmed.® 

8  In  support  of  this  position  tlie  court  citos  and  discusses  the  following 
authorities:  Rick  v.  Krlly  and  Rick  v.  Fischer,  30  Pa.  527;  Myers  v.  South- 
uPHtern  'Sat.  Bank.  19.3  Pa.  1 ;  United  .SVc.  Life  Ins.  cf  Trust  Co.  of  Pa.  v. 
Central  \at.  Batik,  185  Pa.  580;  and  Leather  Manuf.  Nat.  Bank  v.  Morgan,  117 

V.  R.  no.  —  C. 

» Thi.s  case  is  reported  in  20  L.  N.  S.  7Jl,  with  case  note  entitled,  "Loss 
or  prejudice  to  bank  resulting  from  ne<,'lif;ent  failure  on  part  of  depositor  or 
correspondent  bank  to  ^;ive  |)ronipt  notice  of  forgery,  as  a  condition  ot  its 
rifiht  to  eharjre  forged  ciiecks  to  latter's  account."  The  note  says  that  "  It 
seems  to  be  the  general  rule,  contrary  to  that  laid  down  in  Mcyeely  v.  Bank 
of  \orth  Aniericyi,  that  before  a  bank  is  justified  in  charging  the  amount 
paid  on  forged  paper  against  the  account  of  a  depositor  or  correspondent 
b.ink,  Ijocause  of  negligence  in  discovering  or  reporting  the  forgery,  it  must 
show  that,  because  of  such  negligence,  it  was  prejudiced,  or  lost  an  oppor- 
tunity to  protect  itself  by  action  against  the  forger  or  other  third  party"  : 
Citing  ./anin  v.  Ijondon  v.  .S'.  /•'.  Bank,  02  C"al.  14;  Brixen  V.  Dcaerrt  Nat. 
Bank,  5  Utah,  504;  Third  Not.  Bank  v.  Merchants'  Nat.  Bank,  7U  Hun.  475; 
Harlem,  etc.  .l^.s'n  v.  Mercantile  Trust  Co..  10  Misc.  ( N.  Y.)  080;  ll'tnii  V. 
Fifth  Nat.  Bank,  30  Mo.  Api>.  72:  llunly  v.  Chesapeake  Bank.  51  Md.  502; 
Murphxi  v.  Met.  Nat.  Bank,  101  Mass.  159;  Wcinslcin  V.  Nat.  Bank,  69 
Tex.  38. —  C. 


772  CHECKS.  [art.  XVII. 

6.  Liability   of  Dkawkk  to   Dhawku  for  WuoKgful  Dishonor. 

ATLANTIC  NATIONAL  BANK  v.  DAVIS. 
96  Georgia,  334.-1805. 

Action  for  damages  for  dishonoring  plaintiffs  check.  Tlie  check 
was  for  $l"i.48.  Plaintiir-  had  on  deposit  in  defendant  bank  over 
$;?0n.  By  a  mistake  of  a  clerk  payment  was  refused.  Defendant  on 
discovering  the  mistake  wrote  phiintilf  explaining  the  matter  and 
also  wrote  the  holder  or  holder's  forwarding  bank  explaining  the 
error  and  stating  that  plaintiff  was  one  of  defendant's  best  ciistonuM's 
and  had  never  drawn  against  his  account  without  funds  to  his  credit. 
Verdict  for  plaintiff'  for  $300.     Defendant  appeals. 

Lumpkin,  Justice.  —  1.  The  plaintiff's  check  came  by  due  course 
of  mail  to  the  defendant  bank,  upon  wliich  it  was  drawn,  and  in 
which  he  had  on  deposit  at  the  time  sufficient  funds  with  which  to 
pay  it.  The  check  was  returned  unpaid.  It  seems  clear  from  the 
evidence  that  this  was  done,  not  deliberately  or  maliciously,  but  in 
consequence  of  a  mistake  made  by  one  of  the  employees  of  the  bank. 
The  paper  was  not  protested  nor  wilfully  dishonored.  Still,  so  far 
as  the  plaintiff  is  concerned,  we  think  what  occurred  amounted  to  a 
refusal  to  pay  his  check.  The  consequences  to  him  resulting  from 
the  inadvertence  of  the  bank  official  were  exactly  the  same  as  if  there 
had  been  an  express  refusal  to  pay.  We  do  not  think  a  bank  should 
be  allowed  to  send  out  a  paper  with  a  badge  of  dislionor  upon  it,  and 
then  protect  itself  by  saying,  in  effect,  thnt  this  was  caused  simply 
by  its  own  carelessness. 

2.  It  was  not  denied  that  if  the  conduct  of  the  bank  amounted 
to  a  refusal  to  pay,  it  was  liable  in  damages  to  the  plaintiff;  buf'tlie 
serious  question  was,  as  to  what  should  be  the  measure  of  such 
damages. 

There  was  no  proof  of  any  actual  or  special  damage,  and  tlic  de- 
fendant therefore  insisted  that,  at  most,  the  damages  awarded  should 
be  only  nominal.  We  have  given  the  subjc<-t  some  investiofntion,  aiid 
as  a  result,  we  find  ourselves  unable  to  accept  this  as  a  correct  pro- 
position of  law.  The  following  authorities  arc  pertinent,  and  throw 
much  light  upon  the  question :  — 

In  2  Addison  on  Contract,  §  S2<),  the  nuilior,  aflci-  stating  the 
general  rule  that  a  banker  is  bound  to  honor  the  checks  of  his  cus- 
tomer.s,  if  presented  within  banking  hours  and  provided  he  has  in 
hand  sufficient  funds  for  the  purpo.se  belonging  to  the  customers,  adds: 
"  And  if  he  refuses,  he  is  liable  to  an  action  by  the  custouici'  foi'  sub- 
stantial damages,  without  proof  of  actual  damage;  for  it  i-  i  'M 'credit 
to  the  customer  to  have  his  cheque  refused  paymenl."  Av'ain.  in 
2  Morse  on  Banks,  §  458,  after  a  statement  of  the  geiH-ia!  I'.ilc  relat- 


II-  6]  drawee's  liability  to  drawer.  773 

ing  the  bank's  duty  in  the  premises,  we  find  the  following :  "  This 
duty  and  this  right  are  so  far  substantial,  that  if  the  bank  refuses, 
without  sufficient  justification,  to  pay  the  check  of  the  customer,  the 
customer  has  his  action  for  damages  against  the  bank.  It  has  been 
said  that  if  in  such  action  the  customer  does  not  show  that  he  has 
suffered  a  tangible  or  measurable  loss  or  injury  from  the  refusal,  he 
shall  recover  only  nominal  damages.  But  the  better  authority  seems 
to  be,  that  even  if  such  actual  loss  or  injury  is  not  shown,  yet  more 
than  nominal  damages  shall  be  given.  It  can  hardly  he  possible 
that  a  customer's  check  can  be  wrongfully  refused  payment  without 
some  impeachment  of  his  credit,  which  must  in  fact  be  an  actual 
injury,  though  he  cannot  from  the  nature  of  the  case  furnish  inde- 
pendent distinct  proof  thereof.'' 

Accordingly,  it  would  seem  that  the  plaintiff's  recovery  is  not  to 
be  limited  to  merely  nominal  damages.  We  find  authority  for  saying 
that  in  such  a  case  he  should  be  awarded  ''temperate"  damages. 
Thus,  in  BirchaU  v.  Third  Xational  Banl-  (19  Cen.  Law  J.  o{ny),  it 
was  ruled  that  a  bank  is  liable  in  temperate  damages  to  a  customer 
for  a  wrongful  dishonor  of  his  check,  without  proof  of  special  dam- 
ages. In  the  notes  appended  to  an  article  on  "  Damages  for  Wrong- 
ful Dishonor  of  Checks,"  following  the  report  of  the  above  cited 
case,  will  be  found  a  large  collection  of  authorities,  which  may  be 
of  help  to  any  one  desiring  to  further  pursue  an  investigation  into 
this  question.  Another  authority  for  the  allowance  of  "temperate" 
damages  to  a  customer  for  wrongful  dishonor  of  his  check,  although 
special  damage  is  not  shown,  is  Nowmark  on  Special  Bank  Deposits, 
§  SIT);  and  the  same  rule  is  stated  in  3  Am.  and  Eng.  Enc.  of  Law, 
p.  226,  under  the  title  "Checks"  (2d  ed.,  vol.  .5,  pp.  10r>n-10n0)! 
In  a  note  to  the  text,  Birchall's  case,  svpra.  is  cited. 

3.  In  view  of  all  the  evidence  disclosed  by  the  record,  we  think 
the  verdict  for  $200  rendered  in  the  present  case  was  "  temjiorate," 
and  therefore  sustainable. 

Judgment  affirmed.* 

•Accord:  firhnffnrr  v.  Ehrmnn,  1.39  III.  109,  whero  a  jiidpment  for  $450 
for  dishonoring;  a  clir-ck  for  $249  was  uphold  as  n'asonahlr;  I'attrrson  v. 
Marine  N.  H.,  1.30  Pa.  St.  419,  verdict  for  $.300  held  rpa«onahlc.  Sec  also 
Bank  of  Commrrre  v.  r/oos,  .39  Nch.  437.  VVhi-rc  tlip  depositor  proceeds  as  for 
a  hreach  of  contract  and  not  in  tort  it  seenis  that  in  the  aitsence  of  aliepa- 
tion  and  proof  of  Hf>ecinl  damages,  he  can  recover  only  nominal  damafreR. 
Marzetti  v.  Williams.  1  R.  A  .Ad..  41.') ;  Tfronkr  v.  Trntlrnrnrri'it  N.  fi.,  09  Hun 
(N.  v.).  202;  nurrnuqhs  V.  Trndrnmrn'H  N.  fi.,  87  Hun  ( N.  Y.).  fi;  ritizens' 
N.   B.   V.   JmpnrtrrH  and   Trndern'   Hank,    119   N.   Y.    195.  —  II. 

fAll  the  authorities  ajrree  that  an  action  lies  against  a  hank  hy  a  de- 
positor for  the  wrongful  dishonor  hy  the  former  of  the  latter's  check,  and 
that  the  depositr)r  hy  provinp  special  loss  is  entitled  to  recover  com|>ensatory 
damapes.  I'.ut  where  the  depositor  does  not  allepe  and  prove  special  damages, 
the  courts   disagree   as   to   whether   he   should    be  entitled    to  sul.sf .nntial    dam- 


774  CHECKS.  [aHT.    XVII. 

apes  or  bo  oonlinod  to  nominal  (lainaucs  only.  On  this  point  see  Iu))iik  V. 
I'ahmtto  Hank,  74  S.  far.  IHf),  reported  witli  not«  in  7  A.  &.  K.  Ann.  ('as. 
81S;  Columbia  \at.  Hank  v.  MacKniijItt,  29  App.  Cas.  Dist.  of  Col.  580, 
reported  with  note  in  10  A.  &  E.  Ann.  Cas.  897;  and  Third  Xat.  Dank  of  St. 
Louis  V.  Obcr.  17S  Fed.  (('.  I".  A.)  078.  See  also  Hilton  v.  Jcsup  Hanking  Co., 
1'2S  Ga.  :U1.  reported  in  ID  A.  &  K.  Ann.  t"as.  978.  with  note  entitled  "  Ad- 
missibility in  action  by  depositor  for  dainajjes  for  wrongful  dishonor  of  check, 
of  evidence  of  depositor's  financial  staniling  and  credit." 

Some  cases  distinguish  between  an  action  brought  by  a  merchant  or  trader, 
and  one  brought  by  a  person  who  is  not  a  merchant  or  trader.  Thus, 
the  court  in  Third  Xat.  Hank  of  fit.  Louis  v.  Obcr,  supra,  said:  "If  the  de- 
positor is  a  merchant  or  trader,  it  will  be  presumed,  witliout  further  proof, 
that  substantial  damages  have  been  sustained.  Scliaffnrr  V.  Ehrman,  139  111. 
109;  Jatncs  Co.  v.  Hank,  105  Tenn.  1;  t^vendsen  v.  Hank,  04  Minn.  40.  This 
rule  proceeds  upon  the  fact,  commonly  recognized,  that  the  credit  of  a  person 
engaged  in  such  a  calling  is  essential  to  the  prosperity  of  his  business,  and 
the  dishonoring  of  his  checks  is  plainly  calculated  to  impair  it  and  to  indict 
a  most  serious  injury.  In  common  opinion,  substantial  damage  is  the 
natural  and  probable  consequence  of  the  act,  and  therefore  a  substantial  re- 
covery may  be  had,  without  pleading  or  proof  of  special  damage.  ...  On 
the  other  hand,  if  the  depositor  is  not  a  merchant  or  trader,  there  is  no  such 
presumption  of  substantial  injury,  and  his  recovery  should  be  a  nominal  one, 
unless  he  pleads  and  proves  some  special  damage."  But  see  Col.  Xat.  Hank 
V.  MacKnight.  supra,  where  the  court  said:  "Although  in  this  case  the 
plaintiff  was  a  physician,  and  not  a  trader,  we  think  the  jury  should  not 
have  been  confined  to  nominal  damages  only." 

Some  confusion  has  also  arisen  because  of  the  failure  to  distinguish  be- 
tween the  eases  ( 1 )  where  the  depositor  proceeds  as  for  a  breach  of  contract, 
and  (2)  where  he  proceeds  in  tort.  For  an  excellent  statement  of  the  differ- 
ent considerations  affecting  the  measure  of  damages  in  these  two  classes  of 
cases,  .see  Davis  v.  Standard  Xat.  Hank,  50  App.  Div.   (N.  Y.)   210. 

In  Callahan  v.  Hank  of  Anderson,  09  S.  Car.  374.  it  was  held  by  an  evenly 
divided  court  that  where  a  depositor  has  deposited  with  a  bank  funds  suffi- 
cient to  meet  payment  of  a  check  drawn  by  him  in  favor  of  a  third  party, 
he  has  a  right  of  action  against  the  bank  for  its  refusal  to  pay  such  check 
in  the  absence  of  notice  to  him  that  the  bank  lias  applied  the  funds  so 
deposited  in  extinguishment  of  past  due  claims  held  against  him.  See  this 
case  reported  in  2  A.  &  E.  Ann.  Cas.  203,  with  note  entitled,  "  Bank's  lien 
or  set-otT  against  deposit  for  debt  due  it  by  depositor."  —  C] 


PART  II. 
CJTAXUTES 


[ns] 


THE  NEGOTIABLE  INSTRUMENTS  LAW. 

The  Law  has  been  enaeteii  ia  tlie  following  .states  and  territories: 

Alabama.  —  Laws  1!»07,  Chap.  722  (in  edeet  January  I,  1908);  Code  1907, 
Chap.   115,  Sees.  4958-5149. 

Arizona.  —  Rev.  Stat.  1901,  p.  852,  title  49  of  Civil  Code,  Sees.  3304-3491 
(in  elfeet  September  1,  1901);   Laws  1905,  Chap.  23. 

Coi-oKAUO.  —  Laws  1897,  Chaj).  ()4  (approved  April  20,  1897);  Rev.  Stat. 
1908,  pp.   1104-1126,  Sees.  4404-4059. 

Connecticut.  —  Laws  1897,  Chap.  74  (approved  Apr.  5,  1897);  Genl.  Stat. 
E?ev.  1902.  p.  1028. 

District  of  Columbia.  —  Laws  U.  S.  1S09  (in  effect  Apr.  3,  1899);  Laws 
U.  S.  1901;   Laws  U.  S.   1902,  Sees.   1304-1493. 

Florida.  —  Laws   1897,   Chap.   4524    (approved  June   1,   1897);    Genl.   Stat. 

1906,  p.  1147;  Sees.  2394-3099. 

Hawaii. —  Laws  1907,  Act  89,  p.  118   (approved  Apr.  20,  1907). 

Idaho. —  Laws  1903,  p.  3S0   (in  effect  Mar.   10,   1903). 

Illinois.  —  Laws  1907,  p.  403    (approved  June  5,  1907). 

Iowa. —  Laws  1902,  Chap.  130  (approved  Apr.  12,  1902)  ;  Laws  1906,  Chap. 
149:  Code  Supp.  1902,  p.  352,  Chap.  3-A,  Sees.  306O-al-3060^al98. 

Kansas.  — Laws  1905,  Chap.  310  (in  effect  June  8,  1905);  Genl.  Stat. 
1905,  p.  967,  Chap.  70,  Sees.  4533-4732. 

Kentucky.  —  Laws  1904,  Chap.   102    (approved  March  24,  1904). 

Louisiana.  —  Laws  1904,  Chap.  64   (approved  June  29,  1904). 

Maryland.  —  Laws  1898,  Chap.   119    (approved  March  29,   1898). 

Massachusetts.  —  Laws  1898,  Chap.  533  (in  effect  January  1,  1899); 
Laws  1899,  Chap.  130;  Rev.  Laws  1902,  p.  628,  Chap.  73,  Sees.  18-212;  Laws 
1910,  Chap.  417. 

Michigan.  —  Laws  1005,  Chap.  265   (approved  June  16,  1905). 

Missouri.  —  Laws  1905,  p.  243  (approved  Apr.  10,  1905)  ;  Laws  1907,  p.  366. 

Montana.  — Laws  1903,  Chap.  121    (in  effect  March  7,  1903). 

Nebraska.  —  Laws  1905,  Chap.  83  (in  effect  August  1,  1905);    Comp.  Stat. 

1907,  Chap.  41,  Sees.  3558-al-3558-al98. 

Nevada.—  Laws  1907,  Chap.  62   (in  effect  May  1,  1907). 

New  Hampshire. —  Laws  1909,  Chap.  123   (in  effect  January  1,  1910). 

New  Jersey. —  Laws  1902,  Chap.  184  (approved  April  4,  1902)  ;  Laws  1908, 
chap.  215. 

New  Mexico. —  Laws  1907,  Chap.  83   (approved  March  21,   1907). 

New  York. —  Laws  1897,  Chap.  612;  (in  effect  October  1,  1897);  Laws 
1898,  Chap.  336;  Laws  1904,  Chap.  287;  Cons.  Laws,  1909,  Chap.  43. 

North  Carolina.  —  Laws  1899,  Chap.  733  (in  effect  March  8,  1899);  Laws 
1905,  Chap.  327;  Laws  1907,  Chap.  807;  Revisal,  1905,  p.  655,  Chap.  54, 
Sees.  2151-2346. 

North  Dakota.  —  Laws  1899,  Chap.  113  (approved  March  7,  1899);  Civil 
Code,  1905,  p.  1002,  Chap.  90,  Sees.  6303-6498. 

[776] 


THE    NEGOTIABLE    INSTRUMENTS   LAW.  777 

Ohio. —  Laws  1902,  p.  162  (in  effect  January  1,  1903)  ;  Bates'  Annot.  Stat. 
(5th  cd.).  pp.  180Oa-1807,  Sees.  3171-3178e. 

Okl.mioma.—  Laws  1909,  Chap.  24  (approved  March  20,  1909);  Comp. 
Laws.  1909.  Chap.  69,  p.   1044,  Sees.  4435-4624. 

Orfx.on.  —  Laws  1899,  p.  18  (approved  February  16.  1899);  Ballinger  & 
Cotton's  Annot.  Codes  &  Stat.,  p.   1440,  Sees.  4403-4594. 

Pennsylvania.  —  Laws  1901,  No.  162  (in  effect  September  2,  1901);  Laws 
1909,  No.  169,  p.  260. 

Rhode  Island.  —  Laws  1899,  Chap.  674  (in  effect  July  1,  1899)  ;  Gen.  Laws 
1909,  p.  648,  Chap.  200. 

Tennessee.  —  Laws  1899,  Chap.  94  (in  effect  May  16.  1899). 

Utah.  — Laws   1809,  Chap.  83    (in  effect  July  1.   1890). 

Virginia.  — Laws  1898,  Chap.  866  (approved  March  3,  1898);  Laws  1906; 
Chap.  219:  Code,  1904,  Chap.  133a,  Sec.  2841a. 

Washington.  —  Laws  1899,  Chap.  149  (in  effect  March  22.  1899);  Rem- 
ington &  Ballinger's  Annot.  Codes  and  Stat.,  Vol.  2,  p.   120,  vSecs.  3392-3586. 

VVe.st  Virginia.  —  Laws  1907,  Chap.  81    (in  effect  January   1.   1908) 

Wisconsin.  — Laws  1899,  Chap.  356  (in  effect  May  15,  1899);  Laws  1901, 
Chap.  41;   Laws   1905,  Ciiap.  262;    Laws   1907,  Chap."  361. 

Wyoming.  —  Laws  1905,  (  Iiap.  43  (approved  February  15,  1905);  Comp. 
Stat.  1910,  Chap.  210,  Sees.  3159-3354. 


EXPLANATORY  NOTE. 

The  text  is  that  of  the  New  York  Negotiable  Instruments  Law. 
The  material  in  the  notes  in  brackets  is  taken  from  the  notes  of  the 
draftsman  of  the  act  (J.  J.  Crawford,  Esq.),  as  they  appeared  in  the 
draft  printed  by  the  Commissioners  on  Uniformity  of  Laws.  The 
reference,  "  Pages  x-x "  is  to  the  "  Cases  and  Authorities "  con- 
tained in  Part  I  of  this  volume.  The  reference  "Chalmers"  is  to 
Chalmers'  Bills  of  Exchange  Act  (5th  ed.),  London,  1896.  The 
reference  to  "  Daniel  "  is  to  Daniel  on  Negotiable  Instruments. 


[7781 


THE   NEGOTIABLE   INSTRUMENTS   LAW. 

Laws  or  New  York,   1909,  Chapter  43.* 

AN    ACT    in    relation    to    negotiable    instruments,    constituting 
chapter  thirty-eight  of  the  consolidated  laws. 

Hecanie  a  law  February  17,  1909,  with  the  approval  of  the  Governor.     Passed, 
three-fifths   being   present. 

The  People  of  the  State  of  New  YorJc,  represented  in  Senate  and 
Assembly,  do  enact  as  folloivs: 

CHAPTER  38  OF  THE  CONSOLIDATED  LAWS. 
Negotiable  Instruments  Law. 

Abticle  I.  Short  title;  definition.s.     (§§  1,  2.) 
IL  General  trovlsions.     (§§  3-7.) 

III.  Form  a.\i»  interpretatio.n.     (§§  20-42.) 

IV.  Consideration.      (§§  50-55.) 
V.  Negotiation.      (§§  60-80.) 

VI.  Rights  of  iioLura.     (§§  90-98.) 
VII.  Liabilities  of  parties.      (§§   110-119.) 
VIII.  Presentment  for  payment.     (§§   130-148.) 
IX.  Notice  of  di.shonor.     (§§  160-189.) 
X.   Dl.SCHARGE.      (§§  200-20<>.) 

XI.  Bills  of  exchange;    form   and  interpretation,      (§§  210-215.) 
XII.  Acceptance.      (§§  220-230.) 

XIII.  Presentment  for  acceptance.      (§§  240-248.) 

XIV.  Protest.     (§S  260-268.) 

XV.  Acceptance  for  honor.      (§§  280-289.) 
XVI.  Payment  for  honor.     (§§  300-306.) 
XVII.  I5ILLS  in  sets.      (§§  310-315.) 
XVI 11.  Promissory  notes  and  checks.     (§§  320-326.) 
XIX.  Notes   given    for   patent   rkmits    and   for   a    spf.culative  con- 
sideration.     (SS   33()-332.) 
XX.  Laws  bepealeu;  when  to  take  effect.     (§§  340-341.) 


•  Th<»     uniform     Nepotinhic     Tn«tru-  thus  rhanfiinp  the  original   numbering 

ments    Law   wan   f)rigina!ly    f-nartcd    in  of   articles   2   to    19;    a    few    additional 

New  York  by  L.  1897.  r.  612.     Certain  errors  were  corrected,  and   a   few  ver- 

errors,  most  of  them   manifest  on  the  bal   changes   made.      The  existing  act, 

face  of   the   act    il.s«-lf,   were   corrected  however,   is  for  all   practical    purposes 

by  L.    1898,  c.  3.36.     When   it  was  in-  the  same  as  when  it  was  originally  en- 

corporated    into  the  consolidaterl   laws  acted  except  for  the  addition  of  §  328 

in    1909.    '•ections    3    to    7    were    made  by  L.  1904.  c.  287.  —  C. 
into    n    separate    artich',    numbered    2, 

[779] 


780  TllK    NKCOl'IAMll':    INSTUUMKNTS    LAW. 

ARTICLE  1. 

SHORT  TllLE:   DEFINITIONS. 

Section   1.  Sliurt  title. 
2.   Dctiiiitions. 

§  1.  Short  title. 

This  cliiiptcr  shall  ho  known  as  the  "  Negotiable  Instruments 
Law." 

§  2.  Definitions. 

In  this  chapter,  unless  the  context  otherwise  requires: 

"  Aeeeplance "  means  an  acceptance  completed  by  delivery  or 
notification. 

"  Action  "■  includes  counter-claim  and  set-ofT. 

"  Bank  "'  includes  any  person  or  association  of  persons  carrying 
on  the  business  of  hanking,  whether  incorporated  or  not. 

"  Bearer  "  means  the  person  in  possession  of  a  bill  or  note  which 
is  payable  to  bearer. 

"  Bill  "  means  bill  of  exchange,  and  "  note "  means  negotiable 
promissory  note. 

"  Delivery  "  means  transfer  of  possession,  actual  or  constructive, 
from  one  person  to  another. 

"  Holder  "  means  the  payee  or  indorsee  of  a  bill  or  note,  who  is 
in  possession  of  it,  or  the  bearer  thereof." 

"  Indorsement "  means  an  indorsement  completed  by  delivery. 

"  Instrument "  means  negotiable  instrument. 

"  Issue  "  means  the  first  delivery  of  the  instrument,  complete  in 
form,  to  a  person  who  takes  it  as  a  holder. 

"  Person  "  includes  a  body  of  persons,  whether  incorporated  or 
not. 

"  Value  "   means   valuable  consideration. 

"Written"  includes  printed,  and  "writing"  includes  print. 

See  Bills  of  Exchange  Act,  .section  2. 

ARTICLE  II. 

GENERAL    PROVTSTONS. 

Section  3.  Person  primarily  liable  on   instrument. 

4.  Reasonable  time,  what  constitutes. 

5.  Time,  how  computed;   when  last  day  falls  on  holiday, 
G.   Application  of  chapter. 

7.  Law  merchant;  when  governs. 

»  Pages  180,  189. 


FORM    AND    INTERPRETATION.  781 

§  3.  Person  primarily  liable  on  instrument. 

The  person  "  primarily  "'  liable  on  an  instrument  is  the  person 
who  by  the  terms  of  the  instrument  is  absolutely  required  to  pay 
the  same.     All  other  parties  are  "  secondarily  "  liable. 

§  4.  Reasonable  time,  what  constitutes. 

In  determining  what  is  a  '*  reasonable  time  "  or  an  "  unreasonable 
time  "  regard  is  to  be  had  to  the  nature  of  the  instrument,  the  usage 
of  trade  or  business  (if  any)  with  respect  to  such  instruments,  and 
the  facts  of  the  particular  case. 

See  Bills  of  Exchange  Act,  sections  40,  45,  74,  86.     See  pages  484,  737. 

§  5.  Time,  how  computed;  when  last  day  falls  on  holiday. 

Where  the  day,  or  the  last  d;\y,  for  doing  any  act  herein  required 
or  permitted  to  be  done  falls  on  Sunday  or  on  a  holiday,  the  act 
may  be  done  on  the  next  succeeding  secular  or  business  day. 

See  §  145.     See  N.  Y.  General  Construction  Law,  §§  20,  30. 

§  6.  Application  of  chapter. 

The  provisions  of  this  c})apter  do  not  apply  to  negotiable  instru- 
ments made  and  delivered  prior  to  October  first,  eighteen  hundred  and 
ninety-seven. 

§  7.  Law  merchant;  when  governs. 

In  any  case  not  provided  for  in  this  act  tiie  rules  of  the  law  mer- 
chant shall  govern. 

ARTICLE  ITT. 

FORM    AND   INTERPRETATION. 

Sectio.n  20.  Form  of  negotiahln  instnimont. 

21.  Certainty  as  to  sum;   what  constitutes. 

22.  When    promise    is   unconditional. 

23.  Deterniinalilc  future  time;    what  constitutes. 

24.  Additional   |)rovisions  not  affecting  negotiability. 

25.  Omissions;    seal;    particular  money. 

26.  When  payable  on  demand. 

27.  When   payable   to  orrler. 

28.  When    payable   tf)   bearer. 

29.  Terms  when  siifTicient. 

30.  Date;   j)resump(i<)n  as  to. 

31.  Antedated  and  f)OBt-flaled. 

32.  When  dale   may   be   inserted. 

33.  Blanks,  when  may  be  filb'd. 

34.  Inromidete  instrunifjil    not   delivered. 

35.  Delivery;    when   effertual;    when    presumed. 

36.  ConstVuction  where  instrument  is  ambiguous. 

37.  Liability  of  person  signing  in  trade  or  assumed  name. 

38.  Signature  by  ag<-iit  ;   iiutluirity  ;    Ihiw  shown. 


782 


THK    NKr.OTIAIM.K    INSTHUMKNT8    LAW. 


30.  T-iability  of  person  aijjninjj  as  agent. 

40.  Sipnntvire   by   procuration ;    efTeet   of. 

41.  I'^fTeet   of  indorsement   by   infant  or  corporation. 

42.  Forged   signature;    elFect  of. 

§  20.  Form  of  negotiable  instrument. 

An   instiument   to   be   ncjL^otiuhlo   must  conform   to  tlie  following 
requirements : 

1.  It  must  be  in  writing  '  and  signed  by  the  maker  or  drawer; ' 

2.  Must  contain  an  unconditional  ^  promise  *  or  order '  to 
pay  a  sum  certain"  in  money ;^ 

3.  Must  be  payable  on  demand  "  or  at  a  fixed  or  determinable 
future  time ; " 

4.  Must  be  payable  to  order  *"  or  to  bearer;  *^  and 

5.  Where  the  instrument  is  addressed  to  a  drawee,  lie  must 
be  named  or  otherwise  indicated  therein  with  reasonable  cer- 
tainty.'^ 

(Note.  —  See  BilLs  of  Exchange  Act,  sections  3,  4,  5,  6.]     For  definition  of 
bill,  note,  check,  see  §§  210,  320,  321. 


§  21.  Certainty  as  to  sum;  what  constitutes. 

The  sum  jtayable  is  a  sum  certain  ^^  within  the  meaning  of  this 
chapter,  although  it  is  to  be  paid : 

1.  With  interest;  '*  or 

2.  By  stated  installments;'^  or 

3.  By  stated  installments,  with  a  provision  that  upon  default 
in  payment  of  any  installment  or  of  interest,  the  whole  shall 
become  due ; '"  or 

4.  With  exchange,  whether  at  a  fi.xed  rate  or  at  the  current 
rate ; '''  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case  pay- 
ment shall  not  be  made  at  maturity.'* 

[Note.  —  See  Bills  of  Exchange  Act,  section  9.] 

§  22.  When  promise  is  unconditional. 

An  unqualified  order  or  promise  to  pay  is  unconditional  within 
the  meaning  of  this  chapter,  though  coupled  with : 


1  See  §  2.     Pages  34-35. 

2  Pages  35-37. 

3  See  §  22.     Pages  46-61. 

•  Pages  37-44. 
R  Pages  44-45. 

•  See  5   21.     Pages   61-80. 
T  Pag«s  81-89. 

«  See  §  26.     Pages  96-97. 

•  See  §  23.     Pages  97-106. 


10  See  §  27.     Pages  107-122. 

11  See   §   28.      Pages    122-148. 

12  See  §  210.     Pages  148-150. 
IS  Pages  61-64. 

i«  Pages  64-67. 
IB  Pages  67-72. 
i«  Pages  72-74.      • 
17  Pages  74-78. 
x«  Pages  78-80, 


FOEM   AND   INTERPRETATION.  783 

1.  An  indication  of  a  particular  fund  out  of  which  reim- 
bursement is  to  be  made,  or  a  particular  account  to  be  debited 
with  the  amount ;  *"  or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the 
instrument.^" 

But  an  order  or  promise  to  pay  out  of  a  particular  fund  is  not 
unconditional.^' 

[Note.  —  See  Bills  of  Exchange  Act,  section  .3,  subdivision  3.] 

§  23.  Determinable  future  time;  what  constitutes. 

An  instrument  is  })ayable  at  a  determinable  future  time,  within 
the  meaning  of  this  chapter,  which  is  expressed  to  be  payable: 

1.  At  a  fixed  period  after  date  or  sight  ;^^  or 

2.  On  or  before  a  fixed  or  determinable  future  time  specified 
therein ;  '^  or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified 
event,  which  is  certain  to  t>appen,  though  the  time  of  happening 
be  uncertain.-* 

An  instrument  payable  upon  a  contingency  is  not  negotiable,  and 
the  happening  of  the  event  does  not  cure  the  defect.^"* 
[Note.  —  See  Bills  of  Exchange  Act,  section   11.] 

§  24.  Additional  provisions  not  affecting  negotiability. 

An  instrument  wiiicii  contains  an  order  or  promise  to  do  any  act 
in  addition  to  the  payment  of  money  is  not  negotiable.'  But  the 
negotiable  character  of  an  instrument  otherwise  negotiable-  is  not 
affectod  by  a  provision  which  : 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the  in- 
strument be  not  paid  at  maturity;-  or 

2.  Authori/X's  a  confession  of  judgment  if  the  instrument  be 
not  paifl  at  maturity ; '  or 

3.  Waives  the  benefit  of  any  law  intended  for  the  advantage 
or  protection  of  the  obligor;*  or 

4.  fiives  the  holder  an  election  to  require  something  to  be 
done  in  lieu  of  payment  of  money.'' 

But  nothing  in  this  section  shall  validate  any  provision  or  stipula- 
tion otherwise  illegal. 

i»  Pages  r)f>-.54.  2'-  F'agis  40-50.    10.1-lOR. 

20  Pages   .'j.'i-fil.  '  Pages  }tO-«l. 

II  Page  4f».  2  Pages  01-92. 

"  Page  J)7.  »  Page  9.3. 

"  Pages  97-102.  *  Page  94. 
24  Pages    102-103.      [Byies  on    Bills,         f- Pages  94-96, 
96] 


784  THE    NEOOTIABMi:    INSTIIUMENTS    LAW. 

§  25.  Omissions;  seal;  particular  money. 

Tlu"  validity  ami  iu\i,M)t ialdi'  rliaiacUM-  oT  an  iiisf riimont  are  not 
alTocted  hv  llic   fart   that  : 

1.  It  is  not  dated  ; "  or 

2.  Docs  not  specify   the   value  given,  or  that  any   value  has 
been,  given  therefor ; "  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the  place 
where  it  is  payahle ; "  or 

4.  Bears  a  seal ; "  or 

5.  Designates  a  particular  kind  of  current  money   in   wiiich 
payment  is  to  be  made.^ 

Rut  nothing  in  this  section  shall  alter  or  repeal  any  statute  re- 
iiuiring  in  certain  cases  the  nature  of  the  consideration  to  be  stated 
in   the  instrument." 

[XoTE.  —  Sec  Rills  of  Exchange  Act,  section  3,  subdivision    (4).] 

§  26.  When  payable  on  demand. 

An  instrument  is  payable  on  demand : 

1.  Where   it   is   expressed    to    be   payable   on    demand,   or   at 
sight/"  or  on  presentation ;  or 

2.  In  which  no  time  for  payment  is  expressed. *° 

Where  an  instrument  is  issued,  accepted  or  indorsed  when  over- 
due, it  is,  as  regards  the  person  so  issuing,  accepting  or  indorsing  it, 
payable  on  demand." 

[Note.  —  See  Bills  of  Excliange  Act,  section  10. J 

§  27.  When  payable  to  order. 

The  instrument  is  payable  to  order  where  it  is  drawn  payable  to 
the  order  of  a  specified  person  or  to  him  or  liis  order.*^  It  may  be 
drawn  payable  to  the  order  of : 

« Pages   158-159.     See  §   32.     "  Un-        "  See     New     York     Neg.     Inst.     L., 

dcr   most  of  the  continental   Codes   it  §§  330-331. 
\n    essential     that    a    bill     should     be         i"  Page  96. 
dated."       Chalmers,  p.  13.     And  state         n  Page  97. 

a  consideration.  lb.,  p.  14.  And  in  '2  [The  Bills  of  Exchange  Act  pro- 
some  it  is  necessary  that  a  bill  should  vides  that  "a  bill  is  payable  to  ordr-r 
[ye  payable  in  a  place  different  to  that  which  is  expressed  to  be  so  payable  or 
in  which  it  is  made.  "  No  distance  which  is  expressed  to  be  payable  to  a 
is  fixed  by  the  codes, "but  it  has  been  particular  person  and  does  not  contain 
decided  that  the  place  of  payment  words  prohibiting  transfer  or  indicat- 
mu'it  be  so  far  distant  from  the  place  ing  an  intention  that  it  should  not  be 
of  issue  that  there  may  be  a  possible  transferable."  But  this  changes  the 
rate  of  exchange  between  the  two."  law  ( Byles,  83;  Hmith  v.  Kendall, 
lb.,  p.  15.  6    T.    li.     123;     Maule    v.    Crawford, 

T  Pages   15n-irin.      (This   is  the  rule  14    Hun,    193;    Daniel    on    Neg.    Inst., 

in  many  states  by  statute.     See  Daniel,  section    105),    and    the    change    is    not 

5    33.      See   also    Weeks   v.    Esler,    143  deemed     advantageous.       Frrdrrirk    v. 

N.  Y.  374.1  Cotton,     2      Shower,      8;      Smith      v. 

"Pages  81-89.     [Daniel,  §  56  c(  sei/.,  ^fcClure,    5    East,    476;     Howard    v. 

and  cases  cited. 1  PnJmcr,  64  Me.  86;   Daniel,  §   106.1 


FUlLU    AND   INTERPRETATION.  785 

1.  A  payee  who  is  not  maker,  drawer  or  drawee;  or 

2.  The  drawer  or  maker  ;'^  or 

3.  The  drawee;'^  or 

4.  Two  or  more  payees  jointly;'^  or 

5.  One  or  some  of  several  payees;***  or 

6.  The  holder  of  an  office  for  the  time  being." 

Where   the  instrument  is  payable  to  order  the  payee  must  be  named 
or  otherwise  indicated  therein  with  reasonable  certainty.** 
[N'oTi:.  —  S.e  Bills  of  Exciinnpe  Act,  sections  5,  7,  8.| 

§  23.  When  payable  to  bearer. 

'i'lie  instrument  is  payable  to  bearer: 

1.  Wlien  it  is  expressed  to  be  so  payable;"*  or 

2.  When  it  is  payable  to  a  person  named  therein  or  bearer;  *^ 
or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or  non-exist- 
ing person,  and  sucli  fact  was  known  to  the  person  making  it 
80  payable  ;  -°  or 

4.  When  tiie  name  of  the  payee  does  not  purport  to  be  the 
name  of  any  person  ;  -'  or 

5.  Wlien  the  only  or  last  indorsement  is  an  indorsement  in 
blank.-- 

[  NoTK. —  Si  e  Hill.-s  of  Kxfliunge  Act,  sections  7,  8.] 

§  29.  Terms  when  sufficient. 

The  instrument  need  not  follow  the  language  of  this  chapter,  but 
".ny  terms  are  sufficient  which  clearly  indicate  an  intention  to  conform 
to  the  re(|uirenie!its  hereof. 

§  30.  Date,  presumption  as  to. 

Where  the  instrument  or  an  acceptance  or  any  indorsement  tliereon 
is  dated,  such  date  is  deemed  prima  ftirie  to  be  the  true  date  of  the 
making,  drawing,  acceptance  or  indorsement  as  the  case  may  be.'* 

( N'oTK.       Sec   F'ills  of  Kxcliiiiiir*'   -Net,  section   l.T.l 

§  31.  Ante-dated  and  post-dated. 

The  instrument  is  not  invalid  for  the  reason  only  that  it  is  ante- 
dated or  post-dated,  provided  this  is  not  done  for  an  illegal  or  fraudu- 
lent purpose,  '^riie  |)erson  to  whom  an  instrument  so  dated  is  de- 
livered a((|uiic«  the  title  thereto  as  of  the  date  of  delivery.^* 

fNoiK.  —  Sec  MiilH  of  Kxchanfie  .Act,  section  13.  See  Panmorv  v.  Sorth.  l.T 
Kant.  ."ilT.  Ilirwater  v.  UcVordle,  8  Wend.  478;  Bayley  v.  Taber,  5  Mass.  286.] 

>3Pn;'(s   Iin-IH.  20  Pa{,'cs  123-144. 

i<  PajffM   114-115.  21  Page   144. 

16  Pages    11.5-118.  22  Pages  144-148,   291-297.      See    §§ 

18  PagcH   IIH   120.  64.  70. 

IT  Pages    121-122.  23  Pages  ir.l-ir.3. 

i«  Pages    107-113.  2«  Pages  lf51-ir.3. 

«»  Page    122. 

NttOOT.   INSTIUIMKNTS  —  .'iO 


786  TIIK    NEOOTIAIU.K    INSTHUMKNTS    LAW. 

§  32.  When  date  may  be  inserted. 

Where  an  instrument  e.\j)resse(i  to  be  payable  at  a  fixed  period 
after  date  is  issued  undated,  or  where  the  aeeeptanee  of  an  instru- 
ment payable  at  a  fixed  period  after  siglit  is  undated,  any  holder 
may  insert  therein  the  true  date  of  issue  or  acceptance,  and  the 
instrument  shall  be  payable  accordingly.^''  The  insertion  of  a  wrong 
date  does  not  avoid  the  instrument  in  the  hands  of  a  subsequent 
holder  in  due  course;  but  as  to  him,  the  date  so  inserted  is  to  be 
regarded  as  the  true  date.' 

I  NoTK.  —  See  Hills  of  Exchange  Act,  section   12.     See  note,  section  7.] 

§  33.  Blanks;  when  may  be  filled. 

Wlierc  tlie  mslruini'iit  is  wanting  in  any  material  particular,  the 
person  in  possession  thereof  lias  a  prima  facie  authority  to  complete 
it  by  filling  up  the  blanks  therein.'  And  a  signature  on  a  l)lank 
paper  delivered  by  tbe  person  making  the  signature  in  order  that 
the  paper  may  be  converted  into  a  negotiable  instrument  operates  as  a 
prima  facie  authority  to  fill  it  up  as  such  for  any  amount.-'  In  order, 
however,  that  any  such  instrument,  when  completed,  may  be  enforced 
against  any  person  who  became  a  party  thereto  prior  to  its  com- 
pletion, it  must  be  filled  np  strictly  in  accordance  with  the  authority 
given  and  witliin  a  reasonable  time.  But  if  any  such  instrument, 
after  completion,  is  negotiated  to  a  holder  in  due  course,  it  is  valid 
and  effectual  for  all  purposes  in  his  bands,  and  he  may  enforce  it  as 
if  it  had  been  filled  up  strictly  in  accordance  with  the  authority  given 
and  within  a  reasonable  time.* 

[Note. —  See   Bills  of  Exchange,  section  20.]      See   §  206. 

§  34.  Incomplete  instrument  not  delivered. 

\\'here  an  incomj)k'te  instrument  lias  not  been  delivered  it  will 
not,  if  completed  and  negotiated,  without  authority,  be  a  valid  con- 
tract in  the  hands  of  any  holder,  as  against  any  person  whose  signa- 
ture was  placed  thereon  before  delivery. 

[XoiE.  —  See  Davis  J/ac/nne  Co.  v.  Best,  105  N.  Y.  59,  67;  Sedgwick  v. 
Mch'im,  5.3  N.  Y.  307,  313;  Baxendale  v.  Bennett,  L.  R.  3  Q.  B.  525;  Daniel, 
§§  841,  842a.] 

§  35  Delivery;  when  effectual;  when  presumed. 

Every  contract  on  a  negotiable  instrument  is  incomplete  and  re- 
vocable until  delivery  of  the  instrument  for  the  purpose  of  giving 
effect  thereto.  As  between  immediate  parties,  and  as  regards  a  remote 
party  other  than  a  holder  in  due  course,  the  delivery,  in  order  to  be 
effectual,  must  be  made  either  by  or  under  the  authority  of  the  party 

25  See  §  33.  a  Pages  168-174. 

I  Pages   163-168.  ■•Pages  174-192. 

t Pages  163-168. 


FORM   AND    INTERPRETATION.  787 

making,  drawing,  accepting  or  indorsing,  as  the  ease  may  be;  and  in 
such  case  the  delivery  may  be  shown  to  have  been  conditional,  or  for 
a  special  purpose  only,  and  not  for  the  purpose  of  transferring  the 
property  in  the  instrument.''  But  where  the  instrument  is  in  the 
hands  of  a  holder  in  due  course,  a  valid  delivery  thereof  by  all  parties 
prior  to  him  so  as  to  make  them  liable  to  him  is  conclusively  pre- 
sumed.* And  where  the  instrument  is  no  longer  in  the  possession 
of  a  party  whose  signature  appears  thereon,  a  valid  and  intentional 
deliver}'  by  him  is  presumed  until  the  contrary  is  proved.* 
[Note.  —  See  Bills  of  E.vchange  Act,  section  21.1 

§  36.  Construction  where  instrument  is  ambiguous. 

Where  tlic  language  of  the  instrument  is  aml)iguous,  or  there  are 
omissions  therein,  the  following  rules  of  construction  apply : 

1.  Where  the  sum  payable  is  expressed  in  words  and  also  in 
figures  and  there  is  a  discrepancy  between  the  two,  the  sum 
denoted  by  the  words  is  the  sum  payable ;  but  if  the  words  are 
ambiguous  or  uncertain,  references  may  be  had  to  the  figures 
to  fi.v  the  amount ;  ^ 

2.  Where  the  instrument  provides  for  the  payment  of  in- 
terest, without  specifying  the  date  from  which  interest  is  to 
run,  the  interest  runs  from  the  date  of  the  instrument,  and  if 
the  instrument  is  undated,  from  the  issue  thereof;* 

3.  Where  the  instrument  is  not  dated,  it  will  be  considered 
to  be  dated  as  of  the  time  it  was  issued ;  ® 

4.  Where  there  is  a  conflict  between  the  written  and  printed 
provisions  of  the  instrument,  the  written  provisions  prevail ;  " 

5.  Where  the  instrument  is  so  ambiguous  that  there  is  doubt 
whether  it  is  a  bill  or  note,  the  holder  may  treat  it  as  either  at 
his  election ;  '* 

6.  Where  a  signature  is  so  placed  upon  the  instrument  that 
it  is  not  clear  in  what  capacity  the  person  making  tlie  same  in- 
tended to  sign,  he  is  to  be  deemed  an  indorser;  '- 

7.  W'here  an  instrument  containing  the  words  "  I  promise  to 
pay  *'  is  signed  by  two  or  more  persons,  they  are  deemed  to  be 
jointly  and  severally  liable  thereon.'* 

[NoTK.  —  Sfp    y?i!lH   of    Exolianpp    Act,   section    0.1 

§  37.  Liability  of  person  signing  in  trade  or  assumed  name. 

No   jM'rs<tn   is   liable   on    the    iiistnnncnt    whose   sigiiatiirc   does   not 
appear  thereon,  except  as  herein  otherwise  expressly  provided.'*     But 

B  P«Ke«  ISl-LW.  >>  Pajre   106. 

•  F'ajren   1.52-1.58.     See  §  .14.  12  See  §§  113.   114. 

T  PapcH   192-194.  is  I'ap-s    190-197.     f  Sep  Rills  of  E«- 

•  F^apes    194-195.  change  Act.  section  8.5.] 

»  I'a^re   195.     §5  25,  .10-32.  m  Pages  197-199.     See  §  72. 

>o  Pages   195-196. 


^88  TllK    NEGOTIAHI.K    INsTiUIM  KN'IS    LAW. 

oiu'  who  sii:;ns  in  :i  trade  or  ussiuiuhI  nana'  will  ho  lial)le  to  the  same 
extent  as  if  ho  had  si^iied  in  iiis  own  name. 
INoTK.  —  St^   Hills  of   Kxeliaiige   Act,  sootioii   -I'.i.] 

§  38.  Signature  by  agent;  authority;  how  shown. 

The  signature  of  any  party  may  he  made  hy  a  duly  authorized 
agent.  No  particular  I'orm  oi"  appointment  is  necessary  for  this  pur- 
pose; and  the  authority  of  the  agent  may  he  estahlished  as  in  other 
cases  of  agency. 

§  39.  Liability  of  person  signing  as  agent. 

Where  the  instrument  contains  or  a  person  adds  to  his  signature 
words  indicating  that  he  signs  for  or  on  behalf  of  a  principal,  or  in 
a  representative  capacity,  he  is  not  liable  on  the  instrument  if  he 
was  duly  authoriz.ed  ;  ''■'  hut  the  mere  addition  of  words  describing 
him  as  an  agent,  or  as  filling  a  representative  character,  without  dis- 
closing his  principal,  does  not  exempt  him  from  personal  liability.^^ 

[Note. —  See  Bills  of  Exchange  Act,  section  26;  Byles  on  Bills,  30;  Daniel, 
§§  298-302.] 

§  40.  Signature  by  procuration;  effect  of. 

A  signature  by  "  procuration "  operates  as  notice  that  the  agent 
has  but  a  limited  authority  to  sign,  and  the  principal  is  bound  only 
in  case  the  agent  in  so  signing  acted  within  the  actual  limits  pf  his 
authority.'' 

[Note. —  See  Bills  of  Exchange  Act,  section  25;  Byles  on  Bills,  33;  Daniel, 
§  280.1 

§  41.  Effect  of  indorsement  by  infant  or  corporation. 

The  indorsement  or  assignment  of  the  instrument  by  a  corporation 
or  by  an  infant  passes  the  property  tl)erein,  notwithstanding  that 
from  want  of  capacity  the  corporation  or  infant  may  incur  no  lia- 
bility thereon.'^ 

[Note. —See  Bills  of  Exchange  Act,  section  22.1 


15  Pages  216-219.  it  also  involves  a  contingent  liability 

> 6  Pages   199-216.  on  the  part  of  the  indorser."      (lb.) 

17  Pages  219-220.  "Hy  this  section,  when  a  bill  is  payable 

18  Pages  220-221.  This  section  "  is  to  the  order  of  an  infant,  his  indorse- 
probably  declaratory,  biit  the  law  was  ment  tranfers  the  property  therein, 
not  very  clear."  Chalmers,  p.  60.  *  •  *  In  America  it  is  not  uncommon 
"('ay)aeity  to  incur  liability  must  be  to  get  a  bill  made  payable  to  the  or- 
distinguished  from  capacity  to  trans-  der  of  an  infant  clerk.  His  indorse- 
fpj.  •  •  •  An  indorsement  usually  ment  then  operates  as  an  indorsement 
consists  of  two  distinct  contracts,  one  sans  rmourfi,  though  without  discred- 
executed,  the  other  executory.  It  iting  the  bill."  (/ft.,  p.  63.) 
transfers  the  property  in  the  bill,  and 


CONSIDERATION.  789 

§  42.  Forged  signature;  effect  of. 

Where  a  signature  is  forged  or  made  without  authority  of  the 
person  whose  signature  it  puiports  to  be,  it  is  wholly  inoperative, 
and  no  right  to  retain  the  instrument,  or  to  give  a  discharge  there- 
for, or  to  enforce  payment  thereof  against  any  party  thereto,  can  be 
acquired  through  or  under  sucli  signature,'"  unless  the  party,  against 
whom  it  is  sought  to  enforce  such  right,  is  precluded  from  setting 
up  the  forgery  or  want  of  authority.*" 

[Note.  —  See  Bills  of  Exchange  Act.  section  24.] 

ARTICLE  IV. 

C0NSIDER.4TT0N. 

Section  50.  Presumption  of  consideration. 

51.  What   constitutes   consideration. 

52.  What   constitutes    holder    for   value. 

53.  When   lien  on   instrument  constitutes  holder  for  value. 

54.  Effect  of  want  of  consideration. 
5.5.  Inability   of   accommodation    party. 

§  50.  Presumption  of  consideration. 

Every  negotiable  instrument  i.>*  deemed  prima  facie  to  have  been 
issued  for  a   valuable  consideration  ;  and  every  person  whose  signa- 
ture appears  thereon  to  have  become  a  party  thereto  for  value.^' 
[Note. —  See  Bills  of  Exchange  Act,  section  30.] 

§  51.  What  constitutes  consideration. 

Value  ^^  is  any  consideration  sufficient  to  support  a  simple  con- 
tract. An  antecedent  or  pre-existing  debt  constitutes  value;  and  is 
deemed  such  whether  the^nstrument  is  payable  on  demand  or  at  a 
future  time." 

§  52.  What  constitutes  holder  for  value. 

Where  value  has  at  any  time  been  given  for  the  instrument,  the 
holder  is  deemed  a  holder  for  value  in  respect  to  all  parties  who 
became  such  prior  to  that  time.^* 

INoTK.       S(M-   Bills  (if  E\cliari(.'f   Act,  section   27,  -iilxlivision    (2)1. 

§  53.  When  lien  on  instrument  constitutes  holder  for  value. 

Where  the  holder  has  a  lien  on  the  instrument,  arising  either  from 

"Pages  221-225.  21  Pages  234-238. 

2  "  PagPH  225-233.     "  The  word  '   pre-  22  See  (j  2. 

cludrrl  '   was   inHcrted    in   comiriittei-    in  st  Pages  239-249. 

lieu    of    the    word    'estopped,'   an    Kng  24  pa^r>H  240-251.       A       holder      for 

lish    technical    term,    unknown    to    tlie  value  may  or   may   not  lie  a   holder  in 

Scotch  law."     Chalmers,  p.  74.  due  course.     Sw  §  91. 


790  THE    NliUUTlAHLE    INSTHLMKN  18    LAW. 

contnu't  or  by  implication  of  law,  he  is  deeined  a  holder  for  vaUie 
to  the  extent  of  his  lien.-'^ 

[NoTi':.  —  See  Bills  of  Exeliiin^M'  Act,  si'ction  27.] 

§  54.  Effect  of  want  of  consideration. 

Absence  or  failure  of  consideration  is  matter  of  defense  as  againf^t 
any  person  not  a  holder  in  due  course;*  and  partial  failure  of  con- 
sideration is  a  defense  pro  tanto  whether  the  failure  is  an  ascertained 
and  li(]uidated  amount  or  otherwise.^ 

§  55.  Liability  of  accommodation  party. 

An  accouimodatiou  party  is  one  who  has  signed  the  instrument 
as  maker,  drawer,  acceptor  or  indorser,  without  receiving  value  there- 
for,' and  for  the  purpose  of  lending  his  name  to  some  other  person. 
Such  a  person  is  liable  on  the  instrument  to  a  holder  for  value,  not- 
withstanding such  holder  at  the  time  of  taking  the  instrument  knew 
him  to  be  only  an  accommodation  party.* 

[Note.  —  See  Bills  of  Exchange  Act,  section  28.] 

ARTICLE  V. 

NEGOTIATION. 

Section  60.  What  constitutes  negotiation. 

61.  Indor.sement;    how  made. 

62.  Indorsement  must  be  of  entire  instrument. 

63.  Kinds  of  indorsement. 

64.  Special  indorsement;   indorsement  in  blank. 

65.  Blank   indorsement;    how  changed  to  special   indorsement. 

66.  When  indorsement  restrictive. 

67.  EflFect  of  restrictive  indorsement;   rights  of  indorsee. 

68.  Qualified   indorsement. 

69.  Conditional  indorsement. 

70.  Indorsement  of  instrument  payable  to  bearer. 

71.  Indorsement  where  payable  to  two  or  more  persons. 

72.  Effect  of  instrument  drawn  or  indorsed  to  a  person  as  cashier. 

73.  Indorsement  where  name  is  wrongly  designated  or  misspelled. 

74.  Indorsement   in  representative  capacity. 

75.  Time  of  indorsement;    presumption. 

76.  Place  of  indorsement;   presumption. 


2s  Pages  252-253.     Discount  must  be  otherwise    he    can    recover    only    the 

distinguished    from    pledge    or    deposit  anioimt  of  the  lien.     Chalmers,  p.  86. 

for    security.      A    discounter    or    pur-  i  See  §  91. 

chaser  of  the  bill   is  a  holder  for  full  2  Pages      253-254.      An      immediate 

value.      A   pledgee  is  a  trustee  of  the  party   stands   in   the  same   relation   as 

pledgor.      If    the    pledgor    could    have  one  who  is  not  a  holder  in  due  course, 

sued    on    the    instrument    the    pledgee  See  Chalmers,  p.  95. 

may    recover    the    whole    amount,    ac-  '  Pages  257-258. 

counting  to   the   pledgor   for   any   sur-  •*  Pages  254-258. 
plus    above    the    amount    of    the    lien; 


NEGOTIATION.  791 

Section  77.  Continuation  of  negotiable  character. 

78.  Striking  out  indorsement. 

79.  'Jransfer  without   indorsement;    effect  of. 

80.  When  prior  party  may  negotiate  instrument. 

§  60.  What  constitutes  negotiation. 

An  instrument  is  negotiated  when  it  is  transferred  from  one  per- 
son to  another  in  such  manner  as  to  constitute  the  transferee  the 
holder  thereof.'  If  payable  to  bearer'  it  is  negotiated  by  delivery;* 
if  payable  to  order  it  is  negotiated  by  the  indorsement  of  the  holder 
completed  by  delivery.^ 

[Note.  —  See  Bills  of  Exchange  Act,  sections  31,  subdivisions  (1),  (2) 
and   (3).] 

§  61.  Indorsement;  how  made. 

The  indorsement  must  be  written  on  the  instrument  itself  or  upon 
a  paper  attached  thereto.^  The  signature  of  the  indorser,  without 
additional  words,  is  a  sufficient  indorsement." 

§  62.  Indorsement  must  be  of  entire  instrument. 

The  indorsement  must  be  an  indoivement  of  the  entire  instru- 
ment. An  indorsement,  which  purports  to  transfer  to  the  indorsee 
a  part  only  of  the  amount  payable,  or  which  purports  to  transfer  the 
instrument  to  two  or  more  indorsees  severally,  <loes  not  operate  as 
a  negotiation  of  the  instrument.'"  But  where  the  instrument  has 
l)een  paid  in  part,  it  may  be  indorsed  as  to  the  residue.'^ 

[Note.  —  See  Biil.s  of  Exchange  Act,  section  32,  subdivision  (2);  Daniel, 
8  <i«H.] 

§  63.  Kinds  of  indorsement. 

An  indorsement  may  be  either  special  or  in  blank;  and  it  may 
also  be  either  restrictive  or  qualified,  or  conditional. 

B  Page   259.      See   "holder"   defined,  of  the  rule  would  give  rise  to  a  ques- 

8  2.  tioM  of  fact  which  might  be  determined 

8  Pages  2(iO-2fi  1 .  variously.)       See     Rills    of     Exciiange 

t  Pages  2(il-2fifi    (including   indorse-  Act,  section  32.     "Some  of  the  foreign 

ment    in    form    of    assignment    and    of  codes  contain  minute  provisions  to  pre- 

guaranty).  vent    frauds,    r.    (j.,   that   the    first    in- 

X  Pages  2f>t»-2fi7.      \('r<)shy   v.   lUnih,  <lorsement  on   the   alhmge   must   begin 

l«i  Wis.  (IKi;  h'oli/rr  v.  Chasf,  18  Pick,  on    the    l)ill    and    en<l    on    the   allonge; 

r»3;   Frrnth  v.  Turner,  15  Ind.  5!».     The  f)tlierwise    an    allonge    might    l)e    taken 

rule  as  commonly  stated  is.  that  where  fr(»m  one  bill  and  stuck  on  to  another." 

there  is  not  room  on  the  bill,  the  in  Chalmers,  p.  107. 
dorsement  nuiy  be  on  an  alh)nge.  Rut  "See  §§  ((."i-fJl. 
it    is    not    ni-ci's-<ary    that    there   should  >'•  Pages  2(i7-2(S8. 

tx-  a  physical   impossibility  of  writing         "<"(',  the  holder  of  a  bill  for  100  t., 

the  indorsement  on  the  insfniment  it-  indorses    it.    '  I'av    I),   <ir   order,    Hi)   I.' 

rtelf;    it   may   Ik-   on   an   allonge   when-  This  is  invalid,  unless  C  also  acknowl- 

ever  the  necessity  or  convenience  of  the  idge  the  receipt   of  70  /.      (  Hairkinn  v. 

parties    require    it.       (See   chhch    above  i'nrdy,   \    \A.  Haym.  300.)"    (Chalmers, 

cited.)       Resiiles,    any    such    statement  p.    |07. 


•Mt'l?  TiiK  xiXioriAiu.i':  ixsriaMi'.xis  law. 

§  64.  Special  indorsement;  indorsement  in  blank. 

A  t^poiial  imlorsiMiu'nt  spciilics  the  jHTSon  to  whom,  or  to  wliose 
order  the  instrument  is  to  he  jjayahle;  and  llie  indorsement  of  sm-lj 
indorsee  is  necessary  to  tlu'  further  negotiation  of  I  he  instrument. '- 
An  indorsement  in  hhmk  speeities  no  indorsee,  and  an  instrument  so 
indorsed  is  payahle  to  hearer,  and  may  he  negotiated  hy  delivery.'^ 

[Note.  —  See  Hills  of  Kxiluuiye  Act,  section  ^A.] 

§  65.  Blank  indorsement;  how  changed  to  special  indorsement. 

The  holder  may  convert  a  hlank  indorsement  into  a  special  indorse- 
ment by  writing  over  the  signature  of  the  iudorser  in  hlank  any  con- 
tract consistent  with  the  character  of  the  indorsement.'* 

[Note.  —  See  Bills  of  Exchange  Act,  section  34;  Daniel,  §  694,  and  cases 
cited.) 

§  66.  When  indorsement  restrictive. 

An  indorsement  is  restrictive,  which  either: 

1.  Proliibits  the  further  negotiation  of  the  instrument;'-'^  or 

2.  Constitutes   tlie   indorsee  the  agent  of   the   indorser;'"  or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of 
some  other  person.'^ 

But  the  mere  absence  of  words  implying  power  to  negotiate  does 
not  make  an  indorsement  restrictive."* 
[Note.  —  Illustrations: 
{!)   Pay  Bank  of  A.  only.     For  deposit  in  Bank  of  A.  only. 

(2)  Pay  A.  Cashier,  or  order,  for  collection. 

(3)  Pay  A.  for  account  of  C. 

The  language  of  the  Bills  of  Exchange  Act,  (§  35).  is:  "It  is  a  mere 
authority  to  deal  with  the  bill  as  thereby  directed,  and  not  a  transfer  of 
the  ownership  thereof."  But  this  cannot  apply  to  the  indorsement  men- 
tioned in  sul)division  (3);  for  in  such  a  case  the  indorser  means  that  the 
title  shall  pass.  Thus,  if  the  indorsement  is  "  Pay  A  for  use  of  B  "  the 
title  passes  to  A ;  but  tlie  indorsement  is  restrictive  to  the  extent  that 
it  gives  notice  that  the  instrument  cannot  be  negotiated  by  A  for  his  own 
debt  or  for  liis  own  benefit.     Hook  v.  rrntt,  78  N.  Y.  371.  375.] 


12  Page  208.     See  §§  28.  70.  i^  Pages   268-271.      "The   holder   of 

13  Pages  208-271.  See  §  28.  "Bill  a  bill,  indorsed  hy  ('  in  blank,  writes 
payable  to  the  order  of  .John  Smith,  over  C's  signature  the  words.  '  Pay  to 
He  signs  on  the  back  '  .John  Smith.'  the  order  of  D.'  The  holder  who  does 
This  act  is  interpreted  by  the  law  mer-  this  is  not  liable  as  an  indorser,  but 
chant  as  an  indorsement  in  hlank  by  the  transaction  operates  as  a  special 
.John  Smith,  and  operates  as  if  he  had  indorsement  from  C  to  D.  (  Y^incent 
written:  1.  T  hereby  assign  this  bill  v.  Horlock,  1  ("amp.  442.)"  Chalmers, 
to  bearer.     2.  I  hereby  undertake  that  p.   112. 

if  this  bill  be  dishonored,  T.  on  receiv-  !'•  Pages  271-274. 

ing  due  notice  thereof,  will   indemnify  '«  Pages  274-277. 

the    t)earer."      Chalmers.    ]>.    110.      See  'T  Pages  277-280. 

§    116.  '"<  I'ages   272-274. 


NEGOTIATION.  793 

§  67.  Effect  of  restricting  indorsement;  rights  of  indorsee. 

A  restrictive  indorsement  confers  upon  tlic   indorsee  the  right: 

1.  To  receive  payment  of  the  instrument; 

2.  To  bring  any  action  tliereon  tliat  the  indorser  could  bring; 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form  of 
the  indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of  the  first  in- 
dorsee under  the  restrictive  inciorsement. 
(Note.  —  See  Bills  of  Exchange  Act,  section  35.] 
Pages  280-284      See  §  77. 

§  68.  Qualified  indorsement. 

Qualified  indorsement  constitutes  the  indorser  a  mere  assignor 
of  the  title  to  the  instrument.'"  It  may  he  made  by  adding  to  the 
indorser's  signature  the  words  "  without  recourse  "  or  any  words  of 
similar  import  Such  an  indorsement  does  not  impair  the  negotiable 
character  of  the  instrument.^" 

f\oTE.  —  Sep  Daniel.  §  TOO.]     See  Bills  of  Exchange  Act.  section   Ifi. 

§  69.  Conditional  indorsement. 

Where  an  indor.senicnt  is  conditional,  a  party  required  to  pay  the 
instrument  may  disregard  the  condition,  and  make  payment  to  the 
indorsee  or  liis  transferee,  whether  the  condition  has  been  fulfilled 
or  not.  But  any  person  to  whom  an  instrument  so  indorsed  is 
negotiated,  will  hold  the  same,  or  the  proceeds  thereof,  subject  to 
the  rights  of  the  person  indorsing  conditionally. 

[NoTK.  —  The  first  sentence  is  the  same  as  section  33  of  the  Bills  of  Exchange 
Act  with  a  .<»Iight  nuuiification.  In  his  note  to  that  section  .Judge  Chalniers 
says:  "This  section  alters  the  law.  It  was  formerly  held  that  if  a  bill  was 
indorsed  conditionally,  the  acceptor  paid  it  at  his  peril  if  the  condition  was  not 
fnllillcd.  '1  his  was  hard  on  him.  ]f  lie  dishonored  the  hill  he  might  Iw  liai)le 
to  damages,  and  yet  it  migiit  be  imj)()ssible  for  him  to  find  out  if  the  condition 
had  been  fulfilled."  See  Daniel,  §S  til)?,  OflSa.  There  appear  to  1)0  no  American 
ca«cs  upon  the  subject;  and  the  only  English  case  is  that  of  Rnbrrtsnn  v. 
h'rnsivfilon,  4  Taunt.  .'10. J 

Page  287. 

§  70.  Indorsement  of  instrument  payable  to  bearer. 

Where  !in  Inst niriieiit ,  [);iyiil)le  to  b.'iirer,  is  indorsed  specially,  it 
may  nevertheless  be  further  negotiated  by  delivery;  but  the  person 
indorsing  specially  is  liable  as  indorser  to  only  such  holders  as  make 
title  through  his  indorsement.^' 

§  71.  Indorsement  where  payable  to  two  or  more  persons. 

Where  an  instrument  is  payable  to  the  firder  of  I  wo  or  more  payees 


"•See  8   115.  21  Pages  288-298. 

I"  Pages  284-287. 


794  THE    NFCOTIAMIK    I  NsTlil' M  KNTS    LAW. 

or  indorsees  who  are  not  partners,  all  must  indorse,  unless  the  one 
indorsing  lias  authority  to  indorse  for  the  others.^' 

I  Note.  —  Sop  Hills  of  Kxclumgo  Act,  section  32,  siibciivision  (3).  Dnnicl, 
§  701(1.] 

§  72.  Effect  of  instrument  drawn  or  indorsed  to  a  person  as  cashier. 

Where  an  instrument  is  drawn  or  indorsed  to  a  [ktsou  as  "  eashier  " 
or  other  tiseal  otliter  ol'  a  hank  or  corporation,  it  is  deemed  prima 
facie  to  he  payal)le  to  the  hank  or  corporation  of  whi(;h  lie  is  such 
ofTieer;  and  may  lie  nefrotiatcd  hy  either  tlie  indorsement  of  the  bank 
or  corporation,  or  the  indorsement  of  the  otlicer.-^ 

§  73.  Indorsement  where  name  is  wrongly  designated  or  misspelled. 

Where  the  name  of  a  payee  or  indorsee  is  wrongly  designated  or 
misspelled,  he  may  indorse  the  instrument  as  therein  described,  add- 
ing, if  he  thinks  fit,  his  proper  signature.^* 

[Note.  —  See  Bills  of  Exchange  Act,  section  32,  subdivision    (4).] 

§  74.  Indorsement  in  representative  capacity. 

Where  any  person  is  under  obligation  to  indorse  in  a  representa- 
tive capacity,  he  may  indorse  in  such  terms  as  to  negative  personal 
liability. 

[XoTK.  —  Same  as  Bills  of  Exchange  Act,  section  31,  subdivision  (5).] 
§  68;  also  §  39. 

§  75.  Time  of  indorsement;  presumption. 

E.xcept  where  an  indorsement  bears  date  after  the  maturity  of  the 
instrument,  every  negotiation  is  deemed  prima  facie  to  have  been 
effected   before  the  instrument  was  overdue.^* 

[Note.  —  See  Bills  of  Exchange  Act,  section  36,  subdivision  (4)  New 
Orleans,  etc.  v.  Montgomery,  95  U.  S.  1;  Collins  v.  Gilbert,  94  U.  S.  753.  See 
also  numerous  cases  cited  in  Daniel,  §  728.] 

§  76.  Place  of  indorsement;  presumption. 

Except  where  the  contrary  appears  every  indorsement  is  presumed 
prima  facie  to  have  been  made  at  the  place  where  the  instrument 
is  dated.* 

[For  summary  of  rules  governing  conflict  of  laws,  see  Bills  of  Exchange 
Act,  §  72.] 

22  Page  298.  The    form     sometimes     adopted,     viz., 

23  Pages  299-300.     See  §  37.  '  Mrs.  .John  Jones,'  is  clearly  irregular, 
2«  Pages  301-302.    "A  question  some-    though    its    invalidity   has    never   been 

times  arises  as  to  how  a  bill   payable  decided."     Chalmers,   p.    109. 

(say)   to  '  Mrs.  .John  .Jones  '  should  be  2.'.  I'age  302.     See  §  91. 

indorsed.      The    proper    form    appears  i  Pages  302-305. 
to  be  '  Ellen  .Jones,  wife  of  .John  .Jones,' 


UIGHTS    OF    HOLDER.  795 

§  77.  Continuation  of  negotiable  character. 

An  Jnstniment  negotiable  in  its  origin  continues  to  be  negotiable 
until  it  has  heen  restrictively  indorsed"  or  discharged  by  payment' 
or  otherwise.* 

(Note.—  See  Bills  of  l';xohange  Act,  section  36.] 

§  78.  striking  out  indorsement. 

The  holder  may  at  any  time  strike  out  any  indorsement  which  is 
not  necessary  to  his  title  ^  The  indorser  whose  indorsement  is  struck 
out  nnd  all  indorsers  subsequent  to  him,  are  thereby  relieved  from 
liability  on  the  instrument.® 

§  79.  Transfer  without  indorsement;  effect  of. 

Where  the  holder  of  an  instrument  payable  to  his  order  transfers 
it  for  value  without  indorsing  it,  the  transfer  vests  in  the  transferee 
such  title  as  the  transferer  had  therein,  and  the  transferee  acquires, 
in  addition,  the  right  to  have  tlie  indorsement  of  the  transferer. 
But  for  tlie  purpose  of  determining  whether  the  transferee  is  a  holder 
in  due  course,  the  negotiation  takes  effect  as  of  the  time  when  the 
indorsement  is  actually  made.^ 

§  80.  When  prior  party  may  negotiate  instrument. 

Where  an  instrument  is  negotiated  back  to  a  prior  party,*  such 
party  may,  subject  to  the  provisions  of  this  chapter,"  reissue  and 
further  negotiate  the  same."'  But  he  is  not  entitled  to  enforce  pay- 
ment tlicrcof  against  any  intervening  party  to  whom  he  was  per- 
Bonally  liable.*' 

INoTE.  —  See  Bills  of  Exchange  Act,  section  37.1 

ARTICLE  VI. 

RIGHTS   OF   HOLDER. 

Section  no.  Right  of  holder  to  sup;   p.aymont. 

91.  What  constitute.^  a  holder  in  due  course. 

92.  When  perHon   not  deemed   holder   in  due  course. 

93.  Notice  Ix-foro  full   aniovint  paid. 

94.  When  title  defective. 

95.  What  conHtitiites  notice  of  defect. 
9fi.  Rights  of  holder  in  due  course. 
97.  When  subject  to  original  defenses. 
OK.  Who  deenu'd   holder   in   duf  cr)urse. 


a  See  S8  flft-67.  able  rules  as  the  rule  at  law.     Daniel, 

•  See  §  200.  §   741.1 

♦  I'age  300.  «  See  §   202. 

»  Pages  300-307.  »  See  §§  200-200.    as    to    discharges. 

•Sef-   5    no.  loPnges  310-313. 

t  PagPM   307  310.      [This   is  the  same  n  Png.-s    310-.'?].'?.      This    is    a    rule 

as  Hills  of  Kxchange  Act,  sec.  31,  sub-  against  circuity  of  action, 
dirision    (4  I.     It  rstablishis  the  equit- 


796  THE    NKOOTIABI.F.    INSTRUMENTS    LAW. 

§  90.  Right  of  holder  to  sue;  payment. 

Tlu'  Iii)M(T '-  of  a  iK'Ljoliiihlc  inst niiiHMit  may  sue  thereon  in  his 
own  nanie;'^  and  payment  to  liiin  in  due  eourse  discharges  the 
instrument.'* 

(NoTK.  —  Sre  Bills  of  Exoliaiiso  Act,  section  .IS,  subdivisions    (1)    and    (.'<)•  I 

§  91.  What  constitutes  a  holder  in  due  course. 

A  liolder  in  due  course  is  a  liolder  who  has  taken  tlie  instrument 
under  the  following  conditions: 

1.  Tliat  it  is  complete  and  regular  u]ion  its  face;''' 

2.  That  he  hecame  the  holder  of  it  hefore  it  was  overdue,  and 
without  notice  that  it  had  been  previously  dishonored,  if  such 
was  the  fact ;  '* 

3.  That  he  took  it  in  good  faith  and  for  value;  '^ 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no  notice 
of  any  infirmity  in  the  instrument  or  defect  in  the  title  of  the 
person  negotiating  it.'* 

fNoTE.  —  See  Bills  of  Exchange  Act,  section  29,  subdivions  (a)  and  (6).| 
"  The  act  has  substituted  the  term  '  holder  in  due  course  '  for  the  cumbrous 
equivalent  bona  fide  holder  for  value  witliout  notice."     Chalmers,  p.  90. 

§  92.  When  person  not  deemed  holder  in  due  course. 

Where  an  instrument  payable  on  demand  is  negotiated  an  un- 
reasonable length  of  time  after  its  issue,  the  holder  is  not  deemed 
a  holder  in  due  course. ^^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  36,  subdivision  (3).  Crini  v. 
Stockucather,  88  N.  Y.  339;   Herrkk  v.   Woolvtrton,  41   N.  Y.  581] 

§  93.  Notice  before  full  amount  paid. 

Where  the  transferee  receives  notice  of  any  infirmity  in  the  in- 
strument or  defect  in  the  title  of  the  person  negotiating  the  same 
before  he  has  paid  the  full  amount  agreed  to  be  paid  therefor,  he 
will  be  deemed  a  holder  in  due  course  only  to  the  extent  of  the 
amount  theretofore  paid  by  him.^° 

§  94.  When  title  defective. 

The  title  of  a  person  who  negotiates  an  instrument  is  defective 
within  the  meaning  of  this  chapter  when  he  obtained  the  instrument,  or 

12  See    §    2.      "The    Act   deals   only  is  Pages  314-318. 

with     transfer     by     negotiation,     that  i4  See  §§  148,  200. 

is,     transfer     according     to     the     law  is  Pages  319-320.     See  §§  32-33. 

merchant.      It    leaves    untouched    the  '«  Pages  320-337. 

rules    of    general    law    which    regulate  it  Pages  337-340.     See  §  51. 

the  transmission  of  bills  by  act  of  law,  is  Pages  340-357.     See  §  95. 

and  their  transfer  as  choses  in  action  is  Page  323. 

or    chattels    according    to    the   general  20  Pages  357-360. 
law,"      (e.     g.,     by     marriage,     death, 
bankruptcy,    sale    on    execution,    etc.) 
Chalmers,  p.   125. 


RIGHTS   OF   HOLDER.  797 

any  signature  thereto,  by  fraud,  duress,  or  force  and  fear,  or  other 
unlawful  means,  or  for  an  illegal  consideration,  or  when  he  nego- 
tiates it  in  breach  of  faith,  or  under  such  circumstances  as  amount 
to  a  fraud. ^^ 

[Note.  —  See  Bills  of  E.xchange  Act,  section  29,  subdivision  (2).]  "This 
list  of  defects  in  title  may  not  be  exhaustive.  A  person  whose  title  is 
defective  must  be  distingui.shed  from  a  person  who  has  no  title  at  all,  and 
who  can  give  none;  as  for  instance,  a  person  making  title  through  a  forged 
indor.sement.  The  words  '  force  and  foar  '  were  inserted  in  committee  as  tiie 
equivalent  of  the  English  technical  term  duress,  which  is  unknown  to  Scotch 
law.     (See  Bell's  Principles,  9th  ed.,  §  12.)  "     Chalmers,  p.  92. 

§  95.  What  constitutes  notice  of  defect. 

To  constitute  notice  of  an  infirmity  in  the  instrument  or  defect 
in  the  title  of  the  person  negotiating  the  same,  the  person  to  whom 
it  is  negotiated  must  have  had  actual  knowledge  of  the  infirmity 
or  defect,  or  knowledge  of  such  facts  that  his  action  in  taking  the 
instrument  amounted  to  bad  faith. ^^ 

§  96.  Rights  of  holder  in  due  course. 

A  holder  in  due  course  holds  the  instrument  free  from  any  defect 
of  title  of  prior  parties  and  free  from  defenses  available  to  prior 
parties  among  themselves,  and  may  enforce  payment  of  the  instru- 
ment for  the  full  amount  thereof  against  all  parties  liable  thereon.^' 

[Note.  —  See  Bills  of   Excliange  Act,  section  38,  subdivision    (2).] 

§  97.  When  subject  to  original  defenses. 

In  the  hands  of  any  holder  other  than  a  holder  in  due  course,  a 
negotiable  instrument  is  subject  to  the  same  defenses  as  if  it  were 
non-negotiable.  But  a  holder  ^*  who  derives  his  title  through  a 
bolder  in  due  course,  and  who  is  not  himself  a  party  to  any  fraud 
or  illegality  affecting  the  inptrunient,  has  all  the  rights  of  such 
former  holder  in  respect  of  nil  parties  prior  to  the  latter.^" 

§  98.  Who  deemed  holder  in  due  course. 

Every  lioldcr  is  (hjcrned  prinia  facie  to  be  a  holder  in  due  course; 
but  when  if  is  shown  that  the  title  of  any  person  wiio  has  ncgofiafod 
the  instrument  was  defective,  the  biiiilcn  is  on  the  holder  to  prove 
that  he  or  some  person  under  whom  hi'  claims  ac(|nirod  the  title  as 
a  holder  in  due  course.'     But  the  last  mentioned  nilc  does  not  apply 


21  Pages  370-309.  2"  Pages  3fiO-3ni. 

22  pRgrx   33R-357.      See   Bills   of   Ex-         i  Pages      .305-370.       See      Tntam      v. 
change  Art.  §  00.  flnslnr.    1,.    H.    23    (,).    B.    D.    3-ir>,   con- 

23  Pagr«     nfil-nO.^.        \('romu-rll      v.     struing    Bills   of    Exchange    Act,    g    30, 
Coiintv  nf  Snr.  or,,  n.  S.  51.  00.)  huIiscc.    (2). 

24  "  WlirthfT  for  value  or  not." 
Bills  of  Exchange  Act,  §  29,  nubsec, 
(3). 


7f>8  THE    NEOOTIARl-K    INSTIirMKNTS    LAW. 

in  favor  of  n  party  who  became  bound  on  the  instrument  prior  to 
tlie  acquisition  of  such  defective  title. 

[XoTK.  —  This  is  similar  to  Bills  of  Exchange  Act,  section  30,  subdivision 
(2)  ;  but  tho  plirasoolopy  has  been  ohanpod  so  as  to  better  harmonize  with 
the  language  <>f  section  55,  (N.  Y.  §  94),  which  is  the  same  as  Bills  of  Kxchange 
Act,  section  liP,  subdivision  (2).  The  language  of  the  Bills  of  Kxchange  Act 
is  "  subseiiuent  to  the  alleged  fraud  or  illegality."  But  this  is  not  quite  cor- 
rect;  for  the  holder  may  be  a  holder  in  due  course,  though  the  fraud  or  ille- 
gality was  in  thp  transfer  to  him.  The  last  sentence  has  no  equivalent  in  the 
Bills  of  Exchange  .Act;  but  it  is  necessary  to  qualify  the  general  statement.  If 
A  issues  his  note  to  B,  and  C  gets  possession  of  it  and  fraudulently  negotiates 
it  to  D,  the  fraud  of  C  in  nowise  affects  .\,  and  is  no  defense  to  him  when 
sued  on  the  instrument  by  D.l 

ARTICLE  VII. 

LIABILITIES  OF  PARTIES. 

Section  110.  Liability  of   maker. 

111.  Liability  of  drawer. 

112.  Liability  of  acceptor. 

113.  When   person  deemed  indorser. 

114.  Liability  of  irregular  indorser. 

115.  Warranty;    where    negotiation    by    delivery    or    by    a    qualified 

indorsement. 

116.  Liability  of  general   indorser. 

117.  Liability  of  indorser  where  paper  negotiable  by  delivery. 

118.  Order  in  which  indorsers  are  liable. 

119.  Liability  of  agent  or  broker. 

§  110.  liability  of  maker. 

The  maker  of  a  negotiable  instrument  by  making  it  engages  that  he 
will  pay  it  according  to  its  tenor ;  ^  and  admits  the  existence  of  the 
payee  and  his  then  capacity  to  indorse.  ^ 

[Xmi;.  —See  Bills  of  Exchange  Act,  section  88.] 

§  111.  Liability  of  drawer. 

The  drawer  by  drawing  the  instrument  admits  the  existence  of  the 
payee  and  his  then  capacity  to  indorse ;  and  engages  that  on  due  pre- 
sentment the  instrument  will  be  accepted  and  paid,  or  both,  according 
to  its  tenor,  and  that  if  it  be  dishonored,  and  the  necessary  proceed- 
ings on  dishonor  be  duly  taken,  he  will  pay  the  amount  thereof  to  the 
holder,  or  to  any  subsequent  indorser  who  may  be  compelled  to  pay  it.* 

2  Page     400.       "  The     maker     of     a  note  corresponds  with  the  acceptor  of 

promissory  note  is  the  principal  debtor  a  bill  of  exchange,  and  the  same  rules 

on    the    instrument.      The    maker    is  apply    to    both."      Chalmers,    p.    270. 

sometimes  called   the  drawer,   but  the  See  §   130. 

primary   and   absolute   liability  of  the  3  Pages  401-403. 

maker  of  a  note  must  be  distinguished  *  Pages  418-419.     Bills  of  Exchange 

from  the  secondary  and  conditional  lia-  Act.  §  55,  subsec.    (1).     The  drawer'i 

bilitv  of   the   drawer   of   a   bill    of  ex-  liability  is  similar  to  that  of  the  i«- 

change.     In   general   the   maker   of  a  dorser's.     See  §  116, 


LIABILITIES    OF    PAIITIRS.  799 

But  the  drawer  may  insert  in  the  instrument  an  express  stipulation 
negativing  or  limiting  his  own  liability  to  the  holder.  ^ 

§  112.  Liability  of  acceptor. 

The  acceptor  by  accepting  ^  the  instrument  engages  that  he  will  pay 
it  according  to  the  tenor  of  his  acceptance  '  and  admits : 

1.  The  existence  of  the  drawer,  the  genuineness  of  his  signa- 
ture, and  his  capacity  and  authority  to  draw  the  instrument;* 
and 

2.  The  existence  of  the  payee  and  his  then  capacity  to  indorse.  ® 
[Note.  —  See  Bills  of  Exchange  Act,  section  54.     Tlie  BilLs  of  Exchange  Act 

contains  the  words.  "  but  not  tlie  genuineness  or  validity  of  liis  indorsement." 
But  as  the  section  purports  to  specify  what  the  acceptance  admits,  all  other 
matters  are  necessarily  excluded  by  implication.  To  specify  in  some  instances 
and  not  in  otkers  what  is  excluded  destroys  the  symmetry  of  the  Act,  and, 
besides,  might  give  rise  to  doubts  as  to  its  construction.] 

§  113.  When  person  deemed  indorser. 

A  person  placing  his  signature  upon  an  instrument  otherwise  than  as 
maker,  drawer  or  acceptor  is  deemed  to  be  an  indorser,  unless  he 
clearly  indicates  by  appropriate  words  his  intention  to  be  bound  in 
some  other  capacity.^" 

[Note.  —  Section  56  of  the  Bills  of  Exchange  Act  provides:  "Where  a  per- 
.son  signs  a  bill  otherwise  than  as  drawer  or  acceptor,  he  thereupon  incurs  the 
liabilities  of  an  indor.=er  to  a  holder  in  due  course."  But  this  language  is  too 
broad.  There  is  no  reason  why  one  should  not  bind  himself  as  guarantor  or 
surety  to  a  holder  in  due  course  if  he  clearly  indicates  such  an  intent.  The 
language  "  otherwise  than  as  maker,"  etc.,  would  not  meet  the  case  of  a  signa- 
ture HO  placed  that  there  would  be  a  question  whether  the  person  signing 
meant  to  bine?  himself  as  joint  maker  or  otherwise.  I'ut  the  point  is  corrected 
in  section  17  (K.  Y.  §  3G),  by  the  provision  "that  where  a  signature  is  so 
[•laced  upon  the  instr\iP"'nt  that  it  is  not  clear  in  what  capacity  the  person 
making  the  same  intended   to  sign,  he  will   be  deemed  an  indorser."] 

§  114.  Liability  of  irregular  indorser. 

WIkto  a  person,  not  otherwise  a  party  to  an  instrument,  places 
thereon  his  .--ignature  in  blank  before  delivery,  *'e  is  liable  as  indorser  " 
in  accordance  with  the  following  rules : 

1.  If  the  instrument  is  payable  to  the  order  of  ?  third  person, 
he  is  liable  to  the  payee  anrl  all  snbs('f|uerit  parties. 

'•  [See  Bills  of  Exchange  .Act,  see-  the  bill.  There  may,  of  course,  he 
tion  Ifi.]  See  §  OK.  other  estoppels  arising  on  evidence. 
«  As  to  acceptances,  se<«  <;§  220-2.30.  (See  §  42,  ante.)  If  the  amount  of 
7 'Ihe  arreptor  is  a  primary  party  the  bill  be  altered,  or  if  any  other 
and  absolutely  liable.  See  §  .1.  No  material  alteration  be  made  in  it,  the 
flemand  on  him  is  necessary  to  fix  his  acceptor  is  not  precluded  by  this  sec- 
liability.     See  §   1.10.  fion    from    setting   it   up."     Chalmers, 

•  Pages  4^)3-41 8.  p.    18.'-). 

•  Same   as   in   §    110.      "This   wction  "i  I'jiges  4.'>8-4.')!t. 
daals    only    with    estoppels    arising    on  n  F'agrs  440-458, 


800  TlIK    NKOOTTAin.K    T  NSIIU' M  I;NTS    I,.\\V. 

2.  If  tlio  iiistruiiiont  is  payable  to  the  order  of  the  maker 
or  drawer,  or  is  payable  to  bearer,  he  is  liable  to  all  parties  sub- 
sequent to  the  maker  or  drawer. 

■?.   If  he  sigMS  for  the  aeeommodation  of  the  payee,  he  is  liable 
to  all  j)artics  subsequent  to  the  payee. 
[NoTK.  ^  Tliis  section  is  intendod  to  cover  irregular  iinlorsfnicnts.     On  tills 
subject  tlio  (Ircisions  are  very  conHictinp.     In  .some  jnrisdictions  i\  person  i)lac- 
in<:    lii.s    signature   on   the   back    of   a   note   before    the    payee    has    indorsed    is 
deemed  a  joint  maker;    in  other  jurisdictions  he  is  regarded  as  a  guarantor; 
and  in  still  others  as  an  indorscr;   and  those  courts  wliicli  hold  him  to  he  an 
indorser  differ  as  to  whether  he  is  a  tirst  or  second   iiidorser.     The  ca.ses  are 
too   numerous   to  be  cited    here.      Many   of  them    will    be   found    in    Daniel    on 
Negotiable  Instruments,  sections  707  719.     The  rule  stated  above  is  embodied 
in  part   in  section  :UI7  of  the  Civil   Code  of  California,  which   reads:      "One 
who   indorses   a    negotiable   instrument   before   it   is   delivered   to   the   payee   is 
liable  to  the  i)ayee  thereon,  as  an  indorser."     This  is  also  the  effect  (probably) 
of  section  5H  of  the  Bills  of  Kxchange  Act.     (See  Chahm-rs  on  Jiills.  Notes  and 
Cheques,  section  50.)      The  California  rule  is  adopted  because  it  is  conducive 
to  certainty,  and  because   it  ajipears  to  accord   more   nearly   with   what   mu.st 
have  been  the  intention  of  the  parties.     When  a  plain  man  jiuts  his  signature 
on   the   back   of  a   negotiable  instrument  he   ordinarily   understands   that   be   is 
becoming  liable  as  an  indorser;   and  if  he  puts  it  there  before  the  instrument 
is  delivend.  he  usually  does  so  for  the  purpose  of  giving  the  maker  or  drawer 
credit  with  the  payee  or  other  person  to  whom  it  is  negotiated.     In  many  of 
the  eases  the  reasoning  is  highly  technical,  and   the  decisions  are  based   upon 
considerations  which,  in  all  probability,  never  entered  the  heads  of  the  partie.9 
themselves.     The   California   Code   makes  no   provision   for   a  case   where   the 
instrument   is  drawn   to  the  order  of  the  maker  or  drawer.     This   is  covered 
by  subdivision  2,  above.     Subdivision  3  is  added  to  provide  for  a  case  where, 
tile  payee  being  unable  to  enforce  payment,  th^re  might  be  a  nuestion  whether 
the  indorser  would  be  liable  to  a  person  claiming  under   the  payee. 

Illustrations. 

Note  made  by  A,  payable  to  order  of  B,  indorsed  by  C,  and  afterwards 
delivered  to  B.     C  is  liable  as  indorser  to  B. 

Note  made  by  A,  payable  to  order  of  himself,  indorsed  by  B,  and  afterwards 
delivered  to  C.     B  is  liable  as  indorser  to  C. 

Note  made  by  A,  to  order  of  B,  indorsed  by  C  before  B,  but  for  accommoda- 
tion of  B,  and  discounted  by  Bank  of  X.  C  is  liable  as  indorser  to  Bank  of  X 
and  not  to  B.] 

"  .\,^lfs,  —  Such  an  indorsement  as  is  referred  to  by  this  section  would  in 
continental  countries  be  termed  an  'aval,'  which  is  said  by  Lord  Blackburn  to 
be  an  antiquated  term  signifying  'underwriting.'  (5  App.  Cas.  at  p.  772.) 
According  to  I'othier  (as  cited  by  Lord  Blackburn,  supra),  an  '  aval  '  might  be 
either  on  the  bill  itself  or  on  a  separate  paper,  and  if  such  an  '  aval  '  was  given 
by  anyone,  his  obligation  to  all  subsequent  holders  of  the  bill  was  precisely  the 
same  as  that  of  the  person  to  facilitate  whose  transfer  the  aval  was  given,  and 
under  whose  signature  it  was  written.  English  and  Scotch  law,  as  Lord  Black- 
burn proceeds  to  point  out,  do  not  go  so  far  as  this.  If  a  person,  not  the 
holder,  indorse  a  bill,  he  is  not  a  surety  for  the  drawee  or  acceptor  to  the 
drawer;  'such  an  indorsement  creates  no  obligation  to  those  who  previously 
were  parties  to  the  bill,  it  is  solely  for  the  benefit  of  those  who  take  subse- 
quently. It  is  not  a  collateral  engagement,  but  one  on  the  bill,  and  it  is  for 
that  reason  and  becau.se  the  original  bill  lias  incident  to  it  the  capacity  of  an 
indorsement  in  the  nature  of  an  '  aval,'  that  such  an  indorsement  requires  no 


LIABILITIES    OF    PARTIES.  801 

netc  stamp.  {Steele  v.  McK inlay,  5  App.  754;  see  also,  at  p.  782,  per  Lord 
Watson,  and  his  comments  tliereon,  in  Macdonald  v.  Whitfield,  8  App.  Caa. 
733,  at  p.   748.)  "     L'lialniers,  pp.   189-190. 

§  115.  Warranty  where  negotiation  by  delivery  or  by  a  qualified 
indorsement. 
Every  person  negotiating  an  instrument  by  delivery  or  by  a  quali- 
fied indorsement,  warrants:  '" 

1.  That  the  instrument  is  genuine  and  in  all  respects  what 
it  purports  to  be; 

2.  That  he  has  a  good  title  to  it; 

3.  That  all  prior  parties  had  capacity  to  contract; 

4.  That  he  has  no  knowledge  of  any  fact  which  would  impair 
the  validity  of  the  instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only,  the  warranty  extends 
in  favor  of  no  holder  other  than  the  immediate  transferee.  The 
provisions  of  subdivision  three  of  this  section  do  not  apply  to  persons 
negotiating  public  or  corporate  securities,  other  than  bills  and  notes. 

[Note.  —  Where  tliere  is  a  latent  defect,  as  for  example,  usury,  it  is  not 
covered  by  the  implied  warranty  of  a  person  negotiatinor  the  instrument  with- 
out indorsement.  In  such  cases  scienter  is  necessary  in  order  to  render  the 
transferer  liable.  (Littaucr  v.  Goldman,  72  N.  Y.  50(5.)  Nor  would  he  be 
liable  if  the  nuiker  of  tiie  note  had  become  insolvent  unless  he  knew  such  fact. 
{Bicknall  v.  Waterman,  5  R.  I.  43;  Fenn  v.  Harrison,  3  T.  R.  757;  Fydell  v. 
Clark,  1  Esp.  447.)  The  application  of  the  rule  of  commercial  paper  to  per- 
sons selling  corporate  bonds,  etc.,  would  work  great  hardships  and  much  public 
inconvenience.      (See  Otis  v.  Cullum,  92  U.  S.  448.)] 

See  Rills  of  Exchange  Act,  section  58,  subsection  (3).  "There  is  some  con- 
fusion in  the  cases  owing  to  the  distinction  between  the  warranty  of  genuine- 
ness and  the  liability  on  the  consideration  having  been  lost  sight  of.  The 
warranty  of  genuineness  is  an  incident  of  the  contract  of  sale,  and  it  is  imma- 
terial whether  the  thing  sold  be  a  bill  or  any  other  personal  chattel.  Tiie 
transferer  is  for  this  purpose  an  ordinary  vendor."     Chalmers,  p.   196. 

§  116.  Liability  of  general  indorser. 

Ev«'ry  indorser  '•'  who  indorses  without  qualification,  warrants  to 
all  sub.scquont  holders  in  due  course: 

1.  The  matter  and  things  mentioned  in  subdivisions  one,  two 
and  thn-(;  of  the  next  preceding  section;    and, 

2.  That  the  instrument  is  at  the  time  of  his  indorsement  valid 
and  sulisisting.'* 

And,  in  addition,  he  engages  that  on  due  presenlnu'nl,  it  shall 
be  accepted  or  paid,  or  both,  as  the  ease  may  be,  according  to  its  tenor, 
and  tlinl  if  ii  be  disboriopfd,  nnrl  the  necessary  proceedings  on  dis- 
honor be  duly  taken,  Ih-  will  pay  (he  anu)unt  thereof  to  the  holder. 
or  to  any  subsfqnent  indorser  who  may  be  compelled  to  pay  it." 

(NoTK.  ^  Sfj.  Hills  of  Exchange  Act.  section  55,  subdivision  (21.  The  l.nn- 
guage  of  the  Bills  of  Exchange  Act  fixing  the  liabilitieH  of  the  various  parties 

12  Pages   419-437.  i«  Pages  437-439. 

»»  Pages  439-440.  i'.  Pages  442-445. 

WEQOT.   INBTROMKNTB  —  f)! 


803  TllK    NKtlOllAlU.K    lN\sritL'Ml'.N  TiS    LAW. 

is  unifiirnily,  "  is  lufcliulcd  from  dciix  iii^',  I'U-."  Ihit  tliis  ih  sUiting  the  effect 
of  tlu'  priiu-ipio  and  not  tlie  itriiuipli'  itstdf.  Upon  sncli  a  Htatenu'nt  the  ques- 
tion arises:  W  liy  is  lie  pioeludcd  y  I  he  reason  is  tliat  lie  lias  jjiven  implied 
warranties  and  admissions.  '1  he  more  seientihe  nudiiod  is  to  stale  wtiat  these 
warranties  ami  admissions  are,  and  the  other  will  follow  by   implication.]* 

§  117.  Liability  of  indorser  where  paper  negotiable  by  delivery. 

Where  a  person  places  his  iiulorsement  on  an  instrument  negotiable 
by  delivery  lie  incurs  all  the  liabilities  of  an  indorser." 

[NoTK.  —  See  Daniel,  §  G(53a,  and  cases  there  cited.) 

§  118.  Order  in  which  indorsers  are  liable. 

As  respects  one  another,  indorsers  are  liable  prima  facie  in  the 
order  in  which  they  indorse;  but  evidence  is  admissible  to  show  that 
as  between  or  among  themselves  they  have  agreed  otherwise.*^  Joint 
payees  or  joint  indorsers  who  indorse  are  deemed  to  indorse  jointly 
and  severally.'* 

[NoTK.  —  Evidence  to  show  an  agreement  for  a  joint  liability:  See  Easterly 
V.  Barber,  fif)  N.  Y.  4.33;  Phillips  v.  Preston,  5  How.  ( U.  S.)  278;  Kdelen  v. 
White,  6  Bush,  408.  Contra:  Johnson  v.  Ramsay,  43  N.  J.  L.  279; 
Daniel,  §  703.  Evidence  to  show  contract  that  one  was  to  be  prior  in- 
dorser: See  .SVflcA;  v.  Kirk,  77  Pa.  St.  380;  Reinhart  v.  Schall,  69  Md.  352; 
Hlagcl  V.  Rust,  4  Gratt.  274;  Daniel,  §  704.  As  to  joint  payees  indorsing: 
See  Lane  v.  Stacy,  8  Allen,  41;  Daniel,  §  704.1 

§  119.  Liability  of  an  agent  or  broker. 

Where  a  bi-oker  or  other  agent  negotiates  an  instrument  without 
indorsement,  he  incurs  all  the  liabilities  prescribed  by  section  one 
hundred  and  fifteen  of  this  cliapter,  unless  he  discloses  the  name  of 
his  principal,  and  the  fact  that  he  is  acting  only  as  agent.'" 

[Note. —  See  Meridan  Aat.  Bank  v.  Gallaudct,  120  N.  Y.  298;  Cabot  Bunk 
V.  Morton,  4  Gray,  156;   Worthington  v.  Coicles,  112  Mass.  30.] 

ARTICLE  VIII. 

PRESENTMENT  FOR  PAYMENT. 

Section  130.  EfTect  of  want  of  demand  on  principal  debtor. 

131.  Presentment  wliere  instrument   is  not  payable  on  demand. 

132.  What  constitutes  a  sufficient  presentment. 

133.  Place  of  presentment. 

134.  Instrument  must  be  exhibited. 

135.  Presentment  where  instrument  payable  at  bank. 

•The  following  provision  in  the  original  draft  was  omitted  in  the  final  revis- 
ion: [But  the  provisions  of  this  section  do  not  apply  to  an  indorser  to  whom 
the  instrument  has  been  indorsed  restrictively  as  agent  only.  National  Park 
Bank  v.  Seaboard  National  Bank,  114  N.  Y.  28;  United  States  v.  American 
Exnhanqr  \at.  Bank,  70  Fed.  Rep.  232.1     f^ff  pagPS  439-440. 

isParre  443.  is  Page  46f>. 

17  Pages  459-465.  i«  Pages  441-442. 


PRESENTMEXT    FOR  PAYMENT.  803 

Section  ISfi.  Presentment  where  principal  debtor  is  dead. 

137.  Presentment  to  persons  liable  as  partners. 

138.  Presentment  to  joint  debtors. 

139.  When  presentment  not  required  to  charge  the  drawer. 

140.  When  presentment  not  required  to  charge  the  indorser. 

141.  When  delay   in  making  presentment  is  excused. 
14-2.  When  presentment  may   be  dispensed  with. 

143.  When  instrument  dishonored   by   non-payment. 

144.  Liability    of    person    secondarily    liable,    when    instrument    dis- 

honored. 

145.  Time  of  maturity. 

146.  Time;  how  computed. 

147.  Rule   where   instrument  payable  at  bank. 

148.  What  constitutes  payment  in  due  course. 

§  130.  Effect  of  want  of  demand  on  principal  debtor. 

Presentmeot  for  payment  is  not  necessary  in  order  to  charge  the 
person  primarily  liable  on  the  instrument;  ==«  but  if  the  instrument 
IS,  by  its  terms,  payable  at  a  special  place,  and  lie  is  able  and  willing 
to  pay  it  there  at  maturity  and  has  funds  there  available  for  that 
purpose,  such  ability  and  willingness  are  equivalent  to  a  tender  of 
payment  upon  his  part.  But  except  as  herein  otherwise  provided, 
presentment  for  payment  is  necessary  in  order  to  charge  the  drawer 
and  indorsers.^* 

{Note.  — See  Bills  of  Exchange  Act,  section  52;  Hills  v.  Place,  48  N  Y 
620,  523;  Parker  v.  Stroud,  98  N.  Y.  379,  384;  Cox  v.  \ational  Bank,  100 
U.  S.  713;  Wallace  v.  McConnell,  13  Peters,  136;  Lozier  v.  iJorun,  55  Iowa,  77- 
Insurance  Company  v.  Wilson,  29  W.  \'a.  543.] 

§  131.  Presentment  where  instrument  is  not  payable  on  demand 
[and  where  payable  on  demand]. 
Where  the  instrument  is  not  payable  on  demand,  presentment 
must  be  made  on  the  day  it  falls  due."  Whore  it  is  payable  on 
demand,  presentment  must  be  made  within  a  reasonable  time  '^  after 
its  is8ue,='«  except  tliat  in  the  case  of  a  bill  of  exchange,  presentment 
for  payment  will  be  sufficient  if  made  within  a  reasonable  time  after 
the  last  negotiation  thereof.^'* 

fNoTK.  —  Se«-  I{illH  of  Exchange  Act,  section  45,  subdivision  (2).  All  the 
authorities  agree  that  checks  and  bills  of  exchange  payable  on  demand  must 
be  presented  promptly;  but  as  to  promissory  not.-s  .Irawn  so  i)ayable  there  is 
much  conflict.  In  Mcrritt  v.  Todd  (23  N.  Y.  28)  the  rule  was 'laid  down  by 
the  Court  of  Appeals  of  New  York  that  "a  promissory  note  payable  on 
demand,  with  interest,  is  a  continuing  security;  that  an  indorser  remains 
liable  until  an  actual  demand,  an.l  that  the  h..ld.-r  is  n<.l  chargeable  with 
neglect  for  omitting  to  make  such  demand  within  any  particular  time."  The 
doctrine  of  this  case  has  been   much   criticised.      [The   rule  of  this  case  wa» 


"  Pages  477-480.  2,  Sw    §    4.    antr 

^'  Page  480.     See  §§  1 1 1,  1 16.  24   Pages  483-490. 

"  I*»g«  '*>^3.  25  Pages  400-494. 


See  §§   241,  322. 


804  Tin;  N-KddiiAiu.K  instruments  law. 

lii'lil  to  he  olKini,'od  by  this  si'itioii  of  the  Nt<,'.  lust.  Law  in  Com.  Nat.  Bk.  V. 
/.iDtimriiHiu,  lsr>  N.  V.  210,  rt'portpd  liorcin  at  p.  48;i.  |  In  some  States  the 
tiiiu'  within  wliicli  prouiissory  notes,  jiayable  on  demand,  must  be  presented, 
is  tixed  by  statute.  California  t  ivil  t  ode.  section  3248;  t'onnecticut  Gen'l 
Statutes,  p.   405,  section    1S59;    Minnesota  Statutes    (1891),  section  2104.] 

§  132.  What  constitutes  a  sufficient  presentment. 

Present iiuMit  tor  paynu'iit,  to  be  sufficient,  must  be  made: 

1.  By  the  holder,  or  by  some  person  authorized  to  receive 
payment  on  his  behalf ; ' 

2.  At  a  reasonable  hour  on  a  business  day ;  ^ 

3.  At  a  proper  place  as  herein  defined ;  ^ 

4.  To  the  person  primarily  liable  on  the  instrument,  or  if 
he  is  absent  or  inaccessible,  to  any  person  found  at  the  place 
where  the  presentment  is  made.* 

§  133.  Place  of  presentment. 

Presentment  for  payment  is  made  at  the  proper  place : 

1.  Where  a  place  of  payment  is  specified  in  the  instrument  and 
it  is  there  presented  ; '" 

2.  Where  no  place  of  payment  is  specified,  but  the  address 
of  the  person  to  make  payment  is  given  in  the  instrument  and 
it  is  there  presented ;  ® 

3.  Where  no  place  of  payment  is  specified  and  no  address 
is  given  and  the  instrument  is  presented  at  the  usual  place  of 
business  or  residence  of  the  person  to  make  payment ;  "^ 

4.  In  any  other  case  if  presented  to  tlie  person  to  make  pay- 
'  ment  wherever  he  can  be  found,  or  if  presented  at  his  last  known 

place  of  business  or  residence.* 
[Note.  —  See  Bills  of  Exchange  Act,  section  45,  subdivision    (4).] 

§  134.  Instrument  must  be  exhibited. 

The  instrument  must  be  exhibited  to  the  person  from  whom  pay- 


»  Pages  480-482.     [See  Bills  of  Ex-  diligence      such      person      cannot      be 

change    Act.    section    45,    subdivision  found."     But  this  rule  appears  to  be 

(2).     Daniel.  iiS  571-587.]  more   stringent   than    that   of   the   law 

2  Pages  494-495.     [.S'ait  Springs  Nat.  mercliant.      See    Cromwell   v.    Hytison, 
Bank   v.    Burton,   58   N.   Y.   430,   432;  2  Camp.  596;  Daniel,  §  590.] 
Farruiicorth    v.    Allen,    4    Gray,    453;  s  Pages    508-512.       "The     place    of 
Barclay  v.   Bailey.  2  Camp.  527;    Wil-  payment  may  be  specified  either  by  the 
kins  V.  Jadis,  2  B.  &  Aid.   188.]  drawer,     or     by     the     acceptor      for 

3  See  §  133.  maker]."  Chalmers,  p.  145.  See  §  228, 
«  Pages  515-517.      See    §§     130-138.  «  Pages  508-509. 

[The  language  of  the  Bills  of  Exchange  ^  Pages  512-515.    {Gates  v.  Beecher, 

Act  is  "or  to  some  person  authorized  60    N.    Y.    518,    522;    Daniel,    §§    635, 

to   pay   or   refuse  payment  on   his   be-  636.] 

half  if  with  the  exercise  of  reasonable  8  Pages    512-515. 


rURSRNTMEXT   FOR  PAYMENT.  805 

mont  is  demanded,  and  when  it  is  paid  must  be  delivered  up  to  the 
party  paying  it." 

(Note.  —  See  Musson  v.  Lake,  4  How.  262;  Freeman  v.  Boynton,  7  Mass. 
483;   Draper  v.  Clemens,  7  Mo.  52;   Daniel,  §  654.] 

§  135.  Presentment  where  instrument  payable  at  bank. 

Where  the  instrument  is  payable  at  a  hank,  presentment  for  pay- 
ment must  be  made  during  banking  hours,  unless  tlie  person  to  make 
payment  has  no  funds  there  to  meet  it  at  any  time  during  tlie  day, 
in  which  case  presentment  at  any  hour  before  tlie  bank  is  closed  on 
that  day  is  sufficient. ^° 

§  136.  Presentment  where  principal  debtor  is  dead. 

Where  the  person  primarily  liable  on  the  instrument  is  dead,  and 
no  place  of  payment  is  specified,  presentment  for  payment  must  be 
made  to  his  personal  representative,  if  such  there  be,  and  if  with  the 
exercise  of  reasonable  diligence,  he  can  be  found. ^* 

[Note.  —  See  Bills  of  Exchange  Act,  section  45,  subdivision  (7);  Daniel, 
§  501.]  This  is  dechiratory.  (Williams  on  Executors,  7th  ed.,  p.  2003.) 
See  §  242   (2)   and  245   (1),  for  rule  governing  presentment  for  acceptance. 

§  137.  Presentment  to  persons  liable  as  partners. 

Where  the  persons  primarily  liable  '^  on  the  instrument  are  liable 
as  partners,  and  no  place  of  payment  is  specified,  presentment  for 
payment  may  be  made  to  any  one  of  them,  even  though  there  has 
been  a  dissolution  of  the  firm.*^ 

(Note.  —  See  Hubbard  v.  Matthews,  54  N.  Y.  43,  50;  Fourth  Nat.  Bank  v. 
Heuachuk,  52  Mo.  207;  Crowley  v.  Barry,  4  Gill.  194;  Cayuga  Co.  Bank  v. 
Hunt,  2  Hill,  635;  Daniel  on  Neg.  Inst.,  sections  592-593.] 

§  138.  Presentment  to  joint  debtors. 

Where  there  are  several  persons  not  partners,  primarily  liable  on 
the  instrument,  and  no  place  of  payment  is  specified,  presentment 
must  be  made  to  them  all.'* 

[Note. — See  Bills  of  P>xrhange  .Act,  section  45,  subdivision  (0).  Gates  v. 
Hrecher,  60  N.  Y.  51K.  523;  Union  Bank  v.  Willis,  8  Mete.  504;  .Arnold  v.  Drrs- 
srr,  H  Allen,  435;  Willis  v.  i}reen,  5  Hill,  232.  In  some  cases  this  might  be 
impracticable,  but  such  cases  are  covered  by  section  H2.  (N.  Y.,  §  142.)  "This 
i-  probably  declaratory  (Union  Bank  v.  Willis,  4!)  Mass.  504),  but  the  point 
was  not  clear.  Of  course,  if  one  [)ays,  or  in  refusing  payment,  acts  as  the 
agent  of  the  others,  that  is  enough."     Chalmers,  p.   146. 

»  Page  518.     "  In  England,  it  is  con-  '"'  Pages  4it5-504. 

ceived    that    possession    is    prima   facie  ii  Pages   5I()-5I7. 

evidence   of    identity,   and    that    if   the  i^See  §  2. 

j)ayer  doubts  the   identity  of  the   per-  '»  Pag*-  517. 

son  presenting,  he  must  pay  or  refuse  '♦  Pages  517-518. 
paymi-nt  at  his  own  risk."       Chalmers, 
p.  203. 


806  THE    NEOOTIAHl.K    IXSTIIU-M  llNTS    LAW. 

§  139.  When  presentment  not  required  to  charge  the  drawer. 

Pros(>ntiiiont  for  payment  is  not  required  in  order  to  cliarge  the 
drawer  where  he  has  no  riglit  to  expeet  or  require  that  the  drawee 
or  acceptor  will  pay  the  instrument.'^ 

(XoTK.  —  See  Bills  of  Exchange  Act,  section  46,  subdivision  (2)  (c).  Ijife 
Insurance  Company  v.  Pendleton,  112  U.  S.  696;  Daniel,  §§  1074-1076.] 
Si'e  §§   185-186. 

§  140.  When  presentment  not  required  to  charge  the  indorser. 

Presentment  for  payment  is  not  required  in  order  to  charge  an 
indorser  wliere  the  instrument  was  made  or  accepted  for  his  accommo- 
dation, and  he  has  no  reason  to  expect  that  the  instrument  will  be 
paid  if  presented.'* 

INoTE.  —  See  Bills  of  Exchange  Act,  section  46,  subdivision  (2)  (d).]  See 
§   186. 

§  141.  When  delay  in  making  presentment  is  excused. 

Delay  in  making  presentment  for  payment  is  excused  when  the 
delay  is  caused  by  circumstances  beyond  the  control  of  the  holder 
and  not  imputable  to  his  fault,  misconduct  or  negligence.  When  the 
cause  of  delay  ceases  to  operate,  presentment  must  be  made  with 
reasonable  diligence.'^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  46,  subdivision  (1).]  "The 
cases  do  not  clearly  distinguish  between  excuses  for  non-presentment  and 
excuses  for  delay  in  presentment,  but  when  the  question  is  one  of  reasonable 
diligence  the  distinction  is  an  important  one.  (cf.  Allen  v.  Edmuyulson,  2 
Exch.,  at  p.  724,  notice  of  dishonor.)  If  presentment  is  delayed  at  the 
request  of  the  drawer  or  indorser  sought  to  be  charged,  the  delay  is  pre- 
sumably excused.  (Lord  Ward  v.  Oxford  R'y  Co.,  2  DeG.  M.  &  G.  750.)  " 
Chalmers,  p.  149.  "  Bill  drawn  in  England,  payable  in  Leghorn.  At  the  time 
thf  bill  matures  Leghorn  is  besieged.  The  holder  is  not  in  Leghorn.  This 
excuses  delay.      {Patience  v.  Toumley,  2  Smith,  223.)  "  lb.,  p.   148. 

§  142.  When  presentment  may  be  dispensed  with. 

Presentment  for  payment  is  dispensed  with : 

1.  Where  after  the  exercise  of  reasonable  diligence  presentment 
as  required  by  this  chapter  cannot  be  made ;  '* 

2.  Where  the  drawee  is  a  fictitious  person ;  '^ 

3.  By  waiver  of  presentment  express  or  implied.^" 
[Note. —  See  Bills  of  Exchange   Act,  section  40,  .subdivision    (2).] 

15  Pages  520-522.  with  the  attempt  to  make  presentment 

18  Page  523.  when    such    attempt    would    be    futile. 

17  Pages  518-520.  {Foster  v.  Julien,  24  N.  Y.  28.)     This 

18  Pages  524-527.  The  Bills  of  Ex-  tendency  is  of  doubtful  expediency  and 
change  Act  adds:     "The  fact  that  the  finds  no  favor  in  England." 

holder  has  reason  to  believe  that  the  i"  Page  575,  note.     This  is  declara- 

bill    will,    on    presentment,    be    dishon-  tory.       {Hwith    v.    Bellamy,    2    Stark, 

ored,  does  not  dispense  with  the  neces-  223.)      Chalmers,   p.    150.      See   §    186 

aity      for      presentment."       Chalmers  (2). 

(p.    150),  says:      "In   some   American  20  Qn  waiver,  see  §§  180-182. 

States  there  is  a  tendency  to  dispense  527-629. 


PRESENTMENT    FOR  PAYMENT,  807 

§  143.  When  instrument  dishonored  by  non-payment. 
The  instrument  is  dishonored  by  non-payment  when: 

1.  It  is  duly  presented  for  payment  and  payment  is  refused 
or  cannot  be  obtained ;    or 

2.  Presentment  is  excused  and  the  instrument  is  overdue  and 
unpaid. 

[Note.  —  See   Bills  of  Exchange  Act,  section  47,   subdivision    (l).] 

§  144.  Liability  of  person  secondarily  liable,  when  instrument  dis- 
honored. 

Subject  to  the  provisions  of  this  chapter,-'  when  the  instrument 
is  dishonored  by  non-payment,  an  immediate  right  of  recourse  to  all 
parties  secondarily  liable  --  thereon,  accrues  to  the  holder." 

[Note.  —  See  Bills  of  Exchange  Act,  section  47,  subdivision    (2).] 

§  145.  Time  of  maturity. 

Every  negotiable  instrument  is  payable  at  the  time  fixed  therein 
without  grace.*  Wlien  the  day  of  maturity  falls  upon  Sunday,  or 
a  holiday,  the  instrument  is  payable  on  the  next  succeeding  business 
day.-*  Instruments  falling  due  on  Saturday  are  to  be  presented  for 
payment  on  the  next  succeeding  business  day,  except  that  instruments 
payable  on  demand  may,  at  the  option  of  the  holder,  be  presented  for 
payment  before  twelve  o'clock  noon  on  Saturday  when  that  entire 
day  is  not  a  holiday.^' 

§  146.  Time;  how  computed. 

Where  the  instrument  is  payable  at  a  fixed  period  after  date, 
after  sight,  or  after  the  hajiponning  of  a  specified  event,  the  time 
of  payment  is  determined  by  excluding  the  day  from  which  the  time 
is  to  begin  to  run,  and  by  including  the  date  of  payment. 

(Note.  —  See  Bills  of  Exchange  Act,  .section  14.]  See  New  York  General 
Construction  Law,  §§  20,  30.     Case.s,  p.  504,  note. 

2«  See  §§  280-289.  •  Days    of    grace    are    preserved    by 

22  See  §  3.  the     Bills    of    Exchange     Act,     !5     u': 

23  Pages  442-44.5.  "As  a  gene'-al  "  Three  days,  called  days  of  grace,  are, 
r\ile  the  holder's  right  of  action  in  every  caw*  where  the  bill  itself  does 
against  a  drawer  or  indorscr  dates  not  otherwise  provide,  added  to  the 
from  the  time  when  notice  of  dishonor  time  of  payment  as  fixed  by  the  bill, 
\•^  or  ought  to  be  received  and  not  and  the  bill  is  due  and  payable  on  the 
from  the  time  when  it  is  sent  (Car-  last  day  of  grace."  Cases,  pp.  234- 
triquc  v.   lirrnabo.  (',  Q.    B.   498);    and  23fi.  .504,  note. 

in  any  case  there  is  no  right  of  action  -*  Where  days  of  grace  are  allowed 

till  the  day  after  ilishonor.     The  right  and  the  last  day  of  grace  is  a  holiday, 

of  recourse  must  be  distinguished  from  the  instrument  is  due  on  the  preceding 

the     right     of     action.      (Krnnrdy     v.  day.     Bills  of  Exchange  Act,  §  14. 

Thomas,  1894.  2  Q.  B.  7.59.)"     (halm  2' Pages  504-508. 
ers,   p.    152. 


SOS  THE    NPXiOriAHI.K    I  N'STIKIM  llMTH    LAW, 

§  147.  Rule  where  instrument  payable  at  bank. 

Wlioiv  till'  instruiiu'iit  is  made  ])ayal>le  at  a  bank  it  is  equivalent 
to  an  ordi'i-  to  tlie  l)ank  to  \)f[y  tlie  same  Tor  tlie  account  of  the 
priuoipul  debtor  thereon. 

[NoTK.  —  .4rrria  A'<it.  Bank  v.  Fourth  Nat.  Bank.  46  N.  Y.  82;  Commercial 
Bank  v.  Hughis,  17  Wend.  94;  Votnmercial  \iit.  Bank  v.  Hcnninger,  105  Pa. 
St.  4iH»;  Btiiford  Bank  v.  Acuarn,  125  Ind.  582;  Home  Nat.  Bank  v.  Newton, 
8  Bradwell,  503;  Contra:   Grissom  v.  Commercial  Bank,  87  Tenn.  350.] 

§  148.  What  constitutes  payment  in  due  course. 

Payment  is  made  in  due  course  when  it  is  made  at  or  after  the 
maturity  of  the  instrument  to  the  holder  thereof  in  good  faitii  and 
witliout  notice  that  his  title  is  defective.' 

[Note.  —  See   Bills  of   Exchange   Act,   section  59.]      See   §  200. 

ARTICLE  IX. 

NOTICE  OF  DISHONOR. 

Section  160.  To  whom  notice  of  dishonor  must  be  given. 

161.  By  whom  given. 

162.  Notice  given  by  agent. 

163.  Ed'ect  of  notice  given  on  behalf  of  holder. 

164.  Eflect  where  notice  is  given  by  party  entitled  thereto. 

165.  When  agent  may  give  notice. 

166.  When  notice  sufficient. 

167.  Form  of  notice. 

168.  To  whom  notice  may  be  given. 

169.  Notice  where  party  is  dead. 

170.  Notice  to  partners. 

171.  Notice  to  persons  jointly  liable. 

172.  Notice  to  bankrupt. 

173.  Time  witliin  which  notice  must  be  given. 

174.  W'here  parties  reside  in  same  place. 

175.  Where   parties  reside   in   difl'erent   places. 

176.  When  sender  deemed  to  have  given  due  notice. 

177.  Deposit  in  post  office,  what  constitutes. 

178.  Notice  to  antecedent  party;    time  of. 

179.  Where   notice  must  be  sent. 

180.  Waiver  of  notice. 

181.  Whom   affected   by   waiver. 

182.  Waiver  of  protest. 

183.  When   notice  dispensed   with. 

184.  Delay  in  giving  notice;   how  excused. 

185.  W'hen  notice  need  not  be  given  to  drawer. 

186.  When  notice  need  not  be  given  to  indorser. 

187.  Notice  of  non-payment  where  acceptance  refused. 

188.  Effect  of  omission   to  give   notice  of  non-acceptance. 

189.  When  protest  need  not  be  made;   when  must  be  made. 

1  Cases,  pp.  591-598.  See  §  2,  as  to  "  holder;  "  §  95,  as  to  "good  faith;  " 
§  94,  as  to  defective  title. 


NOTICE    OF   DISHONOR.  809 

§  160.  To  whom  notice  of  dishonor  must  be  given. 

Except  as  lieiL'ui  ollierwise  provided,-'  wlieu  a  negotiable  instru- 
ment has  been  dishonored  by  non-acceptance  ^  or  non-payment/  notice 
of  dishonor  must  be  given  to  the  drawer  and  to  each  indorser,  and 
any  drawer  or  indorser  to  whom  such  notice  is  not  given  is  dis- 
charged.* 

( NoTi".  —  See  Bills  of  Exchange   Act,  section   48.] 

Note.  —  A  maker  or  acceptor  is  not  entitled  to  presentment  (§  130,  ante) 
or  notice.  Want  of  notice  of  dishonor  is  no  defense  to  a  guarantor,  unless  he 
is  actually  injured  for  want  of  such  notice.  Brown  v.  Curtis,  2  N.  Y.  225. 
(.  ases,  p.  467. 

§  161.  By  whom  given. 

The  notice  may  be  given  by  or  on  behalf  of  the  holder,  or  by  or 
on  behalf  of  any  party  to  the  instrument  who  might  be  compelled  to 
pay  it  to  the  holder,  and  who,  upon  taking  it  up  would  have  a  right 
to  reimbursement  from  the  party  to  whom  the  notice  is  given." 

[Note.  —  See  Bills  of  Exchange  Act,  section  4f),  subdivi.sion  (1);  Daniel, 
§§  (187-990.  The  Bills  of  Exchange  Act  uses  only  the  words  "  holder  "  and 
"  indorser."  But  the  right  extends  to  any  person  liable  only  as  a  surety, 
whether  he  is  technically  an  indorser  or  not.] 

§  162.  Notice  given  by  agent. 

Notice  of  dishonor  may  be  given  by  an  agent  either  in  his  own 
name  or  in  the  name  of  any  party  entitled  to  give  notice,  whether 
that  party  be  his  principal  or  not.^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (2);  Daniel, 
§§  991,  992.  and  cases  cited.) 

§  163.  Effect  of  notice  given  on  behalf  of  holder. 

Where  notice  is  given  l)y  or  on  behalf  of  the  holder,  it  enures  for 
the  benefit  of  all  subsequent  holders  and  all  prior  parties  who  have 
a  right  of  recourse  against  the  party  to  whom  it  is  given.* 

(Note.  —  See  Bills  of  Exchange   Act,   section   49,  subdivision    (.T);    Daniel, 

i  floo.] 

2  See  8§   lRO-180.  dorsed    by    C   is   held    by    D.      D's   at- 

3  See  §  246.  tf)rney  gives  notice  of  dishonor  to  the 
*  See  §  14.3.  drawer,  huf  by  mistake  gives  it  in  C's 
»  Case."!,  p.  5.30.     "  Where  the  drawer  name    instead    of    D's.      The    notice    is 

or  indorser  of  a  bill  is  discharged  from  siiflicient,    provided    ('.    is   liable   to   D. 

his  liability  thereon  liy  the  ominHJon  to  and  has  a  right  of  recourse  against  the 

Rive  him  d\ie  notice  of  dishonor,  he  is  drawer.      {Harrison  v.    Ru.tror,    15   M. 

al.HO  discharged   frf)m   any   liability   on  fi    W.   2.31.)"     Chalmers,   p.    155.      "A 

the   consideration    therefor.       {Uridfitfi  party  entitled  to  givp  notice  may  con- 

V.    fierry,    .3    Taunt.     1.30;     I'rarnrk    v.  stitute     the     drawee    or    acceptor     his 

Purnell,      14      ('.      B.      N.      S.      728.)"  agent  for  the  purpose  of  giving  notice 

Chalmers,   p.    15.3.      For   drawer's   and  of    dishonor.       [Uonhrr    v.     h'irran,    4 

indorser's    contract,     see     §     111     anci  Camp.  87,  as  modified  by   Harrison  r. 

9   116.  Rusrnr.,   15  M.  *  W.,  at  p  235.)"     lb, 

«  Pages  533-538.  «  Pages  534-538. 

T  Cases,    pp.    53.5-530.      "A    bill    in 


810  TiiK  NK(;(yri\r.i,K  instrumknts  law. 

§  164.  Effect  where  notice  is  given  by  party  entitled  thereto. 

W'horo  auinc  js  given  by  or  on  holiall'  of  a  party  entitled  to  give 
notiee,  it  enuivs  for  the  benelil  of  llie  holder  and  all  parties  sub- 
sequent to  tlio  party  to  whom  uotiee  is  given.'' 

[NoTi;.  —  See  Rills  t)f  Exfliaiigi'  Act,  .soction  11),  sul)(iivision  (4);  Diiniol, 
§  !i!M).l  "  In  a  N>\v  York  case  it  was  hold  that  a  notice  tiiily  sent  by  the 
holder  did  not  enure  for  the  benefit  of  a  prior  indoracr  when  it  did  not  reach 
the  party  to  whom  it  was  sent,  but  tlic  circumstances  of  the  case  were 
somewhat  special,  (licale  v.  Parisli,  20  N.  V.  407.)  The  Act  does  not  counte- 
nance this  view."  ChaluuMs.  jip.  150  7.  ("hahiiers  cites  Chapnuin  v.  Kcane, 
3  A.  &  E.  193;  Lysaght  v.  Bryant,  19  L.  J.  C.  P.  160;  mreeter  v.  Fort  Bank, 
34  N.  Y.  413. 

§  165.  When  agent  may  give  notice. 

Where  the  instrument  has  been  dishonored  in  the  hands  of  an 
agent,  he  may  either  liimself  give  notice  to  the  parties  liable  thereon, 
or  he  may  give  notice  to  his  principal.  If  he  give  notice  to  Ids 
principal,  lie  must  do  so  within  the  same  time  as  if  he  were  the 
holder,  and  the  principal  upon  the  receipt  of  such  notice  has  himself 
the  same  time  for  giving  notice  as  if  the  agent  had  been  an  inde- 
pendent holder.'" 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (13).]  "  A  bill 
payable  in  London  is  indorsed  in  l)lank  by  the  holder,  and  deposited  witli  a 
country  banker  for  collection.  '1  he  country  banker's  London  agent  presents  it 
for  payment  and  gives  him  due  notice  of  its  dishonor.  The  country  banker  on 
the  day  after  the  receipt  of  such  notice  gives  notice  to  his  customer,  who  in 
turn  gives  similar  notice  to  his  indorser.  The  indorser  has  received  due 
notice.  (Bray  v.  Uadv^en,  5  M.  &  S.  68.  See  also  (Jlode  v.  Bayley,  12  M.  &  W. 
51;  Prince  v.  Oriental  Bank,  L.  K.  3  App.  Cas.,  at  p.  332.)  "  Chalmers, 
p.  102. 

§  166.  When  notice  sufficient. 

A  written  notice  need  not  be  signed  "  and  an  insufficient  written 
notice  may  be  supplemented  and  validated  by  verbal  eonnnunit  ation.'^ 
A  misdescription  of  the  instrument  does  not  vitiate  the  notice  unless 
the  party  to  whom  the  notice  is  given  is  in  fact  misled  thereby.'^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (7).  Byles  on 
Bills,  276;  Daniel,  §§  979a-980.     Subdivision    (0)   of  section  49  of  the  Bills  of 

»  Pages  534-538  was  payable  at  the  'T  Bank'   (Brom- 

1"  Page  538.  age  v.  Vaughan,  16  L.  J.  Q.  B.  10),  or 

Ji  But  it  must  come  from  the  right  which   describes  a  bill  of  excliange  as 

person.      See    §§    161-162.      See    Max-  a  note   (kitockman  v.  Parr,  1 1  M.  &  VV. 

well  V.  Brain,  10  L.  T.  N.  S.  301.  809;   Bain  v.  Gregory,   14  L.  T.  N.  8. 

12  The  sufficiency  or  insufTicifncy  in  (101),  or  which  transposes  the  names 
such  case  is  a  question  of  fact,  of  the  drawer  and  acceptor  ( Mellcrsh 
Boulditch  V.  Canty,  4  Minn.  S.  C.  AW:  v.  Ifippen,  7  Exch.  57H ) ,  or  which 
Metinlfr  v.  Rirhardson,  11  ('.  B.  1011.  describes    the    acceptor     by    a     wrong 

13  Pages  539-541.  "A  notice  to  the  name  {Harpham  v.  Child,  1  F.  «fe  F. 
drawer  which  describes  the  bill  as  pay-  652),  may  be  sufTlcient."  Chalmers, 
able  at  the  '  S  Bank,'  when  in  fact  it  p.   159. 


NOTICE   OF    DISHONOR. 


811 


Exchange  Act.  which  reads  "  Return  of  a  dishonored  bill  to  the  drawer  or 
an  indorscr  is  in  point  of  law  deemed  a  sufficient  notice  of  dishonor  "  is 
omitted.  In  his  note  to  that  sub-section,  Judge  Chalmers  says:  "This  sub- 
section approves  a  common  practice  of  collecting  bankers  which  was  pre- 
viously of  doubtful  validity."     No  such  practice  prevails  in  this  country.] 

§  167.  Form  of  notice. 

The  notice  may  be  in  writing  or  merely  oral  ^*  and  may  be  given 
in  any  terms  which  sufficiently  identify  the  instrument,  and  indicate 
that  it  has  heen  dishonored  hy  non-acceptance  or  non-payment.'*  It 
may  in  all  cases  be  given  by  delivering  it  personally  or  through  the 
mails.'* 

§  168.  To  whom  notice  may  be  given. 

Notice  of  dishonor  may  be  given  either  to  the  party  himself  or  to 
his  agent  in  that  behalf." 

{Note.  —  See  Bills  of  Exchange  Act,  .section  49,  subdivision  (8).  Fassin  v. 
Hubbard.  55  N.  Y.  4«o,  471;  l.ake  Hhore  Nat.  Bank  v.  Butler  Colliery  Co  51 
Hun,  G3,  68.] 

§  169.  Notice  where  party  is  dead. 

When  any  party  i.s  dead,  and  his  death  is  known  to  the  party  giving 
notice,  the  notice  must  be  given  to  a  personal  representative,  if  there 
be  one,  and  if  with  reasonable  diligence,  he  can  be  found.'**     If  there 


»*  [See  Bills  of  Exchange  Act,  sec- 
tion 49,  subdivision  (5)  ;  Cuyler  v. 
Strvena,  4  Wend.  506;  (SUispow  v. 
I'ratte,  8  Mo.  336;  Byjes  on  Bili.s,  271; 
Daniel,  §  972.] 

I- Cases,  pp.  539-542.  [Byles  on 
Bills,  976;  Daniel.  §§  79.3-978.  The 
stat<"ment  that  the  holder  looks  for 
payment  to  the  party  to  whom  notice 
\^  sent  is  not  necessary;  for  this  is 
implied  from  the  fact  of  giving  notice. 
Bank  of  (I.  S.  v.  Carnenl,  2  Peters, 
543;  Milhi  V.  Bank.  11  Wheat.  431, 
436;  Sclson  v.  First  Nat.  Bank  (U.S. 
Circuit  Ct.  App.),  69  Fed.  Kep.  798, 
801.]  "  Notic<'s  f)f  dishonor  are  now 
ronstrued  very  liberally.  In  1834  the 
flmme  of  I^ords,  in  Solar tr  v.  I'nlmrr, 
1  Bing.  N.  C.  194,  <leeided  that  the 
notice  must  inform  the  lioliicr.  eiflier 
in  terms  nr  by  neeesNary  implication, 
that  the  bill  had  been  firesented  and 
dishonored.  This  inconvenient  de- 
ciwion  was  frequently  regretted  (see 
'•.  ().,  Krrrnrnil  v.  TCa/voN,  I  E.  *  B., 
at  p.  804),  and  was  event ii.illy  pot  rid 
of  by  considering  it  merely  a  finding 
on  the  partirular  facts.     { I'nul  v.  foci, 


27  L.  J.  Ex.,  at  p.  384.)  Since  1841 
(see  Fitrz  v.  S'harwooil,  2  Q.  B.  388, 
where  the  notice  would  now  probably 
be  sufficient),  it  does  not  appear  that 
any  written  notice  of  dishonor  has 
been  held  bad  on  the  ground  of  in- 
sufficiency in  form."    Chalmers,  p.  158. 

18  Pages  542-546.     See  §§    177,   179. 

1-  Pages  546-547.  "  It  is  the  duty 
of  the  drawer  or  indorser  of  a  bill,  if 
he  l)e  absent  from  his  place  of  business 
or  residence,  fo  see  that  there  is  some 
person  there  to  receive  notice  on  his 
behalf."  Chalmers,  p.  KiO,  citing 
Allen  V.  Edmundson,  2  Exch.,  at 
p.   723. 

'«  Pages  546-547.  [S.-e  Bills  of  Ex- 
change Act,  .section  49,  subdivision 
(9).  The  statement  is  based  upon  tin- 
.■\meriean  liecisions.  Mnssarhu.'o  tts 
Bank  v.  Olirrr.  10  Cush.  557;  Mrr 
chnntn'  Bank  v.  Hirrh.  17  .lohns.  24. 
See  also  Smalley  v.  \\ri<iht.  40  N.  .F. 
L:iw,  471;  doodnow  v.  Marren,  122 
Mass.  82:  Brnlls  v.  Prrk,  12  Barb. 
245;  Cnyuqa  Co.  Bank  v.  lirnnitt,  5 
Mill,  236;  Masprro  v.  I'cdcsclauw,  22 
La.  Ann.  227.) 


81',?  THK    Ni:(i()IIAIU,K    INS'l'Iil'MKNTS    I, AW. 

be  no  personal  ropivsoiiliitivc,  notice  may  be  sent  to  the  last  residence 
or  lasl  pliui'  of  hiisinoss  of  tlu'  (linrascd.'" 

§  170.  Notice  to  partners. 

Whoro  the  parties  \o  \)v  notified  are  partners  notiee  to  any  one 
partner  is  notice  to  the  firm  even  ftiou^h  tliere  has  been  a  dissolution.'^" 

§  171.  Notice  to  persons  jointly  liable. 

iSotice  lu  joint  parties  wlio  are  not  partners  must  be  given  to  each 
of  them,  unless  one  of  them  has  authority  to  receive  such  notice  tor 
the  others.-' 

[Note.  —  Sec  Bills  of  Kxcliiuige  Act,  scftion  4!),  subdivision  (11).  Tin-  nilc 
is  liased  upon  the  American  decisions.  Willis  v.  (Ireni,  5  Ilill,  232.  See  aVo 
Daniel.  §  999a,  and  cases  cited.] 

§  172.  Notice  to  bankrupt. 

Where  a  party  has  been  adjudged  a  bankrupt  or  an  insolvent,  or 
has  made  an  assignment  for  the  benefit  of  creditors,  notice  may  be 
given  either  to  the  party  himself  or  to  his  trustee  or  assignee." 

[Note.  —  See  Bills  of  Exchange  Act,  section  4!),  subdivision  (10).  Daniel, 
§  1002;  Cnllahan  v.  Kentuclytj  Hank,  82  Ky.  231;  Contra:  House  v.  Vinton 
Rank.  43  Ohio  St.  346.]  "  All  that  had  been  decided  before  the  Act  was  that 
notice  given  to  the  bankrupt  in  ignorance  that  a  trustee  had  been  appointed 
was  sufficient."     C  lialnicrs,  p.    160. 

§  173.  Time  within  which  notice  must  be  given. 

Notice  may  be  given  as  soon  as  the  instrument  is  dishonored;^-'' 
and  unless  delay  is  excused  as  hereinafter  provided,  must  be  given 
within  the  times  fixed  by  this  chapter.^* 

§  174.  Where  parties  reside  in  same  place. 

Where  the  person  giving  and  the  person  to  receive  notice  reside 
in  the  same  place,  notice  must  be  given  v^'ithin  the  following  times: 

1.  If  given  at  the  place  of  business  of  the  person  to  receive 
notice,  it  must  be  given  before  the  close  of  business  hours  on 
the  day  following ;  "'• 


in  Pages       .540-.')47.      IGoodnonJ      v.  10  Ves.  216 ;  Daniel,  §  103fi.1     Bills  of 

Warren,     122    ]\fa=8.     82;     Merchants'  Exchange  Act,  section  40.   subdivision 

Ba7tk  V.  Birch,   17  Johns.  25.]  (12). 

20  Pages  547-548.  [See  Coster  v.  2^  [Bills  of  Exchange  Act,  section 
Thomason,  10  Ala.  717;  f^loromh  v.  40,  subdivision  (12).  The  phrase 
JAzarfli,  21  Ea.  .Ann.  3.to;  rinhhard  v.  "must  be  given  within  a  reasonable 
Matthpus.  54  N.  Y.  43,  .SO;  Fourth  time  thereafter."  used  in  the  Bills  of 
Nat.  Bank  v.   Hensrhuh,  52  Mo.  207.)  Exchange  Act,  is  omitt«d ;  for  the  time 

21  Pages  547-548.  is    definitely    fixed    and    this    language 

22  Pages    606-608.  has  no  force.] 

23  Page  544.  IBank  of  Meranrfria  2' Pages  548-554,  [See  Daniel 
T.  Hiran,  9  Peters,  33-.    Fjeno.x  v.   Roh-  §  1038.] 

erts,  2  Wheat.  373;  Ex  parte  Moline, 


NOTICE    OF    DISHONOR.  813 

2.  If  given  at  his  residence,  it  must  be  given  before  the  usual 
bouT-s  of  rest  on  tlie  day  following; ' 

3  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in 
time  to  reach  him  in  usual  course  on  the  day  following.^ 

§  175.  Where  parties  reside  in  different  places. 

Where  tl)e  person  giving  and  the  person  to  receive  notice  reside 
in  different  places,  the  notice  must  be  given  within  the  following 
times : 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in 
time  to  go  by  mail  the  day  following  the  day  of  dishonor,  or 
if  there  be  no  mail  at  a  convenient  hour  on  that  day,  by  the 
next  mail  thereafter.* 

2.  If  given  otherwise  than  through  the  post-office,  then  within 
the  time  that  notice  woiild  have  been  received  in  due  course  of 
mail,  if  it  had  been  deposited  in  the  post-office  within  the  time 
specified  in  the  last  subdivision.^ 

§  176.  When  sender  deemed  to  have  given  due  notice. 

Where  notice  of  dislionor  is  duly  addressed  and  deposited  in  the 
post-office,  the  sender  is  deemed  to  have  given  due  notice,  notwith- 
standing any  miscarriage  in  the  mails.* 

[Notp:.  —  See  Bills  of  Exchange  Act,  section  49,  subdivision  (15)  ;  Byles  on 
Bills.  277.1 

§  177.  Deposit  in  post-office;  what  constitutes. 

Notice  is  deemed  io  have  been  deposited  in  the  post-office  when 
deposited  in  any  branch  post-office  or  in  any  letter  box  under  the 
control  of  the  post-office  department.'* 

1  Pages  548-554.  fSee  Phelpa  v.  taining  the  notice  was  duly  addressed 
fitocking,  21  Neb.  444;  Darhishire  v.  and  posted.  (Hatches  v.  Salter,  4 
Parker,  6  East,  8.]  Bing.  715;  cf.  Nkilbrrk  v.  Garbett,  7  Q. 

2  C'aRes.  p.  55f>.  [This  rule  is  that  B.  S4fi. )  The  sufTiciency  of  the  direc- 
of  the  Bills  of  F^xchanpe  Act  (§  4fl,  tion  on  the  letter  is  a  question  of  rea- 
■ubsec.  12),  and  is  in  accordance  with  sonable  diligence.  If  the  drawer  or  in- 
the  i»ractice  in  New  N'ork  City.  Some  dorscr  has  a  place  of  business,  the 
of  the  «lecisif>nH  dffm  service  through  notice  should  be  addressed  to  him 
the  post-ofllce  insufficient,  unless  there  there;  if  he  has  not,  then  it  should  be 
ia  proof  that  the  notice  was  actually  addressed  to  him  at  his  residence,  and 
received  in  dtie  time.  (See  Daniel,  the  jiarty  giving  notice  is  hound  to  use 
§  1005,  and  cases  cited. )  But  thi«  rule  reasoriabh'  diligence  to  discover  such 
would  1k'  extremely  inconvenient  in  place  of  hu'<iness  or  residence.  Ifrr- 
large  places.)     See  next  section.  riflq>^  v.  Fitzfjrratri,  T>.  B.  4  Q.  B.  fi.10.) 

•  PaireH  .').54-50fl.  [This  is  suhstan-  When,  however,  the  bill  contains  an 
tially  the  same  as  the  Bill  of  Exchange  address  it  seems  that  such  address  is 
Act,  section  4!),  snlKlivision  (12)  ib).  in  any  case  sufncient  to  charge  the 
It  is  supjiorterl  by  numerfius  American  party  giving  that  addrens.  { Hurmmter 
decisions.     See  Daniel.  §§    10.'jn-1041.1  v.   linrrnn.   17  Q.   B.  K28;   cf.  Kx  parte 

3  Pages  .500-661.  linker,    L.    H.    4    (  h.    D.    at   p.    799.)" 

♦  Pages    .'J45-54r>.      "It    lies    on    the    Chalmers,  pp.    155-6. 
sender   to   prove   that   the    letter   con         •'  Pages  545-546. 


814 


THE    NICGOTIAUI,!-:    INSTKUMKNTS    LAW. 


§  178.  Notice  to  antecedent  party;  time  of. 

WluMT  ;i  i):m1v  rrcfivrs  iiolicc  of  dislioiior,  lio  has,  after  the  receipt 
of  such  notice,  the  same  time  for  giving  notice  to  antecedent  parties 
that  the  holder  has  after  the  dishonor." 

[NoTK.  —  See  Bills  of  Exchange  Act,  section  40,  subdivision  (14);  Daniel, 
!J    1044;    Byles  on   Rills.  28:?. 1 

§  179.  Where  notice  must  be  sent. 

WIrmv  ;i  i»;niy  has  added  an  address  to  his  signature,  notice  of 
dishonor  must  be  sent  to  that  address;^  but  if  he  ha;:  not  given  such 
address,  then  the  notice  must  be  sent  as  follows: 

1.  Either  to  the  post-office  nearest  to  his  i)lace  of  residence, 
or  to  the  post-ofTice  where  he  is  accustomed  to  receive  his  letters; ' 
or 

2.  If  he  live  in  one  place  and  have  his  place  of  business  in 
another,  notice  may  be  sent  to  either  place;"  or 

3.  If  he  is  sojourning  in  another  place,  notice  may  be  sent  to 
the  place  where  he  is  so  sojourning.*" 

But  where  the  notice  is  actually  received  by  the  party  within  the 
time  specified  in  this  chapter,  it  will  be  sufficient,  though  not  sent 
in  accordance  with  the  requirements  of  this  section. 

§  180.  Waiver  of  notice. 

Notice  of  dishonor  may  be  waived,  either  before  the  time  of  giving 
notice  has  arrived,  or  after  the  omission  to  give  due  notice  and  the 
waiver  may  be  express  or  implied." 

[Note.  —  See  Bills  of  Exchange  Act,  section  50,  subdivision  (2);  Daniel, 
§§  1147-1168;  Byles  on  Bills,  293.] 


6  Pages  561-565.     See  §  165,  note. 

T  Pages  56.5-566.     Note  to  §  176. 

8  Pages  566-571.  [See  Bank  of  Co- 
lumbia V.  Lnirrpncr,  1  Peters,  578;  Na- 
tional Bank  v.  Cade,  73  Mich.  449; 
Northitestern  Coal  Co.  v.  Bowman,  69 
Iowa.  103.] 

»  Pages  566-571.  [Bank  of  U.  .9.  v. 
Cnrnrnl,  2  Peters,  549;  Williams  v. 
Bank  of  U.  S.,  2  Peters,  96;  Montgom- 
ery Co.  Bank  v.  Marsh,  7  N.  Y.  481.] 

10  Pages  571-573. 

11  Pages  580-584.  For  waiver  of 
presentment  see  §  142.  "  Waiver  of 
notice  of  dishonor  in  favor  of  the 
holder  enures  for  the  benefits  of  parties 
prior  to  such  holder  as  well  as  subse- 
quent holders.  ( Fahey  v.  flilhert,  30 
L.  .T.  Ex.  170.)  Waiver  of  notice  of 
dishonor  by  an  indorser  does  not  affect 
parties  prior  to  such  indorser.  [Turner 


V.  Leech,  4   B.  &   Aid.   451.)      An  ac- 
knowledgment   of     liability     must     be 
made  with  full  knowledge  of  the  facts 
in    order    to    operate   as    a   waiver   of 
notice  of  dishonor.     (  Goodall  v.  Dolley, 
1   T.  Pv.  712;   cf.  I'ickin  v.   Graham,   1 
Cr.   &  M.,  at  p.   729.)      Many   of  the 
cases   fail    to   distinguish   between   ad- 
missions   of    liability,    which    are    evi- 
dence of   due    notice    having   been    re- 
ceived,    and     admissions    of    liability 
when   due   notice   has   not  been   given, 
and    which    therefore    are    evidence    of 
waiver.     The  distinction  is  important 
( As  to  what  is  evidence  of  due  notice 
see   Taylor    v.    Jones,    2   Camp.    105 
Hicks  V.  Beaufort,  4  Bing.  N.  C.  229 
Brownell    v.     Bonney,     1     Q.     B.    39 
Curlcwis    V.    Corfield,    1    Q.    B.    814 
Campbell  v.  Webster,  15  L.  J.  C.  P.  4 
Mills   v.   Gibson,   16   L.  J.   C.   P.   249 


NOTICE   OF    DISHONOR. 


815 


§  181.  Whom  affected  by  waiver. 

Where  the  waiver  is  embodied  in  the  instrument  itself,  it  is  binding 
upon  all  parties;^-  but  where  it  is  written  above  the  signature  of 
an  indorser,  it  binds  him  only.^^ 

§  182.  Waiver  of  protest. 

A  waiver  of  protest,  whether  in  the  case  of  a  foreign  bill  of  ex- 
change or  other  negotiaI)le  instrument,  is  deemed  to  be  a  waiver  not 
only  of  a  formal  protest,  but  also  of  presentment  and  notice  of 
dishonor.** 

§  183.  When  notice  is  dispensed  with. 

Notice  of  dishonor  is  dispensed  with  when,  after  the  exercise  of 
reasonable  diligence,  it  cannot  be  given  to  or  does  not  reach  the 
parties  sought  to  be  charged.'^ 

[Note.  —  See  Bills  of  Excluinge  Act,  section  50,  subdivision    (2).] 

§  184.  Delay  in  giving  notice;  how  excused. 

Delay  m  giving  iiolue  of  dishonor  is  excused  wlien  the  delay  is 
caused  by  circumstances  beyond  the  control  of  the  holder  and  not 
imputable  to  his  default,  misconduct  or  negligence.  When  the  cause 
of  delay  ceases  to  operate,  notice  must  be  given  with  reasonable 
diligence.** 

[XOTK.  —  See  Bills  of  Exchanpo  Act,  section  50;  Daniel,  §§  10511-1 146.  A 
more  specific  statement  of  wliat  will  excuse  delay  is  deemed  imi)ractical)lc. 
Any  attempt  to  enumerate  particular  instances  would  lead  to  confusion.] 


Jarkson  v.  Collins,  17  L.  J.  Q.  B.  142; 
Itartholomrw  v.  Hill,  5  L.  T.  N.  S.  756. 
A»  to  what  is  not,  liorrndaile  v.  Lone, 
A  Taunt.  93;  Uraithirnite  v.  Colcnmn, 
4  N.  &  M.  f)54;  Brll  v.  Fran/cis,  4  M.  & 
C.  44<i;  Holmci  v.  Staines,  .T  ('.  &  K. 
Ifl.)  In  .\merica  it  lias  heen  held  that 
a  verhal  waiver  of  notice  may  he  re- 
vr)ked  iK'fore  the  time  ff)r  K'vin<r  notice 
has  expired.  (Sr<(ni<l  \nl.  Hank  v. 
Mcduirr,  .33  Oh.  St.  205.)  "  Chalmers, 
[.p.   ir.0-7. 

12  I'app  5Klri.  [See  I'nol  v.  Amhr- 
.inn,  llfi  Ind.  04;  firynnt  v.  Merrhants' 
Rank,  8  Bush.  4.3.1 

y^  [Woodman  v.  Thurston,  K  ('u«h. 
157;  Farmers'  Hank  v.  Firinfi,  78  Ky. 
264.1  "  Such  nn  indorBcment  is  Home- 
timeH  spoken  of  n«  n  fnrnltative  in- 
dorsement. If  relntcH  only  to  Ihe  in 
dorser's  linhility.  and  df)es  not  oflxT 
wine  affect  the  negotiation  of  the  hill. 
Such  stipulati(ms  are  resorted  to  when 


the  payment  of  the  hill  is  doubtful, 
and  the  drawer  or  indorser  wislies  to 
save  expense  in  case  of  it.s  return.  In 
the  United  States  it  has  been  held 
that  an  indorsement  in  the  above  form 
dispenses  with  the  necessity  of  notice 
to  all  subsequent  in<lors(>rs  (Daniel, 
§  lOnO;  Parshlry  v.  Hrath,  00  Me. 
00)  ;  and  in  I'Vanee  a  similar  construc- 
tion has  been  put  on  the  phrases  '  Re- 
lour  sans  frais,'  '  h'ltour  sans  protrt' 
and  'sans  enmpte  de  retour.'  (Nou- 
piii<T,  §  250;  German  Kxehanpe  Law, 
art.  42,  .seems  ambi<ruons).  II  is 
dniibtfiil  whether  the  Knf,'lish  Act 
would  bear  such  an  interpretation." 
(  halmers,  p.  40. 

The  above  secti'in  fixes  the  law  con- 
trary to  t'arshley  v.   Heath,  supra. 

'<  I'apes    584-580. 

1^'  Pajre  580. 

i«  I'agea  573-574. 


816  THE    NKOOTIABLE    INSTKUMKNTS    LAW. 

§  185.  When  notice  need  not  be  given  to  drawer. 

Motuc  of  dishonor  is  not  rc<|uii-f(l  to  hv  given  to  the  drawer  in 
either  of  the  following  cases : 

1.  Whero  the  drawer  and  drawee  are  the  same  person;  ^^ 
•>.'.  Where  the  drawee  is  a   fictitious  person  or  a  person  not 
havinj;  capai'ity  to  contract;  '' 

,S.  Where  the  drawer  is  the  person  to  whom  the  instrument 
is  presented  for  payment ;  '^ 

4.  Where  the  drawer  has  no  right  to  expect  or  require  that 
the  drawee  or  acceptor  will  honor  the  instrument;  '^ 

5.  Where   the   drawer   has  countermanded   payment.^* 

§  186.  When  notice  need  not  be  given  to  indorser. 

Notice  ot"  dishonor  is  not  required  to  })e  given  to  an  indorser  in 
either  of  the  following  cases: 

1.  Where  the  drawee  is  a  fietitions  person  or  a  person  not 
having  capacity  to  contract,  and  the  indorser  was  aware  of  the 
fact  at  the  time  he  indorsed  the  instrument;^" 

2.  Where  the  indorser  is  the  person  to  whom  the  instrument 
is  presented  for  payment ;  -^ 

3.  Where  the  instrument  was  made  or  accepted  for  his  accom- 
modation.-- 

[Note. —  See  Bills  of  Exchange  Act,  section  50,  subdivision    (2)    (d).] 

§  187.  Notice  of  non-payment  where  acceptance  refused. 

Where  due  notice  of  dishonor  hy  non-acceptance  has  been  given, 
notice  of  a  subsequent  dishonor  by  non-payment  is  not  necessary, 
unless'in  the  meantime  the  instrument  has  been  accepted." 

[XoTE.  —  See  Bills  of  Exchange  Act,  section  48,  subdivision  (2);  Daniel, 
§  932.1 

§  188.  Effect  of  omission  to  give  notice  of  non-acceptance. 

An  omission  to  give  notice  of  dishonor  by  non-acceptance  does 
not  prejudice  the  rights  of  a  holder  in  due  course  subsequent  to  the 
omission.^* 

[XoTE.  —  See  Bills  of  Exchange  Act,  section  48,  subdivision    (1).] 


"Pages  .575-576n.  [See  Bills  of  Ex-  that  there  should  be  any  obligation  to 

change  Act.  section  50.  subdivision  (2)  accept.     See  Adams  v.  Darbif,  2.S   Mo. 

(c)-   Daniel    §?  128-129,  IO880.I     See  162;  Dickens  v.  Beal,  10  Peters,  572.] 
"person"   defined,   §   2.  '»  [Sutclilfe  v.  McDouell,  2  Nott.  & 

18  Pages    576-577.      [Life   Insurance  MT.  251;   Daniel,  §  1081.1 
Company  v.  Pmdleton,  112  U.  S.  708;         20  See  preceding  section,  note  17. 
Daniel.  §§   1074,   1076.     The  language        21  Pages  577-579.    See  preceding  iec- 

of  the  Bills  of  Exchange  Act  is  "  where  tion,  note  17. 
the  drawee  or  acceptor   is  as  between         —  Page  579. 
himself  and  the  drawer  under  no  obli-         23  Page  586. 
patinn  to  accept  or  pay  the  bill."     But        2«  Pages  587-589. 
this  is  too  narrow.    It  is  not  required 


DISCHARGE.  817 

§  189.  When  protest  need  not  be  made ;  when  must  be  made. 

Where  auy  negotiable  instrument  has  been  dislionored  it  may  be 
protested  for  non-acceptance  or  non-payment,  as  the  case  may  be; 
but  protest  is  not  required,  except  in  tlie  case  of  foreign  bills  of 
exchange.^' 

(Note.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision  (1);  Daniel, 
§§  926,  928;  Byles  on  Bills,  260.  For  the  other  provisions  relative  to  pro- 
tests see  sections  152  and  160.     (N.  Y.,  §§  260  and  268.)] 

Pages  589-590. 

ARTICLE  X. 

DISCHARGE. 

Section  200.  Instrument;   how  discharged. 

201.  When  persons  secondarily  liable  on,  discharged. 

202.  Right  of  party  who  discharges  instrument. 

203.  Renunciation   by   holder. 

204.  Cancellation;    unintentional;    burden    of    proof. 

205.  Alteration  of  instrument;  effect  of. 

206.  What  con«-titutes  a  material  alteration. 

§  200.  Instrument;    how  discharged. 

A  negotiable  instrument  is  discharged: 

1.  By  payment  in  due  course  by  or  on  behalf  of  the  principal 
debtor ;  ' 

2.  By   payment   in    due   course   by   the   party   accommodated, 
where  the  instrument  is  made  or  accepted  for  accommodation  ; ' 

3.  By  the  intentional  cancellation  thereof  by  the  holder;^ 

4.  By  any  other  act  which  will  discharge  a  simple  contract 
for  the  payment  of  money ;  * 

5.  When   the  principal  debtor  becomes  the   holder  of  the  in- 
strument at  or  after  maturity  in  his  own  right.'' 

[N'</rK.  —  Sec   Rills  of   Exchange   .Vet.   sections  ."id,   (11,   (i3.1 

§  201.  When  persons  secondarily  liable  on,  discharged. 

A  person  sicondarily  liable  on  the  instrument  is  discharged: 

1.  By  >any  act  which  disfhargcs  the  instrument;" 

2.  By    the    intentional    cancellation    of    his   signature    by    the 
holder ;  ^ 

3.  By  the  discharge  of  a  prior  party  ; " 

4.  By  a  valid  tender  of  j)aym('nt  made  by  a  prior  party; " 

»»  PagPH  589-590.  «  See  proceding  section. 

«  PageH  .591-597.     Spp  S  M8.  ^  ['ages  026-627.     See  §   78.        [See 

2  Pages  597-598.     See  §  55.  niiis  of  Exchange  Act.  Heetion  63.1 

•  Pages  599-608.     See  §  204.  "Pages   627-628.      [Daniel.   §    1307.] 

«  Pages  608-626.  637.  •  Page  629. 

»  Pages  597-59H.     See  §  80. 

HSOOT.   INBTRfTllKNTII—  52 


818  THE  Ni'XioiiAiti.i':  insii:umi;n'1's  i.aW. 

5.  Hy  a  ivlcaso  dI"  llio  principal  (K'l'tor,  unless  the  liolder's 
rigiit  of  reeourso  against  tlu'  party  scrondarily  liahle  is  expressly 
reserved;  '" 

G.  By  any  agreement  binding  u|)()n  tiie  holder  to  extend  the 
time  of  payment  or  to  post|)()ne  the  iiolder's  right  to  enforce 
the  instrument,  unless  the  right  of  recourse  against  such  party 
is  expressly  reserved." 

§  202.  Right  of  party  who  discharges  instrument. 

Wiienever  the  instrument  is  paid  hy  a  party  secondarily  liable 
thereon,  it  is  not  discharged;  bur  the  party  so  paying"  ft  is  'remitted 
to  liis  former  rights  as  regards  all  prior  ))artios,  and  he  may  strike 
out  his  own  and  all  subsequent  indorsements,  and  again  negotiate 
the  instrument,  except: 

1.  Where  it  is  payable  to  the  order  of  a  third  person,  and  has 
been  paid  by  the  drawer ;  ^-  and 

2.  Where  it  was  made  or  accepted  for  accommodation,  and 
has  been  paid  by  the  party  accommodated.'^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  oD;  Daniel,  §§  12,35rt-1241.1 
This  section  is.  perhaps,  not  altogether  clear.  Exception  (1)  qualifies  the 
last  clause  beginning  "and  he  may  strike  out,"  etc.,  while  exception  (2) 
qualifies  the  whole  of  the  preceding  statement.  If  tlie  instrument  is  paid  by 
the  party  accommodated,  it  is  discharged  under  the  provisions  of  §  200  (1). 
If  paid  by  a  drawer  of  a  bill  payable  to  the  order  of  a  third  person,  the 
drawer  (not  being  an  accommodated  party),  may  enforce  payment  against 
the  acceptor  but  may  not  re-issue  the  bill.  If  paid  by  an  indorser,  or  by  a 
drawer  of  a  bill  payable  to  drawer's  order,  the  party  paying  (not  being  an 
accommodated  party),  may  enforce  payment  against  prior  parties  or  may 
strike  out  his  own  and  subsequent  indorsements,  and  re-issue  the  instrument. 

§  203.  Renunciation  by  holder. 

The  holder  may  expressly  renounce  his  rights  against  any  party 
to  the  instrument,  before,  at  or  after  its  maturity.  An  absolute 
and  unconditional  renunciation  of  his  rights  against  the  principal 
debtor  made  at  or  after  the  maturity  of  the  instrument,  discharges 
the  instrument.  But  a  renunciation  does  not  affect  tlie  rights  of  a 
holder  in  due  course  without  notice.  A  renunciation  must  be  in 
writing,  unless  the  instrument  is  delivered  up  to  the  person  primarily 
liable  thereon.^* 

[Note.  —  See  Bills  of  Exchange  Act,  section  02;  Byles  on  Bills,  190,  191; 
Daniel,  §§  541-545.  The  Bills  of  Exchange  Act  requires  the  renunciation 
to  be  "  in  writing,  unless  the  bill  is  delivered  to  the  acceptor."  But  this 
effected  a  change  in  the  law.]  "  The  words  requiring  the  renunciation  to  be 
in  writing  were  added  in  committee.  They  alter  the  English  law,  but  bring 
it  into  accordance  with   the  Scotch  law.     At  common   law  a  contract  cannot 


10  Pages  629-631.     [Daniel,  §  1310.]         12  Pages  639-640. 
>'  Pages  631-638.     [Daniel,  §§  1326-        13  Pages  640-641.     See   §65. 
13880.]  14  Pages  599-604. 


DISCHARGE.  8iy 

be  discharged  liv  accord  without  satisfaction.  The  special  rule  as  to  bills 
and  notes  jiartially  reproduced  in  this  section  seems  to  have  been  consciously 
imported  into  the  law  merchant  from  French  law.  ( See  Parke,  B.,  in  Foster 
V.  DawLer,  li  L.\cli.,  at  p.  852.)  Ihis  mode  of  discharge  is  known  in  France 
as  ■  remise  voluntaire,'  and  is  recognized  in  countries  where  the  civil  law  is 
followed.      (See  Nouguier,  §§   1043-1052.)  "     Chalmers,  p.  212. 

§  204.  Cancellation ;   unintentional ;   burden  of  proof. 

A  caneellation  made  unintentionally,  or  under  a  mistake,  or  with- 
out the  autliority  of  the  holder,  is  inoperative;  but  where  an  instru- 
ment or  any  signature  thereon  appears  to  have  been  canceled  the 
burden  of  proof  lies  on  the  party  who  alleges  that  the  cancellation 
was  made  unintentionally,  or  under  a  mistake  or  without  authority.^' 

(Note.  —  See  Bills  of  Exchange  Act,  section  63,  subdivision  (3).]  Chalmers 
cites:  Haper  v.  Hirkbeck,  15  East,  17;  Wilkinson  v.  Johnson,  3  B.  &  C.  428; 
NovtlU  v.  Rossi,  2  B.  &  Ad.  757;  Vastrique  v.  Imrie,  L.  R.  4  H.  L.  435;  War- 
wick v.  Rogers,  5  M.  &  Gr.  340  and  373;  I'rince  v.  Oriental  Bank,  L.  R.  3  App. 
Cas.  325;   Dominion  Bank  v.  Anderson,  15  Sess.  Caa.  408. 

§  205.  Alteration  of  instrument;   effect  of. 

Where  a  negotiable  instrument  is  materially  altered  without  the 
assent  of  all  parties  liable  thereon,  it  is  avoided,  e.xeept  as  against 
a  party  who  has  himself  made,  authorized  or  assented  to  the  altera- 
tion anfl  sui)?e(iuent  indoi'sers.'*  But  when  an  instrument  has  been 
materially  altered  and  is  in  the  hands  of  a  holder  in  due  course,  not 
a  party  to  the  alteration,  he  may  enforce  payment  thereof  according 
to  its  original  tenor.'^ 

(NoTK.  —  See  Bills  of  Exchange  Act,  section  04,  subdivision  (1);  Daniel, 
§S}    I3(l3-1421a. 

The  BilN  of  Kxchange  .Act  contains  a  provision  that  "  where  a  bill  has  been 
materially  altered,  but  the  alteration  is  not  apparent,  and  the  bill  is  in  the 
bands  of  a  holder  in  due  course,  such  holder  may  avail  himself  of  the  bill  as 

>•'•  Pages  005-008,  020-027.  a  holder  in  due  course,  it  was  laid 
10  Pages  008-020.  down  that  the  holder  c(»uld  not  sue 
17  Pagfs  157,  025,  720.  "  The  pro-  the  indorser  on  the  bill,  for  the  instru- 
viso  was  intro.jiKiil  in  committee  to  ment  was  discharged.  {Burchfirld  v, 
mitigate  the  rigor  of  the  common-  Mofjre,  23  L.  J.  Q.  B.  201.)  He  could 
law  rule  in  favor  of  a  holder  in  due  only  sue  on  the  consideration.  In 
course.  •  •  •  \i  eonimon  law  a  .America  the  rule  is  not  quite  so  severe, 
material  alteration,  by  whomsoever  and  it  is  held  that  an  alteration  by  a 
made  {  Dnriihim  v.  Conprr.  11  M.  &  stranger,  or,  as  it  is  called,  'an  act  of 
W.  at  p.  7«!t:  aff'd  13  M.  &  W.  343),  spoliation.'  does  not  avoid  a  bill.  (Par- 
avoided  and  (li-eliarged  the  bill,  except  sons  on  Bills,  vol.  II.,  j).  574;  cf.  U.  S. 
a.s  againnt  a  |»iirty  who  made  or  as-  v.  Spalding,  2  Mason.  4H2;  IHnsmore 
aented  to  the  alteration.  {  Ham>lin  v.  v.  Dunran.  57  N.  Y.  581.)  "  Chalmers, 
Brurk,  9  Q.  B.  300.)  Thus  where  a  |..  214.  Rut  see  pages  014-010  for  the 
bill  was  alten-d  by  adding  a  place  of  effect  of  §  205  upon  the  American 
payment  without  (he  aeeeptorV  con-  rule, 
sent,  arwl  was  subsequently  indorsed  to 


820 


THE    NEGOTIABLE    INSTKU AIKNTS    LAW. 


if  it  had  not  bivn  altiMOil,  ami  may  eufoioo  payinont  of  it  according  to  its 
ori<;inaI  tonor."  Put  this  etTccta  a  clian^c  in  tlic  hiw. )  This  change  was 
8ubse«]ut>ntly  adopted  by  the  Commiasionera  on  Uniformity  of  Laws,  and  is 
introduci'd   in  substance  above. 


§  206.  What  constitutes  a  material  alteration, 

Auy  alteration  whieli  cliaiiges: 

1.  The  date ;  "• 

2.  The  sum  payable,  either  for  principal'"-*  or  interest;^'' 

3.  The  time'-'  or  place"-  of  payment; 

4.  The  number  or  the  relations  of  the  parties ;  -■'' 

5.  The  medium  or  currency  in  which  payment  is  to  be  made;  ^* 
Or  which  adds  a  place  of  payment  where  no  place  of  payment 

is  specified,^^  or  any  other  change  or  addition  which  alters  the 
effect  of  the  instrument  in  any  respect,  is  a  material  alteration.^ 
[Note. —  See  Bills  of  Exchange  Act,  section  04.]     Pages  G08-626. 


18  [See  Wood  v.  Steele,  6  Wallace, 
80;  Crawford  v.  West  Side  Bank,  100 
N.  Y.  50,  56;  Daniel,  §  1376.]    See  §  32. 

19  [See  Daniel,  §   1384.] 

2"  [Daniel,  §  1385,  and  cases  there 
cited.] 

21  [Weyman  v.  Yeomans,  84  111.403; 
Miller  v.  (Jilleland,  19  Pa.  St.  119.] 

22  [Tidmarsh  v.  Grover,  1  Maule  & 
S.  735;  Dank  of  Ohio  Valley  v.  Lock- 
wood.  13  W.  Va.  392.1 

23  [Daniel,  §§  1387-1390.] 

2«  [Angle  v.  Insurance  Company,  92 
U.  S.  330;  Church  v.  Howard,  17  Hun, 
5:  Darwin  v.  Rippey,  63  N.  C.  318; 
Bagarth  v.  Breedlove,  39  Tex.  561.] 

2s  [  Whitesides  v.  Northern  Bank,  10 
Bush,  501.] 

1  Distinguish  authorized  filling  of 
blanks:  §  33. 

"  An  alteration  is  material  which  in 
any  way  alters  the  operation  of  the 
bill  and  the  liabilities  of  tlie  parties, 
whether  the  change  be  prejudicial  or 
beneficial  i  Gardner  v.  Walth.  5  E.  & 
B.  83,  at  p.  89)  ;  and  it  may  be  that 
even  this  test  is  not  wide  enough. 
'  Any  alteration,'  says  Brett,  L.  J., 
'  seems  to  me  material  which  would 
alter  the  business  effect  of  the  instru- 
ment, if  used  for  any  business  pur- 
pose.' (Huff el  V.  Bank  of  England,  9 
Q.  B.  D.  555.  at  p.  568;  see  the  test 
suggested  by  Cotton.  L.  J.,  at  pp.  574, 
575.)      The   materiality   of   any   alter- 


ation is  a  question  of  law.  ( Vance  v. 
Lowther,  1  Ex.  D.  176.) 

"  Subject  to  two  exceptions  the 
holder  of  a  bill,  which  has  been  avoided 
by  a  material  alteration,  cannot  sue 
on  the  consideration  in  respect  of 
which  it  was  negotiated  to  him. 
(Alderson  v.  Langdale,  3  B.  &  Ad. 
660.)  Exception  1.  If  the  bill  was  ne- 
gotiated to  him  after  the  alteration 
was  made,  and  he  was  not  privy  to 
the  alteration,  he  may  sue  on  the  con- 
sideration. {Burchfield  v.  Moore,  23 
L.  J.  Q.  B.  261;  cf.  Cundy  v.  Marriott, 

1  B.  &  Ad.  696.)  Exception  2.  If  the 
bill  was  altered  while  in  his  custody  or 
under  his  control,  he  can  still  recover, 
provided  (a)  that  he  did  not  intend 
to  commit  a  fraud  by  the  alteration 
(Parsons,  vol.  TI..  p.  572:  Hunt  v. 
Gray,  35  N.  J.  L.  227 ),  and  (6),  that 
the  party  sued  would  not  have  had  any 
remedy  over  on  the  bill,  if  it  had  not 
been    altered.      (Atkinson    v.    Hawdon, 

2  A.  &  E.  628;  cf.  Sutton  v.  Toomer, 
7  B.  &  C.  416;   Alderson  v.  Langdale, 

3  B.  &  Ad.  660.) 

"  When  a  bill  appears  to  have  been 
altered,  or  there  are  marks  of  era- 
sures on  it,  the  party  seeking  to  en- 
force the  instrument  is  bound  to  give 
evidence  to  show  that  it  is  not  avoided 
thereby.  (Knight  v.  Clements,  8  A.  & 
E.  215;  Clifford  v.  Parker,  2  M.  &  Gr. 
909.)  "     Chalmers,  pp.  217-218. 


FORM    AMU    INTKKPKETATION.  821 

ARTICLE  XI. 

BILLS   OF   EXCHANGE;    FORM   AND   INTERPRETATION. 

Section  210.  Bill  of  exchange  defined. 

211.  Bill   not  an  assignment  of  funds  in  hands  of  drawee. 

212.  Bill  addressed  to  more  than  one  drawee. 

213.  Inland  and  foreign  bills  of  exchange. 

214.  When   bill   may  be  treated  as  promissory  note. 

215.  Referee  in  case  of  need. 

§  210.  Bill  of  exchauge  defined. 

A  bill  of  exchange  is  an  unconditional  order  in  writing  addressee, 
by  one  person  to  anotlier,  signed  by  the  person  giving  it,  requiring 
the  person  to  whom  it  is  addressed  to  pay  on  demand  or  at  a  fixed 
or  determinable  future  time  a  sum  certain  in  money  to  order  or 
to  bearer. 

(Note. —  See  section  1  (N.  Y.  20);  Bills  of  Exchange  Act,  section  3.] 
"  A  bill  is  sometimes  called  a  draft,  and  an  accepted  bill  is  often  referred  to 
as  '  an  acceptance.'  The  person  who  gives  the  order  is  called  the  drawer.  The 
person  thereby  ordered  to  pay  is  called  the  drawee,  and  if  he  signifies  his 
assent  to  the  order  in  due  form  [see  §  220],  he  is  then  called  the  acceptor. 
The  person  to  whom  the  mone}'  is  payable  is  called  tiie  payee  or  bearer,  as  the 
case  may  be.  [See  §  2.]  The  foreign  codes  for  the  most  part  provide  in 
terms  that  a  bill  may  be  drawn  by  one  person  for  the  account  of  anotlier. 
The  person  for  whose  account  the  bill  is  drawn  is  spoken  of  in  England  as 
the  •  third  account.'  For  example,  a  merchant  in  .America  may  direct  his 
agent  in  England  to  draw  on  a  correspondent  in  Paris  for  his  (the  principal's) 
account."     Chalmers,   p.   8. 

§  211,  Bill  not  an  assignment  of  funds  in  hands  of  drawee. 

A  bill  of  itself  does  not  operate  as  an  assignment  of  the  funds  in 
the  hands  of  the  drawee  available  for  the  payment  thereof,  and  the 
drawee  is  not  liable  on  the  bill  unless  and  until  he  accepts  the  same.^ 

[Note.  —  See   BilN  of   Exchange   Act.  section   53.) 

§  212.  Bill  addressed  to  more  than  one  drawee. 

A  bill  may  be  addressed  to  two  or  more  drawees  jointly,  whether 
they  are  partners  or  not;  but  not  to  two  or  more  drawees  in  the 
alternative  or  in  succession.' 

[Note.  —  See  Bills  of  Exchange  Act,  section  0,  subdivision  (2).)  See  §  229 
(5),  and  §  242    (1). 


»  Pages  644-646.  drawees  would  give  rise  to  difficulty  as 

•Pages   642-04.1.        "Though    a   bill  to  the  recourKe  if  the  bill  was  dishon- 

may   not   U*  addreH-'ed   to  two  drawees  cued,     'ihc  diHicuIty   does   not  arise   in 

in  sucreHsion,  or  in  the  alternative,  it  the   case   of   a    note,   conscijuent ly    the 

may    name   a    drawee   in    case   of   need  makr-rs  of  a  not«'  may  be  liable  jointly, 

[5  2I.')1;    hut  his  status  is  whollv  ilif  or    jointly   and   severally,   acrording   to 

ferent     from     that     of     an     ortlinary  its  tenf>r,  while  the  acceptors  of  a  bill 

drawee.        Alternative      or      successive  lan  only  be  liable  jointly.    A  note  pay- 


8S2  Tilt;  MoooriAHLi';  instruments  i^vv. 

§  213.  Inland  and  foreign  bills  of  exchange. 

An  inland  bill  of  ex(liiUi«,H'  is  a  bill  wbirli  is,  or  on  its  face  purports 
to  bo,  both  drawn  and  payable  within  this  state.  Any  otiier  bill  is 
a  foreijjjn  bill.  Unless  the  londary  appears  on  the  face  of  the  bill, 
the  hoKler  may  treat  it  as  an  inlanil  bill.' 

INoi'K.  —  Stf  Hills  of  Kxohaiit;e  .Vet,  st'ctioii  4,  subdivision  (1);  Buckner  v, 
Finley.  2   Peters.  ftSti;    Striiubiidgc  v.   h'ubinson.  5  Gilmari,  470.] 

§  214.  When  bill  may  be  treated  as  promissory  note. 

Where  m  a  bill  (.Irawer  and  drawee  are  the  same  person,  or  where 
the  drawee  is  a  tietitions  person,  or  a  person  not  having  capacity  to 
contract,  the  holder  may  treat  the  instrument,  at  his  option,  either 
as  a  bill  of  exchange  or  a  promissory  note.^ 

[Note.  —See  Bills  of  Exchange  Act,  section  5,  subdivision  (2).]  See  §  36 
(5).  "If  both  drawer  and  drawee  are  fictitious  persons  the  bill  might,  per- 
haps, be  treated  as  a  note  made  by  the  first  indoraer."     Chalmers,  p.  18. 

§  215.  Referee  in  case  of  need. 

The  drawer  of  a  bill  and  any  indorser  may  insert  thereon  the  name 
of  a  person  to  whom  the  iiolder  may  resort  in  case  of  need,  that  is 
to  say,  in  case  the  bill  is  dishonored  by  non-acceptance  or  non-payment. 
Such  person  is  called  the  referee  in  case  of  need.  It  is  the  option 
of  the  holder  to  resort  to  the  referee  in  case  of  need  or  not  as  he 
may  see  fit. 

[Note.  —  See    Bills    of    Exchange    Act,    .section    15;    Daniel,    §§    HI,    529.] 

"  The  referee  in  case  of  need  is  sometimes  called  the  drawee  in  case  of  need, 
or  simply  the  '  case  of  need.'  A  bill  must  be  protested  or  noted  for  protest 
before  it' can  be  presented  to  the  case  of  need.  [See  §§  280,  286.]  The  con- 
cluding words  of  the  section  settle  the  moot  point,  whether  presentment  to 
the  case  of  need  is  obligatory  or  optional."  —  Chalmers,  p.  38. 

Pages  643-645. 

ARTI(n.E  XII. 

ACCEPTANCE. 

Section  220.  Acceptance,  how  made. 

221.  Holder  entitled  to  acceptance  on  face  of  bill. 

222.  Acceptance  by  separate  instrument. 

223.  Promise  to  accept;    when  equivalent  to  acceptance. 

224.  Time  allowed   drawee  to  accept. 

225.  Liability  of  drawee  retaining  or  destroying  bill. 

226.  Acceptance  of  incomplete  bill. 

227.  Kinds  of  acceptances. 

228.  What  constitutes  a  general   acceptance. 

229.  Qualified   acceptance. 

230.  Pvights  of  parties  as  to  qualified  acceptance. 


able   in   the   alternative  by   one   of   two         *  Pages  646-647. 
makers  is  invalid,      f /'o  , ; :  v.  r.oiul.  4         s  Page  647. 
B.  ft  Aid.  679.)  "     Chalmers,  p.   19. 


ACCfiPtANCE.  823 

§  220.  Acceptance;   how  made. 

The  acceptance  of  a  bill  is  the  signiiicatiou  by  the  drawee  of  his 
assent  to  the  order  of  the  drawer.  The  acceptance  must  be  in  writing 
and  signed  by  the  drawee.*^  It  must  not  express  that  the  drawee 
will  perform  his  promise  by  any  other  means  than  the  payment  of 
money.^ 

§  221.  Holder  entitled  to  acceptance  on  face  of  bill. 

The  holder  of  a  bill  presenting  the  same  for  acceptance  may  re- 
<|uire  that  the  acceptance  be  written  on  the  bill,  and  if  such  request 
is  refused,  may  treat  the  bill  as  dislionored. 

(Note.  —  1  N.  V.  Kev.  Stat.,  708.  section  9.]  The  English  Act  requires  that 
the  acceptance  be  written  on  the  bill;  the  American  Act  leaves  it  optional  with 
the  holder  to  require  it,  or  to  waive  it.  This  permits  acceptances  by  telegraph. 
Carretson  v.  North  Atchinson  Bank,  39  Fed.  Rep.  113.  47  Fed.  Rep.  867,  51 
Fed.  Rep.  168. 

§  222.  Acceptance  by  separate  instrument. 

Where  an  acceptance  is  written  on  a  paper  otlier  than  the  bill 
itself,  it  does  not  bind  the  acceptor  except  in  favor  of  a  person  to 
'vhom  it  is  shown  and  who,  on  the  faith  thereof,  receives  the  bill 
for  value.® 

[  NoTK.  —     1   \.  Y.   Rev.  Stat.   7GS,  section   7.1 

§  223.  Promise  to  accept;   when  equivalent  to  acceptance. 

An  unconditional  promise  in  writing  to  accept  a  bill  before  it  is 
rirawn  is  deemed  an  actual  acceptance  in  favor  of  every  person  who, 
upon  tiie  faith  thereof,  receives  the  bill  for  value.* 

I.NOTK.  —  1.  N.  Y.  Rev.  Stat.  768,  section  8.1 

§  224.  Time  allowed  drawee  to  accept. 

'I'lie  drawee  is  allowed  twenty-four  hours  after  presentment  in 
which  to  decide  whether  or  not  he  will  accept  the  bill;'"  but  the 
acceptance  if  given  dates  as  of  tlic  (lay  of  presentation." 

§  225.  Liability  of  drawee  retaining  or  destroying  bill. 

WlxTc  a  (liawcc  to  wIkhii  a  bill  is  (l.-livcicil  for  acceptance  destroys 
the  same,  or  refu.ses   within   twenty-four   hours  after  such  delivery, 


•  Faffed  648-649.     fSee  Bills  of  Kx-  tion    17,    BubdiviHion    (2)     ib).]      See 

change  Act.  section   17;    1    N.  Y.   Rev.  §  20. 

Stat.,  70K.  §  0.     The  Rilh  <if  Kxrhang«*  »  PnpeH  6.')  1-6.17. 

Act.    following   previous    Engli'*li    »tat  "  I*ate><  6.')1    ('..') 7. 

utes   (1  &  2  George  IV..  r.  78;    19  ft  20  lo  Pages    060-605.       [See     Hjles    on 

Victoria,  c.   78)    requires   that   the   ac-  Rills,   182;    Daniel,  §  492.) 

reptance   l>e   written   on    the   bill.       The  '•  f'l  here  doe.s  not  ap[)ear  «<)  be  any 

American  statutes  do  not  genernllv  re  direct    authority    on    this    point;     the 

quire    this.)       See    next    two    sections,  rule    slafcd    conforms    to    what    ia    the 

T  [See    Bills    of    Exchange    Act,    imsc  cominon    practice.! 


^'ii  THE   NEQOTIABLK   INSTHUMENTS   LAW. 

or  within  siuh  oilier  pi'riod  as  tlio  holdor  may  allow,  to  return  the 
bill  accepted  or  non-accepted  to  the  holder,  he  will  be  deemed  to 
liave  accepted  the  sanie.'-' 

[NoTE.  —  1  N.  Y.  Rev.  Stat.  709,  section  II;  see  Daniel,  §  500.] 

§  226.  Acceptance  of  incomplete  bill. 

A  hill  may  he  aecejited  tiefore  it  has  been  signed  by  the  drawer, 
or  while  otherwise  incomplete,'^  or  when  it  is  overdue,  or  after  it  has 
been  dishonored  by  a  previous  refusal  to  accept,  or  by  non-payment.'* 
But  when  a  bill  payable  after  sight  is  dishonored  by  non-acceptance 
and  the  drawee  subsequently  accepts  it,  the  liolder,  in  the  absence  of 
any  different  agreement,  is  entitled  to  have  the  bill  accepted  as  of 
the  date  of  the  first  presentment.''* 

[Note.  —  See  Bills  of  Exchange  Act,  section  18;   Daniel,  §§  -190-495.] 

§  227.  Kinds  of  acceptances. 

An  acceptance  is  either  general  or  qualified.  A  general  acceptance 
assents  without  qualification  to  the  order  of  the  drawer."  A  quali- 
fied acceptance  in  express  terms  varies  the  effect  of  the  bill  as  drawn. ^^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  19;  Byles  on  Bills,  193;  Daniel, 
§  509  et  seq.] 

§  228.  What  constitutes  a  general  acceptance. 

An  acceptance  to  pay  at  a  particular  place  is  a  general  acceptance 
unless  it  expressly  states  that  the  bill  is  to  be  paid  there  only  and 
not    elsewhere.'^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  19,  subdivision  (2)  ;  Wallace  v. 
McConnell,   13   Peters,   136;    Daniel,   §§   519-520,   641-643.] 

12  Pages  658-665.  is,  whenever  possible,  to  be  construed 

13  Pages  666-667.  See  §  33.  as  general,  not  qualified;  and  a  mere 
'  1*  Pages  667-668.  Chalmers  cites  memorandum,  such  as  a  wrong  due 
Mutford  V.  Walcot,  1  Ld.  Raym.  574;  date,  inconsistent  with  such  construe- 
Wynne  v.  Itaikes,  5  East,  514.  tion,  has  lK>en  rejected  as  being  no  part 

IS  "This    subsection    was    added    in  of  the  acceptance.     {Fan.ihawe  \.  Feet, 

committee.      It   accords   with    mercan-  26  L.  J.  Ex.  314;  cf.  Stone  v.  Metcalfe, 

tile  practice,  and  was  intended  to  se-  4  Camp.  217;   Fitch  v.  Jones,  5  E.  & 

cure    that,    apart    from    special    agree-  B.,  at  p.  246;   Decroix  v.  Meyer,  25  Q. 

ment.  the  holder  should  be  put,  as  far  B.  D.  343.)  "     Chalmers,  p.  46. 
as  possible,  in  the  same  position  as  if         i^  See  §  229. 

the  bill  had  not  been  dishonored.     Un-         i^  Pages  672-673.     "  This  subsection 

less  the  contrary  appear  by  its  terms,  reproduces   the    eflTect   of   the    repealed 

a     bill     of     exchange    is    prima    facie  1  &  2  Geo.  4,  c.  78,  which  was  passed 

deemed   to   have   been   accepted    before  to  override  the  case  of  Roice  v.  Young, 

maturity  and  within  a  reasonable  time  2  Brod.  &  Bing.  165;  s.  c.  2  Bligh.  H. 

after    its   issue,    but   there    is    no    pre-  L.  391,  where  it  was  held  that  an  ordi- 

sumption  as  to  the  exact  time  of  ac-  nary  acceptance  payable  at  a  banker's 

ceptance.      ( Robert. t  v.   Rethell,   12   C.  was    a    qualified    acceptance."      Chal- 

B.   778.)  "     Chalmers,   p.   45.  mers,  p.  48. 

19  Pages   668-672.     "  An   acceptance 


ACCEPTANCE.  825 

§  229.  Qualified  acceptance. 

An  acceptance  is  qualified,  wliich  is: 

1.  Conditional,  that  is  to  say,  wliich  makes  payment  by  the 
acceptor  dependent  on  the  fulfillment  of  a  condition  therein 
stated ;  ^" 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of 
the  amount  for  which  the  bill  is  drawn ;  ^° 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  par- 
ticular place ;  -' 

4.  Qualified  as  to  time;  ^^ 

5.  The  acceptance  of  some  one  or  more  of  the  drawees,  but 
not  of  all." 

[Note.  —  See  Bills  of  Exchange  Act,  section  19,  subdivision  (2);  Byles  on 
Dills,  193-104;  Daniel,  §§  508-520.] 

§  230.  Rights  of  parties  as  to  qualified  acceptance. 

The  holder  may  refuse  to  take  a  qualified  acceptance,  and  if  he 
does  not  obtain  an  unqualified  acceptance,  he  may  treat  the  bill  as 
dishonored  by  non-acceptance.^*  Where  a  qualified  acceptance  is 
taken,  the  drawer  and  indorsers  are  discharged  from  liability  on  the 
bill,  unless  tliey  have  expressly  or  impliedly  authorized  the  holder 
to  take  a  qualified  acceptance,  or  subsequently  assent  thereto."'" 
When  the  drawer  or  an  indorscr  receives  notice  of  a  qualified  accep- 
tance, he  must  within  a  reasonable  time  express  his  dissent  to  the 
holder,  or  he  will  be  deemed  to  have  assented  thereto.* 

(NoTK.  —  Sep  Bills  of  Exchange  Act,  section  44;  Byles  on  Bills,  192-10.3; 
Daniel,  §§  508,  510. 

The  Bills  of  Exchange  Act  provides  that  the  provisions  relative  to  the  assent 
of  the  drawer  and  indorser  <1<)  not  apply  "  to  partial  acceptance  whereof  due 
notice  has  been  given,"  and  that  "  where  a  foreign  bill  has  been  accepted  as  to 
part,  it  must  l>e  protested  as  to  the  balance."  But  there  appears  to  be  sonie 
doubt  whether  this  correctly  states  the  rule  of  the  law  merchant.  See  Daniel, 
§511;  Story  on  Bills,  section  272.) 


i"  I'ages  67.3-674,  continental    codes,    it    seems    that    the 

20  I'age   >)75.  holder  cannot  refuse  a  partial   accept- 

21  Pag«'s   (575-670.     See   §   228.  ancc.     He  can  only   protest  as  to  the 

22  Page  076.  balance.       (French     Code,    arts.     110- 
2»  Page  070.     "Bill   drawn  on   B,  X  120;  German  Exchange  Tiaw,  arts.  25- 

and    Y.      B    accepts,    X    and    \    refuse  28.)  "     Chalmers,  p.   140. 

to  accept.     This  is  a  (jiialined   accept-  •'<  Pages    677-078. 

ance."     Chalmers    (p.  48),  citing   Ma-  '"This   subsection    settles   a    doubt- 

rius.   No.    10,    New    York    Draff    Code,  ful   point   in   favor  of  the  holder.     See 

9    1784;    Nougtiier,   5    451.  subject  discussed  in   Ifoirr  v.   Young,  2 

"Page     077.       "According    to    the  Bligh.  .301."     Chalmers,  p.  141. 


826  1"HE    NEOOTIADLE    INSTHUMENTS    LAW. 

ARTICLE  Xlll. 

PRESENTIMENT    FOR    ACCEPTANCE. 

Section  240.   Wlu'u   present mnit    for   acceptance   must  bi'   made. 

241.  Wlien  failure  to  present  releases  drawer  and   indorser. 

242.  Presentment ;    how   made. 

243.  On  what  days  presentment  may  he  made. 

244.  Presentment;   where  time  is  insuflicient. 

245.  When    presentment    is   e.xcuscd. 

246.  When  dishonored   by   non-acceptance. 

247.  Duty  of  holder  where  hill   not  accepted. 

248.  Rights  of  holder  where  bill  not  accepted. 

§  240.  When  presentment  for  acceptance  must  be  made. 

Presentment  for  acceptance  must  be  made : 

1.  Wliere  the  bill  is  payable  after  sight,  or  in  any  other  case 
where  presentment  for  acceptance  is  necessary  in  owhv  to  fix 
the  maturity  of  the  instrument ;  ^  or 

2.  Where  the  bill  expressly  stipulates  that  it  sliall  he  i)rc.^cntc(l 
for  acceptance ; ^  or 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the 
residence  or  place  of  business  of  the  drawee.* 

In  no  other  case  is  presentment  for  acceptance  necessary  in  order 
to  render  any  party  to  the  bill  liable.^ 

§  241.  When  failure  to  present  releases  drawer  and  indorser. 

Except  as  lierein  otherwise  provided,  the  holder  of  a  hill  which  is 
required  by  the  next  preceding  section  to  be  presented  for  acceptance 
must  either  present  it  for  acceptance  or  negotiate  it  within  a  reason- 
able time."  If  he  fails  to  do  so,  the  drawer  and  all  indorsers  are 
discharged.'' 

[Note.  —  See  Bills  of  Exchange  Act,  section  40,  subdivision  (1)  ;  WMace  v. 
Agry,  4  Mason,  3.3.3;   Daniel,  §§  460-472.] 


2  Pages  679-680.  [See  Bills  of  Ex-  ccptance.  An  agent  is  bound  to  use 
change  Act,  section  39,  subdivision  due  diligence  in  presenting  for  accept- 
(1);   Daniel.  §  454.]  ance,    even    when    presentment    is    op 

3  [See  Bill*  of  Exchange  Act,  .sec-  tional  for  the  purposes  of  the  Act,  and 
tion  30,  subdivision    (2).]  he  is  liable  to  his  principal   for  dam- 

*  f/rf.]     Sep  §  244.  ages     resulting     from    his    negligence. 

5  Pages   680-684.      "Where    present-  ( Pothier,   No.    128 ;    Nouguier,   §   462; 

ment    is    optional,    the    object    of    pre-  Allen  v.  Huyfiarn,  20  Wend.  321;  Bank 

Benting   is    (1),   to   obtain   the   accept-  of     Van    Diemcn'ti    Land    v.     Victoria 

ance  of  the  drawee,  and  thereby  secure  Bank,  L.  R.  3  P.  C.  at  p.  542.)  "  Chal- 

his    liability    as    a    party   to   the   bill;  mers,  p.   132. 

(2).  to  obtain  an   immediate  right  of  "See  §  4. 

recourf=e  against  antecedent  parties  in  ^  Pages  681-684. 
case  the  bill  is  dishonored  by  non-ac- 


PRESENTMENT    FOR    ACCEPTANCE.  827 

§  242.  Presentment;  how  made. 

Presentment  for  acceptance  must  be  made  by  or  on  behalf  of  the 
holder  at  a  reasonable  hour,"  on  a  business  day,  and  before  the  bill 
is  overdue,^  to  the  drawee  or  some  person  autliorized  to  accept  or  re- 
fuse acceptance  on  his  behalf ;  '"  and 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees  wbo  are 
not  partners,  presentment  must  be  made  to  them  all,  unless  one 
has  authority  to  accept  or  refuse  acceptance  for  all,  in  which 
case  presentment  may  be  made  to  him  only;'^ 

2.  Where  the  drawee  is  dead,  presentment  may  be  made  to 
his  personal  representative  ;  '- 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt  or  an  in- 
solvent, or  has  made  an  assignment  for  the  l)enetit  of  creditors, 
presentment  may  be  made  to  him  or  to  his  trustee  or  assignee.*' 

[Next;.  —  See  Bills  of  Exchange  Act,  section  41,  subdivision    (1).| 

§  243.  On  what  days  presentment  may  be  made. 

A  bill  may  be  presented  for  acceptance  on  any  day  on  which  nego- 
tiable instruments  may  be  presented  for  payment  under  the  pro- 
visions of  sections  one  hundred  and  thirty-two  and  one  hundred  and 
forty-five  of  this  chapter.  W^hen  Saturday  is  not  otherwise  a  holiday, 
presentment  for  acceptance  may  be  made  before  twelve  o'clock  noon 
on  that  day. 

§  244.  Presentment  where  time  is  insufficient. 

Wlicrc  the  holder  of  a  hill  drawn  jiayahlc  elsewhere  than  at  the 
place  of  business  or  the  residence  of  the  drawee  has  not  time  with 
the  exorcise  of  reasonable  diligence  to  present  the  bill  for  acceptance 
before  presenting  it  for  payment  on  the  day  that  it  falls  due,  the 
delay  caused  by  presenting  the  bill  for  nrceptaiice  before  presenting 
it  for  payment  is  excused  and  does  not  discharge  the  drawers  and 
indorsers. 

[NoTK.  —  StH'   Hill.«  of  KxclianKO  Act,  Hoction  .39.  .subdivision    (4).] 
This   section    is    renilcri-d    ncrc-sarv    by    §    240,    subsoc.    .T.   antr.     "  It    sctHea 
a  moot   point,  and  jirrhaps  alters  the  law.     Sny)j)osc  a  bill,  livable  one  month 
after  date,  is  drawn  in  New  York  on  a  Liverpool  firm,  but  payable  at  a  London 

•  See    §     l.'?2     (2).       fSee    Daniel.    §  i(\2.     Now  tb"  holder  b.no  an   ontion." 

4fi4a.l  (See  $  24.')  fl])    Chalmerfl,  p.   136n. 

».See    I'lato    v.    Urynoldn.    27    N.    Y.         ''('Hie    I'.ills   of    Kxehan;;e    Act    pro- 

6Rfl,  anrr.  p.  r.sn.  vi.bs     that,     "Where     authorized     by 

">  F*n(fes    fiH.'i-fiRS.      fHyles   on    Hills,  ncrefment     or     nsape     a     presentment 

182;   Daniel,  (j  4K7.1  tbroiijrh    the    post    ofTiee    is    sudieient." 

•'  [Daniel,  §  488.]     Anir.  (j  220   (.')).  Hut  probably  no  sneh  |)ractiee  prevails 

'2  [Daniel,  §  .591.]     "  Hefore  this  en-  in  this  country,  nor  docs  it  apftear  to 

acfrrifnt  flio  Inw  nn  tbi-  point  ^v^«  vorv  bo   n    practice   that   should    be   cncour- 

doubtful.     Hmith  v.  Nrw  Hnuth  Walr^  a|L'ed.l 
Bank,  8  Moore,  1*.  C.  N.  K.,  at  |>p.  4tJI, 


8?8  THE    NEOUTIAHl.H    INSTKUMKNTS    LAW. 

bank.  It  only  reaches  the  English  holder,  or  his  agent,  on  the  day  that  it  ma- 
tures. He  imist,  nevertheless,  present  it  for  acceptance  to  the  ilrawees  in 
LiverpiH)!.  The  Act  provides  that  he  sliall  not  he  piejudiccd  by  so  doing.  Be- 
fore the  act  tile  usual  practice  was  to  protest  the  bill  in  London  without 
any  presentment  to  the  drawees  —  an  obvio\isly  inconvenient  mode  of  pro- 
ceeding, for  the  holder's  object  is  to  get  the  bill  [)ai(l,  and  not  to  run  up 
expenses  against  the  drawer  and  iiidorsers."     Chalmers,  p.  133. 

jj  245.  When  presentment  is  excused. 

Presontinont  for  iu'ccptiuicc  is  excused  and  a  bill  may  be  treated 
as  dishonored  by  non-acceptance  in  either  of  the  following  cases: 

1.  Where  the  drawee  is  dead,'*  or  has  absconded,''"  or  is  a 
fictitious  person  or  a  person  not  having  capacity  to  contract  by 
bill ; '« 

2.  Where  after  the  exercise  of  reasonable  diligence,  present- 
ment cannot  be  made ;  '^ 

3.  Where  although  presentment  has  been  irregular,  acceptance 
has  been  refused  on  some  other  ground.^* 

§  246.  When  dishonored  by  non-acceptance. 
A  bill  is  dishonored  by  non-acceptance: 

1.  When  it  is  duly  presented  for  acceptance,  and  such  an  ac- 
ceptance as  is  prescribed  by  this  chapter  is  refused  or  cannot  be 
obtained ;  or 

2.  When  presentment  for  acceptance  is  excused  and  the  bill 
is  not  accepted. 

[Note.  —  See  Bills  of  Exchange  Act,  section  43,  subdivision    (1).] 

§  247.  Duty  of  holder  where  bill  not  accepted. 

Where  a  bill  is  duly  presented  for  acceptance  and  is  not  accepted 
within  the  prescribed  time,  the  person  presenting  it  must  treat  the 
bill  as  dishonored  by  non-acceptance  or  he  loses  the  right  of  recourse 
against  the  drawer  and  indorsers." 

rXoTE. — See  Bills  of  Exchange  Act,  section  42.  The  language  of  tlio  Rilla 
of  Exchange  Act  is,  "  within  the  customary  time,"  but  the  time  herein  is  fixed 
by  section  136.  (N.  Y.,  §  224.)]  That  is,  due  notice  must  be  given  to  parties 
secondarily  liable.     See,  however,  §  188. 


1*  [See   Bills  of   Exchange  Act,   sec-  is  important,  having  regard  to  the  next 

tion     41,     f^ubdivision      (2);      Daniel,  subsection."     Chalmers,  p.   137n.     The 

§   1178.]     Compare  §  242.  subsec  2.  subsection    referred    to    reads:      "The 

15  [Daniel,  §   1144.     By  the  Bills  of  fact  that  the  lioldcr  has  reason  to  be- 

Exchange    .-\ct   the   bankruptcy   of   the  lieve  that  tlie  bill,  on  presentment,  will 

drawee  will  excuse  presentment  for  ac-  be    dishonored,    does    not    excuse    pre- 

ceptance.     But  this  is  not  the  rule  of  sentment."        This    provision   does   not 

the  Commercial  Eaw.     Daniel,  §§  1I7I-  appear   in  the  American   Act.     But  if 

]172.1  the  drawer  has  no  right  to  expect  ac- 

ifl  [See  Daniel,  §   1111.]  ceptance,  presentment  for  payment  is 

IT  [Daniel,    §    10.59.    H    .sp^.]        See  excused.     §  139. 
§  142,  subsec.  1;  also  §  183.  is  Page    689. 

J'  "  This  is,  perhaps,  new  law,  and 


PROTEST.  839 

§  248.  Rights  of  holder  where  bill  not  accepted. 

When  a  bill  is  dishonored  by  non-acceptance,  an  immediate  right  of 
recourse  against  tlie  drawers  and  indorsers  accrues  to  the  holder,  and 
no  presentment  for  payment  is  necessary.-** 

[Note.  —  See  Bills  of  Exchange  Act,  section  43,  subdivision  (2).] 


ARTICLE  XIV. 

PROTEST. 

Sbction  260.  In  what  cases  protest  necessary. 

261.  Protest:    how  made. 

262.  Protest ;  by  whom  made. 

263.  Protest;  when  to  be  made. 

264.  Protest :  where  made. 

205.  Protest  both  for  non-acceptance  and  non-payment. 

266.  Protest  before  maturity  where  acceptor  insolvent. 

267.  When  protest  dispensed  with. 

268.  Protest   where  bill   is  lost  or  destroyed  or  wronjrly  detained. 

§  260.  In  what  cases  protest  necessary. 

Where  a  foreign  hill,-'  appearing  on  it.-?  face  to  be  such  is  dishonored 
by  non-aeceptanct',  it  must  be  duly  protested  for  non-acceptance,  and 
where  such  a  bill  which  has  not  previously  been  dishonored  by  non- 
acceptance  is  dishonored  by  non-payment,  it  must  be  duly  protested 
for  non-payment.  If  it  is  not  so  protested,  the  drawer  and  indorsers 
are  discharged."  Where  a  bill  does  not  appear  on  its  face  to  be  a 
foreign  bill,  protest  thereof  in  case  of  dishonor  is  unnecessary." 
(NoTK.  —  S»-«'*  Hills  of  Kxchange  Act,  section  51,  subdivision   (2).] 

§  261.  Protest;   how  made. 

The  protest  must  be  annexed  to  the  hill,  or  must  contain  a  copy 
thereof,^'  and  must  be  under  the  hand  and  seal  "  of  the  notary  mak- 
ing it,  and  must  specify: 


20  Pages  689-600.     "  The   immediate  have      In-en      judicially      oonsiderr.l." 

riffht    of    recourse    arising;    on    non  ;ir  Clialniers.  p.    14(). 

peptance   is  an  exceptional    right,   and  21  8ee  §  213. 

seems    peculiar    ♦(>     English     law     and  2=  I'ugc    0!)1.      " 'I  Ik*    noticr.    of    dis- 

Ameriwin  law.     (  \Vhil<  hvud  v.  ^^'alkrr,  honor   is  not  ))ad   bicaiisH   i(    omits  to 

9  M.  i.  \V.,  at  p.  h\i\:    Watson  v.  Tar  Ktate  that  the  bill  has  bcc-n  protested. 

pky,  20   How.    (I).  S.),  at  p.  5I!I;   cf.  { h'x    parte    howmlhal,    l>.    K.    0    (  h. 

Dunn  v.  ff'h'rrfr,  5  M.  &,  S..  at  p.  2851.)  51)1.)  "     Chalmers,  p.  172. 

Pnder  the  rontinental  codes  the  holder  -^  Page  000. 

can    only    protest    the    bill    for    nonac-  2«  [See    I'.ills   of    Kxehange    Art,   see- 

wptance.    and    cb-niand    security    from  tion     51.     subdivision      (7);      Daniel, 

the    drawer    and    ind«)rwrs.       (  Freneli  (j  {144.  | 

Code,  arts.  110.  120;  Cerman  Exehnnge  z-- CaHeH,  pp.  482.  5D0.      fin  some  of 

r.aw,   arts.   25  28. )      The  efTert   of   this  the  States,  as  in  New  York,  the  use  of 

conflict    of    laws    does    not    appear    to  a   nenl    is  nr)t    nrressarv   where  the  rer- 


830  THE    NEOOTIAHLK    I  N.STKl' M  KN'IS    LAW. 

1.  The  time  and  place  of  presentineiil  ; 

2.  The    fael.    that    preseutiueiit    was    made    and    the    manner 
thereof ; 

3.  The  eause  or  reason  for  protesting  the  hill ; 

4.  The  demand   made  and   the  answer  given,  if  any,  or  the 
fact  that   the  drawee  or  aceeptor  eould  not  he  found.' 

§  262.  Protest;   by  whom  made. 
Protest  may  he  made  hy : 

1.  A  notary  puhlie;-  or 

2.  By  any  respectahle  resident  of  the  place  where  the  hill  is 
dishonored,  in  tlie  presence  of  two  or  more  credihle  witnesses.^ 

[Note. —  See   Todd  v.   Neal's  Administrnlnr,  4!)   Ala.   '273;    Daniel,  §§   !i:M- 
934-a;    (.  ivil    (ode  of   (  alifornia,  322<>.  | 

§  263.  Protest;   when  to  be  made. 

Wlien  a  hill  is  protested,  such  protest  must  be  made  on  the  day  of 
its  dishonor,-*  unless  delay  is  excused  as  herein  provided.'  When  a 
bill  has  been  duly  noted.^  the  protest  may  he  subsequently  extended 
as  of  the  date  of  the  noting.^ 

See  pages  696-(5n8. 

§  264.  Protest;  where  made. 

A  hill  must  he  protested  at  the  place  where  it  is  dishonored,^  except 
that  when  a  bill  drawn  payable  at  the  place  of  business  or  residence 


tificate  is  to  be  used  in  the  State;  but  not  clear  tliat  a  bill  emild  not  be  law- 

a  seal  is  probably  desirable  where  the  fully    noted    for    protect    on    tl.f    day 

certificate  is  to  be  used  in  other  juris-  after    its    dishonor;    but    the    business 

dictions.]  members  of  the  Select  Committee  were 

1  Pages    691-695.      [See    Daniel,    §§  unanimous  in  thinking  that  noting  on 
950-9.58.     The  Bills  of  Exchange   Act  the   day   of   dishonor   should   be   made 
provides  that  protest  must  specify  the  obligatory."     Chalmers,  p.   173. 
person    at    whose    request    the    bill    is         ■■>  See   §   267. 

protested,  but  this  makes  a  change  in         «"  By    'noting'    is   meant   the   min- 

the  law.     Daniel,  §  956.1  "te  made  by  a  notary  public  on  a  dis- 

2  Pages  698-700.  "In  England  the  honorod  bill  at  the  time  of  its  dis- 
notarial  presentment  of  the  bill  to  honor.  The  formal  notarial  certificate, 
the  drawee  or  acceptor  is  almost  al-  or  protest,  attesting  the  dishonor  of 
wavs  made  by  the  notary's  clerk,  the  bill,  is  based  upon  the  noting.  The 
(Brooks'  Notary,  4th  ed.,  pp.  78  and  'noting,'  consists  of  the  notary';  ini- 
138.)  In  America  the  validity  of  a  tials,  the  date,  the  noting  charges,  and 
protest  founded  on  such  presentment  a  mark  referring  to  the  notary's  regis- 
has  been  doubted.  (See  Par-sons  on  ter  written  on  the  bill  itself."  Chal- 
Bills,  p.  641.)  "     Chalmers,  p.  175.  mers,  p.   171. 

3  See  Bills  of  Exchange  Act,  section  7  Pages  694-695.  [Bailey  v.  Dnzier, 
g^  6  How.  23;  Cayufja  Co.  Bank  v.  Hunt, 

♦  [See   Bills   of   Exchange    Act,   sec-  2   Hill,  635;    Daniel,  §  940;    Byles  on 

lion   51,   subdivision    (4);    Drnnistoun  Bills,  257.] 

V.    itteirart,    19    How.    606;    Byles    on         «  [See  Daniel,  §  935;  Byles  on  Bills, 
Bills,   257.]      "Before  the  act   it  was    217.] 


PROTEST.  831 

of  some  person  other  than  the  drawee,  has  been  dishonored  by  non- 
acceptance,  it  must  be  protested  for  non-payment  at  the  place  where 
it  is  expressed  to  be  payable,  and  no  further  presentment  for  payment 
to,  01  demand  on,  the  drawee  is  necessary." 

§  265.  Protest  both  for  non-acceptance  and  non-payment. 

A  bill  which  has  been  protested  for  non-acceptance  may  be  subse- 
')iiently  protested  for  non-payment. 

f.NoTE.  —  Sec  Bills  of  Exchange  Act,  section  51,  subdivision  (3).]  "  Protest 
ill  such  case  niigiit  be  necessary  for  the  purpose  of  charging  a  foreign  drawer 
or  indorser  in  his  own  country.  An  Englisli  act  can  only  lay  down  the  law 
for  the  United  Kingdom,  though  by  the  comity  of  nations  the  duties  of  the 
liolder  would  generally  be  regarded  as  regulated  by  the  law  of  the  place  where 
they  are  to  be  performed  .  .  .  Under  some  continental  codes  no  right  of 
action  arises  on  non-acceptance;  the  holder  can  demand  security  from  ante- 
cedent parties,  but  he  is  bound  to  re-present  the  bill  at  maturity. "  Uhalmcrs, 
J.  172. 

§  266.  Protest  before  maturity  where  acceptor  insolvent. 

Wiiere  the  aecci)tur  has  been  adjudged  a  bankrupt  or  an  insolvent 
or  has  made  an  assignment  for  the  benefit  of  creditors,  before  the 
hill  matures,  tlie  holder  may  cause  the  bill  to  be  protested  for  better 
security  against  the  drawer  and  indorsers. 

fXoTF.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision  (f));  Daiiiol, 
§  530.]  "Under  some  continental  codes,  when  the  acceptor  fails  during  the 
currency  of  a  bill,  security  can  be  demanded  from  the  drawer  and  indorsers. 
(German  Exchange  Law,  art.  29;  Netherlands  Code,  arts.  177,  178.)  English 
law  provides  no  such  remedy,  and  the  only  effect  of  such  a  protest  in  England 
is  that  the  bill  may  be  accepted  for  honor.  In  France,  if  the  acceptor  fails, 
the  bill  may  at  once  be  treated  as  dishonored  and  protested  for  non-payment. 
(French  (ode,  .irt.   Ifi3:    Nougiii.-r.  §   1277.)  "     Chalmers,  p.   173. 

§  267.  When  protest  dispensed  with. 

Protest  is  dispensed  with  by  any  circimistiuices  which  would  (lisiien^^o 
with  notice  of  dishonor.'"  Delay  in  noting  or  protesting  is  excused 
when  delay  is  caused  by  cireuinstances  l)eyond  the  control  of  the 
holder  and  not  imputable  to  his  defaiill.  iiii<( ondiK  t,  or  negligence." 
When  the  cause  (/  delay  ceases  to  ()|»erale.  (lie  lijjl  must  be  noted  or 
protested  with  rea.sonable  diligence. 

(Note.  —  See  Bills  of  Exchange  Act,  section  51,  subdivision   (0).] 


■'  [Bills  of  Exchange  Act,  wetion  51,  accejjtur    m    otjicr    |ia\(r."      <  halincrs, 

subdivision   (0);  2  and  3  William  fV..  p.  174. 

ch.  fl8;   Daniel,  §  035;    Byh-s  on  Bills.         i"  I'age  57H.     See  §§   180-180.     Does 

258.1      "Suppose   n    bill    is   drawn    on  (his    incorporate    §     1S8?      See    ("hnl 

B    in    Liverpool,    'payable    at    the    X  mers,  p.   17((. 

Bsnk  in  London.'     11   is  dishr)nored  by         "iChalnuTs  cites:    //rf/r/f  v.   Thorpe, 

non-acceptance.     It   is  to  be   protested  12  East.  171;  Cnmphrll  v.  Wrhfitrr.  15 

for    nonpayment    in    London    without  1,,  .1.  ('.  P.  .j ;    Rnthsrhilil  v.  Curric,  1 

any  further  demand  on  B.     Or<linarily  (}.  P...  at   [i.   17. 
the  protest  recites  the  demand  on  the 


832  TllK    NKlJOriAlU.H    I  NS  TUr  M  KN'l'S    LAW. 

§  268.  Protest  where  bill  is  lost  or  destroyed  or  wrongly  detained. 

\\  liiMi'  a  bill  i.-^  loj-l  or  lU'.-^tixnfd  or  is  wi'uii^iy  tlctaiiit'd  from 
tlio  [KTson  ontitk'd  to  liolil  il,  proti'st  may  Uv  made  on  a  copy  or 
writti'ii  particulars  thereof. 

INoTE.  —  See  Bills  of  P^xclianpe  Act,  soctimi  51,  siilulivision  (8);  Daniel,  § 
1464.]  "  Pothier,  No.  145;  Brooks'  Notary,  4tli  ed.,  \}p.  137  and  217.  See 
further  as  to  lost  bills,  sections  69  and  70  (Bills  of  K.xcliange  Act).  The 
particulars  can  usually  be  obtained  from   the  bill  book."     Chalmers,  p.   175n. 

ARTICLE  XV. 

ACCEPTANCE  FOR  HONOR. 

Section  280.  When  bill  may  be  accepted  for  honor. 

281.  Acceptance  for  honor;    how  made. 

282.  When  deemed  to  1k^  an  acceptance  for  lionor  of  the  drawer. 

283.  Liability  of  acceptor  for  honor. 

284.  Agreement  of   acceptor   for   honor. 

285.  Maturity  of  bill  payable  after  sight;  accepted  for  honor. 

286.  Protest  of  bill   accepted   for   honor  or   containing  a   reference  in 

case  of  need. 

287.  Presentment   for  payment  to  acceptor  for  honor;    how  made. 

288.  When  delay  in  making  presentment  is  excused. 

289.  Dishonor  of  bill  by  acceptor  for  honor. 
Note.  —  See  pp.  701-7OC. 

§  280.  When  bill  may  be  accepted  for  honor. 

Where  a  bill  of  exchange  has  been  protested  for  dishonor  by  non- 
acceptance  or  protested  for  better  security  and  is  not  overdue,  any 
person  not  being  a  party  already  liable  thereon,  may,  with  the  consent 
of  the  holder,  intervene  and  accept  the  bill  supra  protest  for  tlie  lionor 
of  any  party  liable  thereon  or  for  the  honor  of  the  person  for  whose 
account  the  bill  is  dravn.  The  acceptance  for  honor  may  be  for  part 
only  of  the  sum  for  which  the  bill  is  drawn;  and  where  there  has 
been  an  acceptance  for  honor  for  one  party,  there  may  be  a  further 
acceptance  by  a  different  person  for  tlie  honor  of  another  party. 

[Note.  —  See  Bills  of  Kxchange  Act,  section  65,  subdivisions  (1)  and  (2); 
Byles  on  Bills,  262-266.  The  Bills  of  Exchange  Act  makes  no  provision  for 
different  acceptances  svpra  protest;  but  tliis  is  authorized  by  the  commercial 
law.  Byles  on  Bills,  263.1  "In  the  United  States,  as  in  England,  the  holder 
may  refuse  to  allow  acceptance  fcr  honor  (See  Story,  §  122),  for  he  may  wish 
to  exercise  his  immediate  right  of  recourse  which  arises  on  non-acceptance." 
Chalmers,  p.  226. 

§  281.  Acceptance  for  honor;   how  made. 

An  acceptance  for  honor  supra  protest  must  be  in  writing  and 
indicate  that  it  is  an  acceptance  for  honor,  and  must  be  signed  by 
the  acceptor  for  honor. 

[XoTE.  —  See  Bills  of  Exchange  Act,  section  65,  subdivision  (3).  The  Bills 
of  Exchange  Act  requires  the  acceptance  for  honor  to  be  written  on  the  bill, 
but  see  note  to  section  132   (N.  Y.,  §  220).] 


Acceptance  rok  honor.  833 

§  282,  When  deemed  to  be  an  acceptance  for  honor  of  the  drawer. 

Where  an  acceptance  for  honor  does  not  expressly  state  for  whose 
honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for  the  honor  of 
the  drawer. 

[Note.  —  See  Bills  of  Exchange  Act,  spction  65,  subdivision    (4). 

§  283.  Liability  of  the  acceptor  for  honor. 

The  aLLoptor  for  honor  is  liable  to  the  holder  and  to  all  parties  to 
the  bill  subsequent  to  the  party  for  whose  honor  he  has  accepted. 

(Note.  —  See  Bills  of  Exchange  Act,  section  66,  subdivision    {'2).\ 

§  284.  Agreement  of  acceptor  for  honor. 

'i'he  acfeptor  for  honor  hy  such  acceptance  engages  that  he  will 
on  due  presentment  pay  the  bill  according  to  the  terms  of  his  accept- 
ance, provided  it  shall  not  have  been  paid  by  the  drawee,  and  provided 
also,  that  it  shall  have  been  duly  presented  for  payment  and  protested 
for  non-payment  and  notice  of  dishonor  given  to  him. 

(Note.  —  See  Bills  of  Exchange  Act,  section  66,  subdivision    ll).l 

§  285.  Maturity  of  bill  payable  after  sight ;   accepted  for  honor. 

Where  a  bill  payable  after  sight  is  accepted  for  honor,  its  maturity 
is  calculated  from  the  date  of  the  noting  for  non-acceptance  and  not 
from  the  date  of  the  acceptance  for  honor. 

(Note. — ^  See  Bills  of  Exchange  Act,  section  65,  subdivision  (5).l  "This 
section  brings  the  law  into  accordance  with  mercantile  understanding,  and 
gets  rid  of  an  inconvenient  ruling  to  the  etfect  that  maturity  was  to  be  cal- 
culated from  the  date  of  acceptance  for  honor.  {Wiliiam  v.  Gcrtnainc,  7  B. 
&  ('.  4C8.)"     Chalmers,  p.  228. 

§  286.  Protest  of  bill  accepted  for  honor  or  containing  a  reference 
in  case  of  need. 
Where  a  tlislujuored  bill  ha.s  been  Mcceptrd  foi-  lioiior  siijira  /irolcsf 
or  contains  a  reference  in  case  of  need,  it  must  lie  |)r()tc'.sti'd  for  non- 
payment before  it  is  presented  for  payment  to  the  acceptor  for  honor 
or  referee  in  case  of  need. 

[Note.  --See    Hills   of    lv\i-iiaiige    .\c),   section   (17,    siiliiliv  isioii    (1|.| 

§  287.  Presentment  for  payment  to  acceptor  for  honor;    how  made. 
Presentment  for  [laymcnt  to  ilw  a((c))tor  for  honor  inii,<t  he  made 
as  follow.H : 

1.  If  it  is  to  be  prc^cnlcil  in  tlir  |i|;i(t'  wlicrc  llic  protest  for 
non-payment  was  made,  it  must  l)c  presenle<l  not  Inter  (tian  the 
day  following  its  maturity; 

2.  If  it  is  to  Ik-  presented  in  some  other  phuc  than  the  place 
where  it  was  protested,  then  it  must  be  forwarded  within  (lie 
time  specified  in  section  one  hundred  and  seventy-five. 

{Note. —  Sec  BIIIh  of  Exchange  Act,  Hection  67,  subsec.    (2).     "  I)f>ubts  hav- 
ing   ari-en    »h    to    the    day    whi-n    the    bill    should    be    again    presented    to    the 
HKOOT.   IN8TRDMBNT8—  r».'{ 


S;U  TinO    NKCOl'lAllLK    I  NS'l'i;  1 '  M  i:  X'l'S    LAW. 

ftoci'ptor  for  lioiior,  or  rofcrcc  in  i-asc  of  iircil,  for  paynu'iit.  Hit.'  (1  and  7 
\\"\\\.  4.  c.  58,  eiiaets,  HkiI  it  -liiill  not  h.'  iiccivssaiy  to  proscnt,  or  in  case 
the  aciV|>tor  for  limior  or  n'tmr  li\i'  :it  ;i  ilislaiicc,  to  forward  for  present- 
ment, till  the  »la\  followiuji  that  on  wiiiili  tin-  hill  becomes  due."  Byles  on 
15ills.  -Jt;;!.! 

vj  288.  When  delay  in  making  presentment  is  excused. 

'I'lio  provisions  of  sin-tioii  oin'  liundi-cil  ami  t'orty-oiie  apply  where 
there  is  dehty  in  niakiiio-  presentiueiit  to  tlie  acceptor  i'or  iionor  or 
referee  in  ease  of  need. 

§  289.  Dishonor  of  bill  by  acceptor  for  honor. 

When  tlie  bill  is  dishonored  by  the  acce])tor  for  honor  it  must  be 
l)rotested  for  non-payment  by  him. 

INoTE.  —  Bills  of  Exchange  Act,  section  07,  subdivision    (4).] 


ARTICLE  XVL 

PAYMENT   FOR   HONOR. 

Section  300.  Who  may  make  payment  for  honor. 

301.  Payment  for  honor;   how  made. 

302.  Declaration  before  payment  for  honor. 

303.  Preference  of  parties  ofTering  to  pay  for  honor. 

304.  Effect  on  subsequent  parties  wliero  bill  is  paid  for  honor. 

305.  Where   holder   refuses   to   receive   payment  supra  protest. 
30C.  Rights  of  payer  for  honor. 

Note. —  See  pp.  707-708. 

§  300.  Who  may  make  payment  for  honor. 

Where  a  l)ill  has  been  protested  for  non-payment,  any  person  may 
intervene  and  pay  it  supra  protest  for  the  honor  of  any  person  liable 
tliereon  or  for  the  honor  of  the  person  for  whose  account  it  was  drawn. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (1)  ;  Byles  on 
Bills,  267-209;    Daniel,  §    1254.] 

§  301.  Payment  for  honor;   how  made. 

The  jiayment  for  honor  supra  protcsi  in  order  to  operate  as  such 
and  not  as  a  mere  voluntary  payment  must  be  attested  by  a  notarial 
act  of  honor  wliicli  may  be  appended  to  the  protest  or  form  an  extension 
to  it. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (3);  Byles  on 
Bills,  267;   Daniel,  5=  12.o8.1 

§  302.  Declaration  before  payment  for  honor. 

The  notarial  act  of  honor  must  be  founded  on  a  declaration  made 
by  the  payer  for  the  honor  or  by  his  agent  in  that  behalf  declaring 
his  intention  to  pay  the  bill  for  honor  and  for  whose  honor  he  pays. 
[Note.  —  See  Bills  of  Exciiange  Act,  section  68,  subdivision  (4).] 


BILLS    IN    SETS.  835 

§  303.  Prefererce  of  parties  offering  to  pay  for  honor. 

Wliere  two  ui  niui'f  peisuus  uU'er  to  pay  a  bill  i'or  the  honor  of 
.lillerent  parties,  tiie  person  whose  payment  will  discharge  most 
I'iirties  tc  the  bill  is  to  be  given  the  preference. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision    (2).] 

§  304    Effect  on  subsequent  parties  where  bill  is  paid  for  honor. 

Where  a  bill  has  been  paid  for  honor  all  parties  subsequent  to 
the  party  for  whose  honor  it  is  paid  are  discharged,  but  the  payer  for 
honor  is  subrogated  for,  and  succeeds  to,  both  the  rights  and  duties 
of  the  holder  as  regards  the  party  for  whose  honor  he  pays  and  all 
parties  liable  to  the  latter. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision  (5);  Daniel, 
§    1'25.5.] 

§  305.  Where  holder  refuses  to  receive  payment  supra  protest. 

Where  the  holder  of  a  bill  refu.ses  to  receive  payment  .sw/vm  protest, 
he  loses  his  right  of  recourse  against  any  party  who  would  have  been 
discharged  by  such  payment. 

I  Note.  —  See  Bills  of  Exchange  Act,  section  *8,  subdivision    (7).] 

§  306.  Rights  of  payer  for  honor. 

Tlie  payer  for  honor  on  paying  to  the  holder  the  amount  of  the 
bill  and  the  notarial  expenses  incidental  to  its  dishonor,  is  entitled 
to  receive  both  the  bill  itself  and  the  protest. 

[Note.  —  See  Bills  of  Exchange  Act,  section  68,  subdivision   (6).] 

ARTICLE  XVII. 

BILLS  IN  SETS. 

Section  310.  Bill  in  sets  constitutes  one  bill. 

311.  liights  of  holders  where  diffcTcnt  jmrts  are  negotiated. 

312.  Liability  of  holder  who  indorses  two  or  more  parts  of  a  set  to 

different  persons. 

313.  Acceptance  of  bills  drawn  in  sets. 

314.  Payment  by  acceptor  of  bills  drawn  in  sets. 

315.  Effect  of  discharging  one  of  a  set. 
Note.  —  R«-e  pp.  709-7 l.'l. 

§  310.  Bill  in  sets  constitutes  one  bill. 

Where  a  bill  is  drawn  in  a  set,  each  part  of  the  set  being  num- 
bered and  containing  a  reference  to  the  other  parts,  the  whole  of  the 
parts  fonstitntt's  one  bill. 

[Note.  —  See  BIHm  (if  Exchange  .Art,  section  71.  wiibdivision  (1);  Hylos  on 
Bills.  387;  Daniel.  §  11.3.)  "  If  one  part  omit  refcrenri'  to  the  rest,  it  becomes 
a  separate  bill  in  the  hand><  of  a  hona  f'ulr  hobhr.  It  has  bei-n  held  that 
an  agreement  to  deliver  up  an  unaccepted  bill  drawn  in  a  set  is  an  agreement 


686  THM    N'KdOllAlil.l.!    INSTUUMKNTB   LAW. 

ti>  lioliver  np  nil  tlic  pints  in  oxistoiico  (Kvarncf/  v.  Wmt  Orttnada  Co.,  26 
L.  J.  Kx.  15)  ;  iiml  alaci  lliat  a  ptTsoii  win)  iifgotiaU-s  a  hill  of  exchange  drawn 
in  a  set,  is  bound  to  deliver  up  all  the  parts  in  his  possession,  but  by  nego- 
tiating one  part  he  does  not  warrant  tliat  he  bus  the  rest.  (IHnard  v. 
Kluckman,  32  L.  J.  Q.  B.  82.)  In  Kngland  the  obligation  to  give  a  set  is 
pre!>unial)ly   a  matter  of  bargain."     (halintrs.  p.  235. 

§  311.  Rights  of  holders  where  different  parts  are  negotiated. 

Where  two  or  more  parts  ol'  a  set  are  negotiated  to  (Jill'erent  liolders 
in  due  eotirse,  the  holder  whose  title  first  accrues  is  as  between  such 
holders  the  true  owner  of  the  bill.  But  nothing  in  this  section  affects 
the  rights  of  a  person  wlio  in  due  course  accepts  or  pays  the  part 
first  presented  to  him. 

[Note.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (3)  ;  Byles  on 
Bills.  389.] 

§  312.  Liability  of  holder  who  indorses  two  or  more  parts  of  a  set 
to  different  persons. 

Where  the  holder  of  a  set  indorses  two  or  more  parts  to  dilTerent 
persons  he  is  liable  on  every  such  part,  and  every  indorser  subsequent 
tc  him  is  liable  on  the  part  be  has  himself  indorsed,  as  if  such  parts 
were  separate  bills. 

[XoTE.  —  See  Bills  of  Exchange  Act,  .section  71,  subdivision  (2);  Holds 
icorth  V.  Hunter,  10  B.  &  C.  449;   Byles  on  Bills,  389.] 

§  313.  Acceptance  of  bills  drawn  in  sets. 

The  acceptance  may  be  written  on  any  part,  and  it  must  be  written 
on  one  part  only.  If  the  drawee  accepts  mere  than  one  part,  and 
such  accepted  parts  are  negotiated  to  different  holders  in  due  course, 
he  is  liable  on  every  such  part  as  if  it  were  a  separate  bill. 

[Note.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (4);  Holds- 
worth  V.  Hunter,  10  B.  &  ('.  449;  Byles  on  Bills.  389.1 

§  314.  Payment  by  acceptor  of  bills  drawn  in  sets. 

When  tlie  acceptor  of  a  bill  diauii  in  a  set  pays  it  without  requiring 
the  part  bearing  his  acceptance  to  be  delivered  up  to  him,  and  that 
part  at  maturity  is  outstanding  in  the  hands  of  a  holder  in  due 
course,  he  is  liable  to  the  holder  thereon. 

[XoTE.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (5);  Byles  on 
Bills,  389.] 

§  315.  Effect  of  discharging  one  of  a  set. 

Except  as  herein  otherwise  provided,  where  any  one  part  of  a  bill 
drawn  in  a  set  is  discharged  by  payment  or  otherwise  the  whole 
bill  is  discharged. 

f\oTE.  —  See  Bills  of  Exchange  Act,  section  71,  subdivision  (6)  ;  Byles  on 
Bills,  388.] 


PROMISSORY    .VOTES    AN*D    CHECKS. 


d37 


AKTICLE  XVIII. 

PROMISSORY  NOTES  AND  CHECKS. 

Section  320.  Promissory  note  detined. 

321.  Check  defined. 

322.  Within  what  time  a  check  must  be  presented. 

323.  Certification  of  check;  effect  of. 

324.  Effect  where  holder  of  check  procures  it  to  be  certified. 

325.  \\  hen  check  operates  as  an  assignment. 

326.  Recovery  of  forged  check. 

§  320.  Promissory  note  defined. 

A  negotiable  promissory  note  within  the  meaning  of  this  chapter  is 
an  unconditional  promise  in  writing  made  by  one  person  to  another 
signed  by  the  maker  engaging  to  pay  on  demand  or  at  a  fi.xed  or 
determinable  future  time,  a  sum  certain  in  money  to  order  or  to 
bearer.'^  Where  a  note  is  drawn  to  the  maker's  own  order,  it  is  not 
complete  until  indorsed  by  him.'^ 

[Note.  —  See  Bills  of  Exchange  Act,  section  83.]  "A  bank  note  may  be 
defined  as  a  proniis«ory  note  issued  by  a  banker  payable  to  bearer  on  demand. 
But  a  bank  note  differs  from  an  ordinary  note  in  various  important  respects. 
Among  others  it  may  be  reissued  after  payment.  See  further  distinctions 
pointed  out  by  Bramwell,  B.  (Lichfield  Union  v.  Greene,  26  L.  J.  Ex.,  at 
p.   142.)"     Chalmers,  p.  263. 

§  321.  Check  defined. 

A  check  is  a  i)ill  of  exchange  drawn  on  a  bank,'*  payable  on  de- 
mand.'" Except  as  herein  otherwise  provided,  the  provisions  of  this 
chapter  applicable  to  a  bill  of  exchange  payable  on  demand  apply  to  a 
check." 


•  sPage.s  714-721.  See  §  20,  and 
CHiics  under  that  section.  See  gen- 
erally on  form  and  interpretation, 
§§  20-42. 

The  English  Act  includes  notes  pay- 
able "  To,  or  to  the  order  of,  a  speci- 
fied person  or  to  liearer,"  that  is.  it 
inrludes  nonnegotiablr  notes.  So  also 
was  the  former  New  \'f)rk  statute. 
{Carnirrifihl  v.  dray,  127  N.  V.  02.) 
This  section  changes  the  New  York 
law  and  rorifines  th«  operation  of  the 
Act  to  negotiable  notes. 

>a  See  §  27,  subser.  2,  and  §  2H. 
subsec.   5.      Page   71.'). 

i«  Pages  722-724.  [See  Rills  of  Ex 
change  Act,  aertinn  73;  Rull  v.  Kan- 
ton,  123  n.  S.  in.*!;  lloph-innnn  v.  Fn.t- 
ter.  L.  R.  18  Eq.  74. |  See  S  2,  defin 
ing  "  bank." 


15  (Daniel,  §  1574.] 

'8  "  The  .Act  is  declaratory  in  so  far 
as  it  defines  a  check  as  a  bill  of  ex- 
change. ( Xf'ljpan  V.  Vlydvsdalc  Hank, 
L.  R.  9  App.  Cas.  5)5.)  It  is  no  part 
of  the  definition  that  a  check  should 
be  an  inland  bill,  or  that  it  should  \>e 
drawn  by  a  rustomrr  upon  his  banker. 
•  *  •  See  checks  compared  with 
and  distinguished  from  ordinary  bills 
by  Parke,  H.  (0  Moore  P.  C.,  at  p.  flfl), 
Erie,  .7.,  and  Byles.  ,T.  (S  C.  B.  N.  S., 
at  pp.  380,  381,  as  modified  by  L.  R. 
Ift  Eq..  at  p.  7fi,  .lessel.  M.  R.).  Palles. 
('.  B.  (10  Ir.  R.  C.  L.,  at  p.  400),  and 
the  Supreme  foiirt  of  the  United 
States.  (10  Wallace,  at  p.  647.)  All 
checks  are  bills  of  exchange,  but  all 
bills  of  exehantje  arc  not  checks; 
therefore,  an  authoritv  to  draw  checks 


H:^8  THK    SKOOTlAltLK    1 NSTUIM KNTS    LAW. 

§  322.  Within  what  time  a  check  must  be  presented. 

A  cheek  must  be  presented  for  payment  within  a  reasonable  time 
after  its  issue  or  the  drawer  will  be  discharged  from  liability  thereon 
to  the  extent  of  the  loss  caused  by  the  delay. '^ 

[Note. —  Sop  X»n//i  v.  .loncs,  2  Buah.  103;  Cork  v.  Bacon,  45  VVia.  1!»2 , 
Bull  V.  Kasson,  123  V.  S.  105;  Daniel.  §§  158(5-1000.]  See  Hills  of  Exchange 
Act,  section  74.     For  etfect  of  delay  upon  indor.ser's  liability,  see  pages  734-743. 

§  323.  Certification  of  check;    effect  of. 

Where  a  check  is  certilied  by  the  bank  on  which  it  is  drawn  the 
certification  is  equivalent  to  an  acceptance.  ^^ 

§  324.  Effect  where  the  holder  of  check  procures  it  to  be  certified. 

Where  the  holder  of  a  check  procures  it  to  he  accepted  or  certified 
the  drawer  '**  and  all  indorsers  -**  are  discharged  from  liability  thereon. 

§  325.  When  check  operates  as  an  assignment. 

A  check  of  itself  does  not  operate  as  an  assignment  of  any  part  of 
the  funds  to  the  credit  of  the  drawer  with  the  bank,  and  the  bank 
is  not  liable  to  the  holder,  unless  and  until  it  accepts  or  certifies  the 
check. ^' 

[XoTE.  —  See  Bank  v.  Millard,  10  Wall.  152;  Bayik  v.  Schuler,  120  U.  S. 
511;  Bank  v.  Whitman,  94  U.  S.  343,  344;  St.  L.  d  .Sf.  F.  R'y  Co.  v.  -Johnson, 
133  U.  S.  5(i6;  Attorney-General  v.  Continental  Life  hifiuranec  Co.,  71  N.  Y. 
325,  330;  First  \at.  Bank  of  Union  Mills  v.  Clark,  134  N.  Y.  368;  O'Connor  v. 
Mechanics'  Bank,  124  N.  Y.  324;  Covert  v.  Rhodes,  48  Ohio  St.  06;  I'ickle  v. 
Peoples'  Aat  Bank,  88  Tenn.  380;  Boetcher  v.  Colorado  Mat.  Bank,  15  Colo. 
16;  Hopkinson  v.  Foster,  L.  R.  18  Eq.  74;  Contra:  Fonner  v.  Smith,  31  Neb. 
107;  Munn  v.  Burch,  25  111.  35;  Bank  v.  Patton,  109  111.  470,  485.]     See  §  211. 

§  326'.  Recovery  of  forged  check. 

No  bank  sliall  be  liable  to  a  depositor  for  the  payment  by  it  of  a 
forged  or  raised  check,  unless  within  one  year  after  the  return  to 

does    not    necessarily    include    an    au-  after  it  is  received.     Chalmers,  p.  248. 

thority  to  draw  bills.  Forster  v.  Mack-  The  draft  of  the  American   Act  origi- 

reth,  L.   R.  2   Ex.    163.).     Apart  from  nally  contained  the  following:      "  The 

statute,  the  distinctions  between  checks  death  of  the  drawer  does  not  operate 

and   ordinary   bills   of   exchange   arise  as    a    revocation   of    the    authority    of 

from    the    relationship   of   banker    and  the  bank  to  pay  a  check,  if  the  check 

customer  subsisting  between  the  drawer  is    presented    for    payment    within    ten 

and    drawee    of   a   check.      A    check    is  days  from  the  date  thereof;  "  but  this 

intended  for  prompt  presentment,  while  was    struck    out    of     the     final     draft. 

a   note   payable  on   demand    is  deemed  [This  was  taken  from  tiie  statutes  of 

to  be  a  continuing  security.      I  Brooks  Massachusetts    (Pub.   St.   Supp.    1888, 

V.  Mitchell,  9  M.  &  W.,  at  p.  18;  Char-  ch.    210.)         There    seems    to   be    some 

tered  Bank  v.  Dickson,  L.   R.  3  C.  P.,  doubt  as  to  the  common-law  rule.    See 

at  p.  579.)  "     Chalmers,  pp.  245-246.  Daniel,  §  16186.] 

17  Pages   725-733.      S^'e   "reasonable  >»  Pages  743-751. 

time,"  defined  in  §  4.     Independent  of  is  Pages  743-748. 

statute  a  check   must  Ije  presented  or  20  Pages  748-751. 

forwarded  for  presentment  on  the  day  21  Pages  752-758. 


NOTES   GIVEN    FOR    A    PATENT    RIGHT.  839 

the  depositor  of  the  voucher  of  such  payment,  such  depositor  shall 
notify  the  bank  that  the  check  so  paid  was  forged  or  raised. 

Added  by  Laws  of  1904,  ch.  287.  See  note  6,  ante,  p.  758.  See  also  pages 
758-771. 

ARTICLE  XIX.^^^' 

NOTES    GIVEN    FOR    PATENT    RIGHTS    AND    FOR    A    SPECULATIVE 

CONSIDERATION. 

Sectio.v  330.  Negotiable  instruments  given  for  patent  rights. 

331.  Negotiable  in.strunients  given  for  a  speculative  consideration. 

332.  How  negotiable  bonds  are  made  non-negotiable. 

§  G30.  Negotiable  instruments  given  for  patent  rights. 

A  promissory  note  or  otlier  negotiable  instrument,  the  consideration 
of  wiiich  consists  wholly  or  partly  of  the  right  to  make,  use  or  sell 
any  invention  claimed  or  represented  by  the  vendor  at  the  time  of 
sale  to  be  patented,  must  contain  the  words  "given  for  a  patent 
right "  prominently  and  legibly  written  or  printed  on  the  face  of 
such  note  or  instrument  above  the  signature  thereto ;  and  sucli  note 
or  instrument  in  the  hands  of  any  purchaser  or  holder  is  subject  to 
the  same  defenses  as  in  the  hands  of  the  original  holder;  but  this 
section  does  not  apply  to  a  negotiable  instrument  given  solely  for 
the  purchase  price  or  the  use  of  a  patented  article. 

It  is  a  misdemeanor,  to  take,  sell,  or  transfer  such  an  instrument,  knowing 
the  consideration  to  be  as  above  described,  unless  the  words  "  given  for  a 
patent  right  "  appear  on  the  instrument  above  the  signature.  N.  V.  Penal 
Law,  §  1520  (originally  Laws  of  N.  Y.  1897,  c.  613).  See  note  1,  ante,  pp. 
384-385. 

§  331.  Negotiable  instruments  given  for  a  speculative  consideration. 
If  the  consideration  of  a  promissory  note  or  other  negotiable  in- 
strument consists  in  whole  or  in  part  of  the  purchase  price  of  any 
farm  i)roduct,  at  a  price  greater  liy  at  least  four  times  than  the  fair 
market  value  of  the  same  product  at  the  time,  in  the  Unality,  or  of 
the  membership  and  rights  in  an  association,  company  or  combination 
to  produce  or  .sell  any  farm  ])roduct  nt  a  fictitious  rate,  or  of  a  con- 
tract or  bond  to  purchase  or  sell  any  farm  product  at  a  |)rice  greater 
by  four  times  than  the  market  value  of  the  same  ))ro(liict  at  the  time 
in  the  locality,  the  words,  "given  for  a  speculative  consideration,"  or 
other  words  clearly  showing  the  nature  of  the  consideration,  must  be 
prominenlly  and  legibly  written  or  printed  on  the  face  of  such  note 
or  instrument,  al)ove  the  signature  thereof;  and  such  note  or  instru- 
ment, in  the  hands  of  any  purchaser  or  holder,  is  subj<'ct  to  the  same 
defenses  as  in  the  bands  of  th(>  original  owner  or  holder. 


«  Not  a  part  of  the  Negotiable  InatrumrntH  Law  in  inoHt  statefl.     Se«  not* 
1,  ante,  pp.  384-385. 


840  TlIK    XKOoriAlU.K    IN'STIUTMENTS   LAW. 

It  i-*  a  nn>;d(Miionn(ir  to  take,  sell  or  (raiisftM-  siicli  an  iiist niinent,  knowing 
the  iHinsiilcration  to  bo  as  ahovi-  (icsoribt'd,  iinU'ss  tlu>  words  "given  for  a 
speculative  consideration."  or  otlier  words  clearly  siiowing  the  nature  of  tiie 
consideration,  appear  on  the  instrument  above  tlu'  signature.  N.  Y.  Penal 
Law.  S  15'21  (originally  Laws  of  N.  Y.  18(17.  eh.  fii:{.)  See  also  Arnd  v. 
Sjoblviii,  i:n  Wis.  t;4-2,  anlr.  p.  .'{S,{.  and  note  1,  ante,  pp.  384-385. 

§  332.  How  negotiable  bonds  are  made  non-negotiable. 

The  owner  or  holder  of  any  corporate  or  municipal  hond  or  obliga- 
tioD  (except  such  as  arc  designated  to  circulate  as  money,  payable  to 
bearer),  heretofore  or  hcreal'ler  issued  in  and  payable  in  tliis  state, 
but  not  registered  in  pursuance  of  any  state  law,  may  make  such 
bond  or  obligation,  or  the  interest  coupon  accompanying  the  same, 
non-negotiable,  by  subscril)ing  his  name  to  a  statement  indorsed 
tliereon,  that  such  bond,  obligation  or  coupon  is  his  property;  and 
thereon  the  principal  sum  therein  mentioned  is  payable  only  to  such 
owner  or  holder,  or  his  legal  representatives  or  assigns,  unless  such 
bond,  obligation  or  coupon  be  transferred  by  indorsement  in  blank, 
or  payable  to  bearer,  or  to  order,  with  the  addition  of  the  assignor's 
place  of  residence. 

ARTICLE  XX.=^ 

LAWS  REPEALED;   WHEN  TO  TAKE  EFFECT. 

Section  340.  Laws  repealed. 

34L  When  to  take  effect. 

§  340.  Laws  repealed. 

Of  the  laws  enumerated  in  the  schedule  hereto  annexed,  that  por- 
tion specified  in  the  last  column  is  hereby  repealed. 

§  341.  When  to  take  effect. 

This  chapter  shall  take  effect  immediately.^* 

Schedule  of  Laws  Repealed. 

Revised   Statutes.                           Sections.  Subject  matter. 

R.  S.,  pt.  II,  ch.  4,  tit.  II All Bills  and  notes. 

Laws  of      Chapter.         Sections.  Subject  matter. 

1788.  ...        33. . . .      All.  .  .  .      Promissory  notes  to  be  negotiable. 
1794....        48..,.      All....      Promissory    notes    to    be    negotiable 

same  as  bills  of  exchange. 

2s  This    particular    schedule    of    re-  was   originally   enacted    in   New   York 

peals  applies,  of  course,  only  to  New  by  Laws  of  1897,  eh.  612,  which  took 

York   state.  effect  October   1,   1897. 

*«  The   Negotiable   Instruments   Law 


SCHEDULE    OF    LAWS    REPEALED. 


^41 


Chapter. 

Sections. 

44 .  .  . 

.      All.... 

.         34... 

.     All.... 

.      216... 

.     All.... 

.        17... 

.     All.... 

.        20... 

15,  para. 

30   (2nd 

meet.). 

.        21... 

1,  paras. 

51,  272, 

393,  460 

.      141.    . 

.      All.... 

.     416... 

.      All.... 

.      309 . . . 

.      All.... 

.      438 . . . 

.      AH.... 

.      84 

.      All.... 

.      595.. 

.     All.... 

65... 

.     All.... 

.      461.. 

.     All.... 

.     229.. 

.     All.... 

.      262... 

.     All.... 

.      607 . . 

.     All.... 

.  .      612.. 

.     All.... 

.  .      613.. 

.     2.  3..  . 

. .      336.. 

..     All.... 

1904 


287. 


All 


Subject  matter. 
rruiiussoiy    notes    to    be    negotiable 

same  as  bills  of  exchange. 
Regulating  recovery  of  damages  upon 

certain  bills  of  exchange. 
Notice  of  protest  in  New  York  city 

regulated  in  certain  cases. 
Notice  of  protest  in  New  York  city 

further  regulated. 
Adding  §  22  to  R.  S.,  pt.  2,  ch.  4, 

title  2. 

Repealing  Laws  1801,  1819,  1823, 
1826,  above. 

Notice  of  protest ;  how  given. 

('omTncrcial  paper. 

Protest  of  foreign  bills,  etc. 

Negotiability  of  corporate  bonds;  how 
limited. 

Negotiable  bonds;  how  made  non- 
negotiable. 

Negotiable  bonds;  how  made  nego- 
tialile. 

Ncgutialjlc  instruments  given  for 
patent  rights. 

EH'cct  of  holidays  upon  payment  of 
commercial  paper. 

One  hundrcdtli  anniversary  of  the  in- 
auguration of  (Icorge  Wasliington. 

Negotiable  insh  nn!(>nts  given  for  a 
speculative  purpose. 

Days  of  grace  abolished. 

The  Negotiable  Instrumonts  Law  as 
originally  ctuiclcd   in    New   York.''' 

Corn-cling  nianifcsl  errors  in  Nego- 
tiable instruments  Law  as  origin- 
ally enacted.--' 

Adding  §  326.  See  note  6,  tnilr, 
p.  758." 


»»  S«e  note  1.  nntr,  p.  779. 


ENGLISH 

BILLS  OF  EXCHANGE  ACT,   1882 
45  AND  46  Vict.  Ch.  61. 

As  Amended  by  6  Edw.  7,  Ch.  77,  igo6. 


rfi43i 


BILLS  OF  EXCHANGE  ACT,  1882. 

45  AND  46  Vict.,  Ch.  61. 

An  act  to  codify  the  law  relating  to  bills  of  exchange,  cheques, 
and  promissory  notes. 

[18th  August,  1882.] 

Be  it  enacted  by  the  Queen's  Most  Excellent  Majesty,  by  and  with  the 
advice  and  consent  of  the  Lords  Spiritual  and  Temporal,  and  Commons,  in 
this  present  Parliament  assembled,  and  by  the  authority  of  the  same,  as 
follows: 

PART  I. 

Preliminary. 

1.  Short  title. 

This  act  may  be  cited  as  the  Bills  of  Exchange  Act.  1882. 

2.  Interpretation  of  terms. 

In  this  act,  unless  the  context  otherwise  requires  — 

"  Acceptance  "  means  an  acceptance  completed  by  delivery  or  notification. 

"Action"  includes  counter-claim  and  set-off. 

"  Banker"  includes  a  Uxly  of  persons,  whether  incorporated  or  not,  who 

carry  on  the  business  of  banking. 
"Bankrupt"  includes  any  person  whose  estate  is  vested  in  a  trustee  or 

assignee,  under  the  law  for  the  time  being  in  force  relating  to  bank- 

ruptcy. 
"  Bearer"  means  the  person  in  possession  of  a  bill  or  note  which  is  payable 

to  bearer. 
"  Bill  "  means  bill  of  exchange,  and  "  note  "  means  promissory  note. 
"  Delivery  "  means  transfer  of  possession,  actual  or  constructive,  from  one 

person  to  another. 
"  Holder  "  means  the  payee  or  endorsee  of  a  bill  or  note  who  is  in  posses* 

sion  of  it.  fir  tlie  Itearer  thereof. 
"Indorsement"  means  an  indorsement  completofi  by  delivery. 
"  Issue"  means  the  first  delivery  of  a  bill  or  note,  completed  in  form,  to  a 

person  who  takes  it  as  a  hoUler. 
"Person  "  inrlurles  a  l)ody  of  persons,  whether  incorporated  or  not. 
"Value"  means  valuable  ronsidenition. 
"Written"  includes  printeil,  and  "  writing"  includes  print. 

(845J 


946  BILLS  OF   EXCHANGE  ACT. 

PART  IL 
Bills  of  Exchange. 
Form  and  Interpretation. 

3.  Bill  of  exchange  defined. 

(1)  A  bill  of  oxcluiiige  ia  un  uncoiulitional  order  in  writing,  addressed  by  one 
person  to  another,  sigmni  by  the  persua  giving  it,  reijuiring  the  person  to 
whom  it  is  addressed  to  pay  on  demand  or  at  a  Hxed  or  determinable  future 
time,  a  sum  certain  in  money  to  or  to  the  order  of  a  specilied  person,  or  to 

bearer. 

(2)  An  instrument  which  does  not  comply  with  these  oonditions,  or  which 
orders  any  act  to  be  done  in  addition  to  the  payment  of  money,  is  not  a  bill  of 
exchange. 

(3)  An  order  to  pay  out  of  a  particular  fund  is  not  unconditional  within  the 
meaning  of  this  section  ;  but  an  unqualified  order  to  pay,  coupled  with  (a)  an 
indication  of  a  particular  fund  out  of  which  the  drawee  is  to  reimburse  him- 
self or  a  particular  account  to  be  debited  with  the  amount,  or  (6)  a  statement 
of  the  transaction  which  gives  rise  to  the  bill,  is  unconditional. 

(4)  A  bill  is  not  invalid  by  reason  — 

(a)  That  it  is  not  dated; 

(b)  That  it  does  not  specify  the  value  given,  or  that  any  value  has  been 

given  therefor; 

(c)  That  it  does  not  specify  the  place  where  it  is  drawn  or  the  place 

where  it  is  payable. 

4.  Inland  and  foreign  bills. 

(1)  An  inland  bill  is  a  bill  which  is,  or  on  the  face  of  it  purports  to  be  — (a) 
both  drawn  and  payable  within  the  British  Islands,  or  (5)  drawn  within  the 
British  Islands  upon  some  person  resident  therein.  Any  other  bill  is  a 
foreign  bill.  . 

For  the  purposes  of  this  act  "  British  Islands"  mean  any  part  of  the  United 
Kingdom  of  Great  Britain  and  Ireland,  the  Islands  of  Man,  Guernsey,  Jersey, 
Alderney,  and  Sark,  and  the  islands  adjacent  to  any  of  them  being  part  of  the 
dominions  of  Her  Majesty. 

(2)  Unless  the  contrary  appear  on  the  face  of  the  bill  the  holder  may  treat  it 
as  an  inland  bill. 

5.  Effect  where  different  parties  to  bill  are  the  same  person. 

(1)  A  bill  may  be  drawn  payable  to,  or  to  the  order  of,  the  drawer;  or  it  may 
be  drawn  payable  to,  or  to  the  order  of,  the  drawee. 

(2)  Where  in  a  bill  drawer  and  drawee  are  the  same  person,  or  where  the 
drawee  is  a  fictitious  person  or  a  person  not  having  capacity  to  contract,  the 
holder  may  treat  the  instrument,  at  his  option,  either  as  a  bill  of  exchange  or 
as  a  promissory  note. 

6.  Address  to  drawee. 

(1)  The  drawee  must  be  named  or  otherwise  indicated  in  a  bill  vdth  reason- 
able certainty. 

(2)  A  bill  may  be  addressed  to  two  or  more  drawees  whether  they  are 
partners  or  not,  but  an  order  addressed  to  two  drawees  in  the  alternative,  or 
two  or  more  drawees  in  succession,  is  not  a  bill  of  exchange. 


FORM   AND    INTERPRETATION.  847 

7.  Certainty  required  as  to  payee. 

(1)  Where  a  bill  is  not  payable  to  bearer,  the  payee  must  be  named  or 
otherwise  indicated  therein  with  reasonable  certainty. 

(2)  A  bill  may  be  made  payable  to  two  or  more  payees  jointly,  or  it  may  be 
made  payable  in  the  alternative  to  one  of  two,  or  one  or  some  of  several  payees. 
A  bill  may  also  be  made  payable  to  the  holder  of  an  office  for  the  time  being. 

(3)  Where  the  payee  is  a  fictitious  or  non-existing  person,  the  bill  may  be 
treated  as  payable  to  bearer. 

8.  What  bills  are  negotiable. 

(1)  When  a  bill  contains  words  prohibiting  transfer,  or  indicating  an  inten- 
tion that  it  should  not  be  transferable,  it  is  valid  as  between  the  parties 
thereto,  but  is  not  negotiable. 

(2)  A  negotiable  bill  may  be  payable  either  to  order  or  to  bearer. 

(3)  A  bill  is  payable  to  bearer  which  is  expressed  to  be  so  payable,  or  on  which 
the  only  or  last  indorsement  is  an  indorsement  in  blank. 

(4)  A  bill  is  payable  to  order  which  is  expressed  to  be  so  payable,  or  which 
is  expressed  to  be  payable  to  a  particular  person,  and  does  not  contain  words 
prohibiting  transfer  or  indicating  an  intention  that  it  should  not  be 
transferable. 

(5)  Where  a  bill,  either  originally  or  by  indorsement,  is  expressed  to  be  pay- 
able to  the  order  of  a  specified  person,  and  not  to  him  or  his  order,  it  is  never- 
theless payable  to  him  or  his  order  at  his  option. 

9.  Sum  payable. 

(1)  The  sum  payable  by  a  bill  is  a  sum  certain  within  the  meaning  of  this 
act,  although  it  is  required  to  be  paid  — 
(a)  With  interest. 
(6)  By  stated  installments. 

(f)  By  stated  installments,  with  a  provision  that  upon  default  in  pay- 
ment of  any  installment  the  whole  shall  become  due. 
(d)  According  to  an  indicated  rate  of  exchange,  or  according  to  a  rate 
of  exchange  to  be  ascertained  as  directed  by  the  bill. 
(3)  Where  the  sum  payable  is  expressed  in  words  and  also  in  figures,  and 
there  is  a  discrepancy  between  the  two,  the  sum  denoted  by  the  words  is  the 
amount  payable. 

(3)  Where  a  bill  is  ex[iresH«;<l  to  b<>  payaV)lo  with  interest,  unless  the  instru- 
ment otherwise  provides,  interest  runs  from  the  date  of  the  bill,  and  if  tlio  bill 
is  undated  from  the  issue;  thereof. 

10.  Bill  payable  on  demand. 

(1)  A  bill  is  |);i)al)le  on  demand  — 

(a)  Whieh  is  expressed  to  bo  payable  on  demand,  or  at  Bight,  or  on 

presentation  ;  or 

(b)  In  wliifh  no  time  for  payment  is  expressed. 

(2)  Where  a  bill  is  accepted  or  indorsed  when  it  is  ovenlue,  itshall,  as  regards 
the  acceptor  who  ho  a<'cept8,  or  any  indorser  who  so  indorses  it,  be  deemed  a 
bill  jiayaf)le  on  deni.ind. 

11.  Bill  payable  at  a  future  time. 

A  l)ill  is  payable  at  a  det^Tminable  future  time  within  the  meaning  of  thi« 
act  which  is  expressed  to  be  payable  — 


848 


BILLS   OK   EXCHANGE   ACT. 


(1)  At  a  fixed  period  ftftor  date  or  sight. 

(2)  On  or  at  a  fixnl  jioriod  aft«>r  tho  occurrence  of  a  specified  event  which  is 
certJiiii  to  happen,  tliough  tlie  time   of  hiippening  may  be  uncertain. 

An  inslruuu'ut  expresseti  to  be  payable  on  a  contingency  is  not  a  bill,  and 
the  happening  of  tlie  event  does  not  cure  ilie  defect. 

12.  Omission  of  date  in  bill  payable  after  date. 

Wliore  a  bill  expresseil  to  be  payable  at  a  fixed  period  after  date  is  issued 
undated,  or  where  the  acceptance  of  a  bill  payable  at  a  fixed  period  after  sight 
is  undated,  any  holder  may  insert  tiierein  the  true  date  of  issue  or  acceptance, 
and  the  bill  shall  be  payable  accordingly. 

Provided  that  (1)  where  the  holder  in  good  faith  and  by  mistake  inserts  a 
wrong  date,  and  (2)  in  every  case  where  a  wrong  date  is  inserted,  if  the  i)ill 
subsequently  comes  into  the  hands  of  a  holder  in  due  course,  tiie  bill  shall  not 
be  avoided  thereby,  but  shall  operate  and  be  payable  as  if  the  date  so  inserted 
had  been  the  true  date. 

13.  Ante-dating  and  post-dating. 

(1)  Wberea  bill  or  an  acceptance  or  any  indorsement  on  a  bill  is  dated,  the 
date  shall,  unless  the  contrary  be  proved,  be  deemed  to  be  the  true  date  of  the 
drawing,  acceptance  or  indorsement,  as  the  case  may  be. 

(2)  A  bill  is  not  invalid  by  reason  only  that  it  is  ante-dated  or  post-dated,  or 
that  it  bears  date  on  a  Sunday. 

14.  Computation  of  time  of  payment. 

Where  a  bill  is  not  payable  on  demand,  the  day  on  which  it  falls  due  is 

determined  as  follows  : 

(1)  Three  days,  called  days  of  grace,  are,  in  every  case  where  the  bill  itself 
does  not  otherwise  provide,  added  to  the  time  of  payment  as  fixed  by  the 
bill,  and  the  bill  is  due  and  payable  on  the  last  day  of  grace  : 

Provided  that  — 

(a)  When  the  last  day  of  grace  falls  on  Sunday,  Christmas  Day,  Good 
Friday,  or  a  day  appointed  by  Royal  proclamation  as  a  public 
fast  or  thanksgiving  day.  the  bill  is,  except  in  the  case  herein- 
after provided  for,  due  and  payable  on  the  preceding  business 
day; 

(6)  When  the  last  day  of  grace  is  a  bank  holiday  (other  than  Christmas 
day  or  Good  Friday)  under  the  Bank  Holidays  Act,  1871,*  and 
acts  amending  or  extending  it,  or  when  the  last  day  of  grace  is  a 
Sunday  and  the  second  day  of  grace  is  a  bank  holiday,  the  bill  is 
due  and  payable  on  the  succeeding  business  day. 

(2)  Where  a  bill  is  payable  at  a  fixed  period  after  date,  after  sight,  or  after 
the  happening  of  a  specified  event,  the  time  of  payment  is  determined  by 
excluding  the  day  from  which  the  time  is  to  begin  to  run  and  by  including 
the  day  of  payment. 

(3)  Where  a  bill  is  payable  at  a  fixed  period  after  sight,  the  time  begins  to 
run  from  the  date  of  the  acceptance  if  the  bill  be  accepted,  and  from  the  date 
of  noting  or  protest  if  the  bill  be  noted  or  protested  for  non-acceptance  or 
for  non-delivery. 

(4)  The  term  "  month"  in  a  bill  means  calendar  month. 

•34  and  35  Vict.  ch.  17. 


FORM   AND    INTERPRETATION.  849 

15.  Case  of  need. 

Tliu  liiuwei-  of  a  bill  and  any  indorser  may  insert  tlierein  the  name  of  a  per- 
son to  whom  the  holder  may  resort  in  case  of  need,  that  is  to  say,  in  case  the 
bill  is  dishonored  by  non-acceptance  or  non-payment.  Such  person  is  called 
the  referee  in  case  of  need.  It  is  in  the  option  of  the  holder  to  resort  to  the 
referee  in  case  of  need  or  not  as  he  may  think  fit. 

16.  Optional  stipulations  by  drawer  or  indorser. 

The  drawer  of  a  bill,  and  any  indorser,  may  insert  therein  an  express 
stipulation —  * 

(1)  Negativing  or  limiting  his  own  liability  to  the  holder  ; 

(2)  Waiving  as  regards  himself  some  or  all  of  the  holders  duties. 

17.  Definition  and  requisites  of  acceptance. 

(1)  The  acceiitunct'  of  a  bill  is  the  signification  by  the  drawee  of  his  assent 
to  the  order  of  the  drawer. 

(2)  An  acceptance  is  invalid  unless  it  complies  with  tfie  following  condi- 
tions, namely  : 

(a)  It  must  be  written  on  the  bill  and  be  signed  by  the  drawee.     The 

mere    signature    of    the   drawee    without    additional    words    is 
sufficient. 

(b)  It  must  not  express  that  the  drawee  will  perform  his  promise  by 

any  other  means  than  the  payment  of  money. 

18.  Time  for  acceptance. 
A  bill  may  be  accepted  — 

(1)  Before  it  has  been  signed  by  the  drawer,  or  while  otherwise  incomplete: 

(2)  AVlu-n  it  is  overdue,  or  after  it  has  been  dishonored  by  a  previous  refusal 
to  accept,  or  by  non-payment : 

(0)  When  a  bill  payable  after  sight  is  dishonored  by  non-acceptance,  and  the 
drawee  subsequently  accepts  it,  the  holder,  in  the  absence  of  any  different 
;,greemf nt,  is  entitled  to  have  the  bill  accepted  as  of  the  date  of  first  present- 
mrnt  to  the  drawee  for  ajccptance. 

19.  General  and  qualified  acceptances. 

(1)  An  acceptance  is  citiu'r  (a)  general  or  (6)  qualified. 

(2)  A  general  acceptance  a.ssents  without  (pialification  to  the  order  of  the 
drawer.  A  qualified  acceptance  in  express  terms  varies  the  effect  of  the  bill 
as  drawn. 

In  jiarticuhir  an  ar<'<'|)taiicc  is  (jualified  which  is  — 

(o)  CotKlilional,  that  is  to  say,  whicii  makes  payment  by  the  acceptor 
d*-(M>ndent  on  th<<  fulfilhnent  of  a  condition  therein  stated  : 

(b)  I'artial,   that    is   to   K;iy.   .-in    ac<'e|)tanco  to  pay    part  only    of    the 

amount  for  which  the  bill  is  drawn: 

(c)  Local,  that  is  to  say,  an   acceptance  to   pay  only   at  a  i)articular 

B[»ecified  jilace  : 
An  acceptance  to  pay  at  a  particular  place  is  a  general   acceptance, 
unl(!«<H  it  expressly  stall's  that  the  bill  is  to  l»e  paifl  there  only  and 
not  elHewhero  : 

(d)  Qualified  as  to  time  : 

(e)  The  acreptaiK  !•  of  some  one  or  more  of  the  drawees,  but  not  of  all 
IfBOOT.  INBTRnUENTB  —  64 


g50  BILLS   OK   EXCHANGE   ACT. 

20.  Inchoate  instruments. 

(1)  Whore  ;i  simple  signature  on  a  blank  Btampcd  paper  is  delivered  by  the 
signer  in  order  that  it  may  be  converted  into  a  bill,  it  oju-rates  as  a  prima 
facie  authority  to  till  it  up  as  a  complete  bill  for  any  aunjunt  the  stamp  will 
cover,  using  the  signature  for  tiial  of  the  drawer,  or  the  acceptor,  or  an 
indorse r  ;  and,  in  like  manner,  when  a  bill  is  wanting  in  any  material  particu- 
lar, the  t>erson  in  possession  of  it  has  a  prima  facie  authority  to  till  up  the 
omission  in  :uiy  way  he  thinks  fit. 

(2)  In  order  that  any  such  instrument  when  completed  may  be  enforceable 
against  any  person  who  became  a  party  thefeto  prior  to  its  completion,  it 
must  be  filled  up  within  a  reasonable  time,  and  strictly  in  accordance  with 
the  authority  given. 

Reasonable  time  for  this  purpose  is  a  question  of  fact. 

Provided  that  if  any  such  instrument  after  completion  is  negotiated  to  a 
holder  in  due  course,  it  shall  be  valid  and  effectual  for  all  purposes  in  his 
hands,  and  he  may  enforce  it  as  if  it  had  been  filled  up  within  a  reasonable 
time  and  strictly  in  accordance  with  the  authority  given. 

21.  Delivery. 

(1)  Every  contract  on  a  bill,  whether  it  be  the  drawer's,  the  acceptor's,  or 
an  indorser's,  is  incomplete  and  revocable,  until  delivery  of  the  instrument  in 
order  to  give  effect  thereto. 

Provided  that  where  an  acceptance  is  written  on  a  bill,  and  the  drawee  gives 
notice  to  or  according  to  the  directions  of  the  person  entitled  to  the  bill  that 
he  has  accepted  it,  the  acceptance  then  becomes  complete  and  irrevocable. 

(2)  As  between  immediate  parties,  and  as  regards  a  remote  party  other  than 
a  holder  in  due  course,  the  delivery  — 

(a)  In  order  to  be  effectual  must  be  made  either  by  or  under  the 
authority  of  the  party  drawing,  accepting,  or  indorsing,  as  the 
case  may  be : 
(&)  May  be  shown  to  have  been  conditional  or  for  a  special   purpose 
only,  and  not  for  the  purpose  of  transferring  the  property  in  the 
bill. 
But  if  the  bill  be  in  the  hands  of  a  holder  in  due  course  a  valid  delivery  of 
the  bill  by  all  parties  prior  to  him  so  as  to  make  them  liable  to  him  is  con- 
clusively presumed. 

(3)  Where  a  bill  is  no  longer  in  the  possession  of  a  party  who  lias  signed  it  as 
drawer,  acceptor,  or  indorser,  a  valid  and  unconditional  delivery  by  him  is 
presumed  until  the  contrary  is  proved. 

Capacity  and  Authority  of  Parties. 

22.  Capacity  of  parties. 

(1)  Capacity  to  incur  liability  as  a  party  to  a  bill  is  co-extensive  with  capacity 
to  contract. 

Provided  that  nothing  in  this  section  shall  enable  a  corporation  to  make 
itself  liable  as  drawer,  acceptor,  or  indorser  of  a  bill  unless  it  is  competent  to 
it  so  to  do  under  the  law  for  the  time  being  in  force  relating  to  corporations. 

(2)  Where  a  bill  is  drawn  or  indorsed  by  an  infant,  minor,  or  corporation 
having  no  capacity  or  power  to  incur  liability  on  a  bill,  the  drawing  or  indorse- 


THE   CONSIDERATION    FOR   A   BILL.  851 

ment  entitles  the  holder  to  receive   payment  of  the  bill,  and   to  enforce  it 
against  any  other  party  thereto, 

23.  Signature  essential  to  liability. 

No  person  is  liable  as  drawer,  indorser,  or  acceptor  of  a  bill  who  has  not 
signed  it  as  such  : 
Provided  that  — 

(1)  Where  a  person  signs  a  bill  in  a  trade  or  assumed  name,  he  is  liable 
thereon  as  if  he  had  signed  it  in  his  own  name: 

(2)  The  signature  of  the  name  of  a  firm  is  equivalent  to  the  signature  by 
the  person  so  signing  of  the  names  of  all  persons  liable  as  partners  in  that  firm. 

24.  Forged  or  unauthorized  signature. 

Subject  to  the  provisions  of  this  Act,  where  a  signature  on  a  bill  is  forged  or 
placed  thereon  without  the  authority  of  the  person  whose  signature  it  purports 
to  be,  the  forged  or  unautliorized  signature  is  wholly  inoperative,  and  no  right 
to  retain  the  bill,  or  to  give  a  discharge  therefor,  or  to  enforce  payment  thereof 
against  any  party  thereto,  can  be  acquired  through  or  under  that  signature, 
unless  the  party  against  whom  it  is  sought  to  retain  or  enforce  payment  of  the 
bill  is  precluded  from  setting  up  the  forgery  or  want  of  authority. 

Provided  that  nothing  in  this  section  shall  effect  the  ratification  of  an 
unauthorized  signature  not  amounting  to  a  forgery. 

25.  Procuration  signatures. 

A  signature  by  procuration  operates  as  notice  that  the  agent  has  but  a  limited 
authority  to  sign,  and  the  principal  is  only  bound  by  such  signature  if  the 
agent  in  so  signing  was  acting  witliin  the  actual  limits  of  his  authority. 

26.  Person  signing  as  agent  or  in  representative  capacity. 

(1)  Where  a  person  signs  a  bill  as  drawer,  indorser,  or  acceptor,  and  adds 
■words  to  his  signature  indicating  that  he  signs  for  or  on  belialf  of  a  principal, 
or  in  a  representative  cliaracter,  he  is  not  personally  liable  thereon;  but  the 
mere  addition  to  his  signature  of  words  describing  him  as  an  agent,  or  aa  fill- 
ing a  representative  character,  does  not  exempt  liiin  from  personal  liability. 

(2)  In  determining  whetiier  a  signature  on  a  bill  is  that  of  the  principal  or 
that  of  the  agent  by  whose  hand  it  is  written,  the  construction  most  favorable 
to  tlie  validity  of  the  instrument  shall  bo  adopted. 

Till'  Consideration  for  a  Bill. 

27.  Value  and  holder  for  value. 

(1)  Valuable  consideration  for  a  bill  may  be  constituted  by, — 

(n)   Any  ronsidf ration  suffirieiit  to  support  a  simple  contract; 

(b)  An  antf'Cfdfnt  debt  or  liability.     Surli  a  debt  or  liability  is  deemed 

valuable  conHi'lenition  whether  tli«'  bill  is  payable  on  demanil  or 

at  a  future  time. 

(2)  Where  value  lias  at  any  time  lM>en  «iven  for  a  bill  tlm  liolder  is  deemed 
to  be  a  hol.Ier  for  value  as  reg.ards  the  acceptor  and  all  y)arties  to  the  bill  who 
became  parties  prior  U)  such  time. 

(3)  Where  the  hoMer  of  a  bill  has  a  lien  on  it  arising  either  from  cnntraetor 
bv  implication  of  law.  he  in  deemed  to  be  a  holder  for  value  to  the  extent  of 
the  sum  for  which  ho  ha.s  a  lien. 


g52  BILLS   OF   EXCHANGE   ACT. 

28.  Accommodation  bill  or  party. 

{I)  An  ;K\"ommoil;itiuii  pint  v  to  a  bill  is  a  person  who  has  signed  a  bill  as 
drawer,  acceptor,  or  indorser,  without  receiving  value  therefor,  and  for  the 
purpose  of  lentling  his  name  to  some  other  person. 

(3)  An  accominmlation  party  is  liable  on  the  bill  to  a  holder  for  value;  and 
it  is  immaterial  whether,  when  sucli  holder  took  the  bill,  he  knew  suoh  party 
to  be  an  accommodation  party  or  not. 

29.  Holder  in  due  course. 

(1)  A  holder  in  due  course  is  a  holder  who  has  taken  a  bill,  complete  and 
regular  on  tlie  face  of  it,  under  the  following  conditions;  namely, 

(d)  That  he  became  the  holder  of  it  before  it  was  overdue,  and  with- 
out notice  that  it  had  been  previously  dishonored,  if  such  was 
the  fact: 

(b)  Tliat  he  took  the  bill  in  good  faith  and  for  value,  and  that  at  the 
time  the  bill  was  negotiated  to  him  he  had  no  notice  of  any 
defect  in  the  title  of  the  person  who  negotiated  it. 

(2)  In  particular  the  title  of  a  person  who  negotiates  a  bill  is  defective  within 
the  meaning  of  this  Act  when  he  obtained  the  bill,  or  the  acceptance  thereof, 
by  fraud,  duress,  or  force  and  fear,  or  other  unlawful  means,  or  for  an  illegal 
consideration,  or  when  he  negotiates  it  in  breach  of  faith,  or  under  such  cir- 
cumstances as  amount  to  a  fraud. 

(3)  A  holder  (whether  for  value  or  not),  who  derives  his  title  to  a  bill 
through  a  holder  in  due  course,  and  who  is  not  himself  a  party  to  any  fraud 
or  illegality  affecting  it,  has  all  the  rights  of  that  holder  in  due  course  as 
regards  the  acceptor  and  all  parties  to  the  bill  prior  to  that  holder, 

30.  Presumption  of  value  and  good  faith. 

(1)  Every  party  whose  signature  appears  on  a  bill  is  prima  facie  deemed  to 
have  become  a  party  thereto  for  value. 

(2)  Every  holder  of  a  bill  is  prima  facie  deemed  to  be  a  holder  in  due 
course  ;  but  if  in  an  action  on  a  l)ill  it  is  admitted  or  proved  that  the  accep- 
tance, issue,  or  subsequent  negotiation  of  the  bill,  is  affected  with  fraud, 
duress,  or  force  and  fear,  or  illegality,  the  burden  of  proof  is  shifted,  unless 
and  until  the  holder  proves  that,  subsequent  to  the  alleged  fraud  or  illegality, 
value  has  in  good  faith  been  given  for  the  bill. 

Negotiation  of  Bills. 

31.  Negotiation  of  bill. 

(1)  A  bill  is  negotiated  wlien  it  is  transferred  from  one  person  to  another  in 
such  a  manner  as  to  constitute  the  transferee  the  holder  of  the  bill. 

(2)  A  bill  payable  to  bearer  is  negotiated  by  delivery. 

(3)  A  bill  payable  to  order  is  negotiated  by  the  indorsement  of  the  holder 
completed  by  delivery. 

(4)  Where  the  holder  of  a  bill  payable  to  his  order  transfers  it  for  value 
without  indorsing  it,  the  transfer  gives  the  transferee  such  title  as  the  trans, 
feror  had  in  the  bill,  and  the  transferee  in  addition  acquires  the  right  to  have 
the  indorsement  of  the  transferor. 

(.5)  Where  any  person  is  under  obligation  to  indorse  a  bill  in  a  representa- 
tive capacity,  he  may  indorse  the  bill  in  such  terms  as  to  negative  personal 
liability. 


Negotiation  of  bills.  853 

S2.  Requisites  of  a  valid  indorsement. 

An  indorsetuent  in  order  to  operate  as  a  negotiation  must  comply  with  the 
following  conditions,  namely, — 

(1)  It  must  be  written  on  the  bill  itself  and  be  signed  by  the  indorser.  The 
simple  signature  of  the  indorser  on  the  bill,  without  additional  words,  is 
sufficient. 

An  indofsement  written  on  an  allonge,  or  on  a  "  copy  "  of  a  bill  issued  or 
negotiated  in  a  country  where  "  copies"  are  recognized,  is  deemed  to  be  writ- 
ten on  the  bill  itself. 

(2)  It  must  be  an  indorsement  of  the  entire  bill.  A  partial  indorsement, 
that  is  to  say,  an  indorsement  which  purports  to  transfer  to  the  indorsee  a 
part  only  of  the  amount  payable,  or  which  purports  to  transfer  the  bill  to  two 
or  more  indorsees  severally,  does  not  operate  as  a  negotiation  of  the  bill. 

(3)  Where  a  bill  is  payable  to  the  order  of  two  or  more  payees  or  indorsees 
who  are  not  partners  all  umst  indonse,  unless  the  one  indorsing  has  authority 
to  indorse  for  the  others. 

(4)  Where,  in  a  bill  payable  to  order,  the  payee  or  indorsee  is  wrongly  desig- 
nated, or  his  name  is  misspelt,  he  may  indorse  the  bill  as  therein  described 
adding,  if  he  thinks  fit,  his  proper  signature. 

(5)  Where  there  are  two  or  more  indorsements  on  a  bill,  each  indorsement 
is  deemed  to  have  been  made  in  the  order  in  which  it  appears  on  the  bill,  until 
the  contrary  is  proved. 

(6)  An  indorsement  may  be  made  in  blank  or  special.  It  may  also  contain 
terms  making  it  restrictive. 

33.  Conditional  indorsement. 

Where  a  bill  purports  to  be  indorsed  conditionally,  the  condition  may  be 
disregarded  by  the  payer,  and  payment  to  the  indorsee  is  valid  whether  the 
condition  has  been  fulfilled  or  not. 

34.  Indorsement  in  blank  and  special  indorsement. 

(1)  An  indorsement  in  blank  Bi)ecifie8  no  indorsee,  and  a  bill  so  indorsed 
becomes  payable  to  bearer. 

(2)  A  HfK'cial  indorsement  specifies  the  person  to  whom,  or  to  whose  order, 
the  bill  is  to  be  ])ayable. 

i'.i)  The  provisions  of  this  Act  relating  to  a  payee  apply  with  the  necessary 
mrxlifications  to  an  indorsee  under  a  special  indorsement. 

(4)  When  a  bill  has  l)een  indorsed  in  blank,  any  holder  may  convert  the 
blank  indorsi'tnent  intf)  a  spfH-ial  indorsement  b}'  writing  above  the  indorser's 
sij^naturc  a  direction  to  pay  the  bill  to  or  to  the  order  of  himself  or  some  other 
I)«'r8<jn. 

35.  Restrictive  Indorsement. 

(1)  All  iridi.rMiiiciit  is  rtHtriclive  which  prohibits  the  furtlu-r  negotiation  of 
the  bill,  or  which  expressts  that  it  is  a  mere  authority  to  deal  with  tlie  bill  as 
thert'by  din-rti'il,  and  not  a  transfer  of  the  ownership  thereof,  as,  for  example, 
if  n  bill  \h'  indorwd  "  Pay  I),  only,"  or  "  Pay  I),  for  tin-  account  of  X.,"  or 
"  Pay  D.  or  order  for  colh'ction." 

(2)  A  restrictive  indorsement  gives  the  indorse^'  the  right  to  receive  pay- 
ment of  the   bill  and  to  sue  any   jiarty  thereto  that   his  indorser  could  have 


854  BILLS   OF   EXCHANGE   ACT. 

su»h1,  but   gives  him    no  power   to  transfer  his  rights  as  indorsee  unless  It 
expressly  authorize  him  to  do  so. 

(3)  Where  a  restrictive  indorsement  authorizes  further  transfer,  all  subse- 
quent indorsees  take  the  bill  with  the  same  rights  and  subject  to  the  same 
liabilities  as  the  tirst  indorsee  under  the  restrictive  iudorsement. 

86.  Negotiation  of  overdue  or  dishonoured  bill. 

(1)  Where  a  bill  is  negotiable  in  its  origin  it  continues  to  be  negotiable  until 
it  has  l)een  [a)  restrictively  indorsed  or  (/))  discharged  by  payment  or  otherwise. 

(2)  WMiere  an  overdue  bill  is  negotiated,  it  can  only  be  negotiated  subject  to 
any  defect  of  title  affecting  it  at  its  maturity,  and  thenceforward  no  person 
who  takes  it  can  acquire  or  give  a  better  title  than  that  which  the  person  from 
whom  he  took  it  had. 

(3)  A  bill  payable  on  demand  is  deemed  to  be  overdue  within  the  meaning 
and  for  the  purposes  of  this  section,  when  it  appears  on  the  face  of  it  to  have 
been  in  circulation  for  an  unreasonable  length  of  time.  What  is  an  unreason- 
able length  of  time  for  this  purpose  is  a  question  of  fact. 

(4)  Except  where  an  indorsement  bears  date  after  the  maturity  of  the  bill, 
every  negotiation  is  prima  facie  deemed  to  have  been  effected  before  the  bill 
was  overdue. 

(5)  Where  a  bill  which  is  not  overdue  has  been  dishonoured  any  person  who 
takes  it  with  notice  of  the  dishonour  takes  it  subject  to  any  defect  of  title 
attaching  thereto  at  the  time  of  dishonour,  but  nothing  in  this  sub-section 
shall  affect  the  rights  of  a  holder  in  due  course. 

37.  Negotiation  of  bill  to  party  already  liable  thereon. 

Wliere  a  bill  is  negotiated  back  to  the  drawer,  or  to  a  prior  indorser,  or  to 
the  acceptor,  such  party  may,  subject  to  the  provisions  of  this  Act,  re-issue 
and  further  negotiate  the  bill,  but  he  is  not  entitled  to  enforce  payment  of  the 
bill  against  any  intervening  party  to  whom  he  was  previously  liable. 

38.  Rights  of  the  holder. 

The  rights  and  powers  of  the  holder  of  a  bill  are  as  follows: 

(1)  He  may  sue  on  the  bill  in  his  own  name  : 

(2)  Where  he  is  a  holder  in  due  course,  he  holds  the  bill  free  from  any  defect 
of  title  of  prior  parties,  as  well  as  from  mere  personal  defences  available  to 
prior  parties  among  themselves,  and  may  enforce  payment  against  all  parties 
liable  on  the  bill: 

(3)  Where  his  title  is  defective  (a)  if  he  negotiates  the  bill  to  a  holder  in  due 
course,  that  holder  obtains  a  good  and  complete  title  to  the  bill,  and  (h)  if  he 
obtains  payment  of  the  bill  the  person  who  pays  him  in  due  course  gets  a  valid 
discharge  for  the  bill. 

General  Duties  of  the  Holder. 

39.  When  presentment  for  acceptance  is  necessary. 

(\)  Where  a  bill  is  payable  after  sight,  presentment  for  acceptance  is  neces- 
sary in  order  to  fix  the  maturity  of  the  instrument. 

(2)  Where  a  bill  expressly  stipulates  that  it  shall  be  presented  for  accept- 
ance, or  where  a  bill  is  drawn  payable  elsewhere  than  at  the  residence  or  place 
of  business  of  the  drawee,  it  must  be  presented  for  acceptance  before  it  can  be 
presented  for  payment. 


GENERAL   DUTIES   OF   THE    HOLDER.  g55 

(8)  In  no  other  case  is  presentment  for  acceptance  necessary  in  order  to 
render  liable  any  party  to  the  bill. 

(4)  Where  the  holder  of  a  bill,  drawn  payable  elsewhere  than  at  the  place 
of  business  or  residence  of  the  drawee,  has  not  time,  with  the  exercise  of 
reasonable  diligence,  to  present  the  bill  for  acceptance  before  presenting  it  for 
payment  on  the  day  that  it  falls  due,  the  delay  caused  by  presenting  the  bill 
for  acceptance  before  presenting  it  for  payment  is  excused,  and  does  not  dis- 
charge the  drawer  and  indorsers. 

40.  Time  for  presenting  bill  payable  after  sight. 

(1)  Subject  to  tlie  provisions  of  this  Act,  when  a  bill  payable  after  sight  is 
negotiated,  the  holder  must  either  present  it  for  acceptance  or  negotiate  it 
within  a  reasonable  time. 

(2)  If  he  do  not  do  so,  the  drawer  and  all  indorsers  prior  to  that  holder  are 
discharged. 

(3)  In  determining  what  is  a  reasonable  time  within  the  meaning  of  this 
section,  regard  shall  be  had  to  the  nature  of  the  bill,  the  usage  of  trade  with 
respect  to  similar  bills,  and  the  facts  of  the  particular  case. 

41.  Rules  as  to  presentment  for  acceptance,  and  excuses  for  non-ppe- 

sentment. 

(1)  A  bill  is  duly  presented  for  acceptance  which  is  presented  in  accordance 
with  the  following  rules: 

(a)  The  presentment  must  be  made  by  or  on  behalf  of  the  holder  to 

the  drawee,  or  to  some  person  authorized  to  accept  or  refuse 
acceptance  on  his  behalf,  at  a  reasonable  hour  on  a  business  day 
and  before  the  bill  is  overdue  : 

(b)  Where  a  bill  is  addressed  to  two  or  more  drawees,  who  are  not 

partners,  presentment  must  be  made  to  them  all,  unless  one  has 
authority  to  accept  for  all,  then  presentment  may  be  made  to 
him  only  : 

(c)  Where  the  drawee  is  dead,  presentment  may  be  made  to  his  personal 

repn-sentative  : 

(d)  Where  the  drawee  is  bankrupt,  presentment  may  be  made  to  him 

or  his  trustee : 
(«)  Where  authorized  by  agreement  or  usage,  a  presentment  through 
the  post  office  is  sufficient. 

(2)  Presentment  in  accordance  with  these  rules  is  excused,  ami  a  bill  may  be 
treatp<l  as  dishonoured  by  non-acceptance — 

(o)  Where  tli<!  (Iraww  is  dead  or  bankrupt,  or  is  a  fictitious  f)erson  or  a 
p«;r8on  not  having  capacity  to  (;ontract  by  bill  : 

(b)  Where,  after  tli<;  ixen;ise  of  reasonal^le  diligence,  such  presentment 

cannot  Ix;  olTected  : 

(c)  Where,  although   the  presentment  has  In'en  irregular,  acccpt.inoe 

has  lM'«'ri  pffiiscfl  on  some  other  gro>ind. 

(3)  Thf  f:i<t  that  the  holder  has  reason  to  believe  that  the  bill,  on  present- 
ment, will  ))o  dishonoured  does  not  excuse  presentment 

42.  Non-acceptance. 

(1)  When  a  bill  is  duly  presented  for  acceptance  and  is  not  accepted  within 


856  BILLS   OF  EXCHANGE   ACT. 

the  customary  time,  the  person  presenting  it  must  treat  it  as  dishonoured  by 
non-acceptance.  If  he  do  not,  the  holiier  shall  lose  his  right  of  recourse 
against  tlie  drawer  and  indorsera, 

43.  Dishonour  by  non-acceptance  and  its  consequences. 

(1)  A  bill  is  dishonoured  by  non-acceptance — 

(a)  When  it  is  duly  presented  for  acceptance,  and  such  an  acceptance 

as  is  prescribed  by  this  act  is  refused  or  cannot  be  obtained  ;  or 
(6)  When  presentment  for  acceptance  is  excused  and  the  bill  is   not 
accepted. 
(3)  Subject  to  the  provisions  of  this  Act,  when  a  bill  is  dishonoured  by  non 
acceptance,  an  immediate  right  of  recourse  against  the  drawer  and  indorsera 
accrues  to  the  holder,  and  no  presentment  for  payment  is  necessary. 

44.  Duties  as  to  qualified  acceptances. 

(1)  The  holder  of  a  bill  may  refuse  to  take  a  qualified  acceptance,  and  if  he 
does  not  obtain  an  unqualified  acceptance  may  treat  the  bill  as  dishonoured  by 
non-acceptance. 

(2)  Where  a  qualified  acceptance  is  taken,  and  the  drawer  or  an  indorser  has 
not  expressly  or  impliedly  authorized  the  holder  to  take  a  qualified  acceptance, 
or  does  not  subsequently  assent  thereto,  such  drawer  or  indorser  is  discharged 
from  his  liability  on  the  bill. 

The  provisions  of  this  sub-section  do  not  apply  to  a  partial  acceptance, 
whereof  due  notice  has  been  given.  Where  a  foreign  bill  has  been  accepted 
as  to  part,  it  must  be  protested  as  to  the  balance. 

(3)  When  the  drawer  or  indorser  of  a  bill  receives  notice  of  a  qualified 
acceptance,  and  does  not  within  a  reasonable  time  express  his  dissent  to  the 
holder,  he  shall  be  deemed  to  have  assented  thereto. 

45.  Rules  as  to  presentment  for  payment. 

Subject  to  the  provisions  of  this  Act,  a  bill  must  be  duly  presented  for 
payment.  If  it  be  not  so  presented  the  drawer  and  endorsers  shall  be 
discharged. 

A  bill  is  duly  presented  for  payment  which  is  presented  in  accordance  with 
the  following  rules:  — 

(1)  Where  the  bill  is  not  payable  on  demand,  presentment  must  be  made  on 
the  day  it  falls  due. 

(2)  Where  the  bill  is  payable  on  demand,  then,  subject  to  the  provisions  of 
this  Act,  presentment  must  be  made  within  a  reasonable  time  after  its  issue  in 
order  to  render  the  drawer  liable,  and  within  a  reasonable  time  after  its 
indorsement,  in  order  to  render  the  indorser  liable. 

In  determining  what  is  a  reasonable  time,  regard  shall  be  had  to  the  nature 
of  the  bill,  the  usage  of  trade  with  regard  to  similar  biUs,  and  the  facts  of  the 
particular  case. 

(3)  Presentment  must  be  made  by  the  holder  or  by  some  person  authorized 
to  receive  payment  on  his  behalf  at  a  reasonable  hour  on  a  business  day,  at  the 
proper  place  as  hereinafter  defined,  either  to  the  person  designated  by  the  bill 
as  payer,  or  to  some  person  authorized  to  pay  or  refuse  payment  on  his  behalf 
if  with  the  exercise  of  reasonable  diligence  such  person  can  there  be  found. 


GENERAL  DUTIES  OF  THE  HOLDER  857 

(4)  A  bill  is  presented  at  the  proper  place  :  — 

(a)  Where  a  place  of  payment  is  specified  in  the  bill  and  the  bill  is 

there  presented. 

(b)  Where  uo  place   of  payment  is  specified,  but   the  address  of  the 

drawee  or  acceptor  is  given  in  the  bill,  and  the  bill  is  there  pre- 
sented. 

(c)  Where  no  place  of  payment  is  specified  and  no  address  given,  and 

the  bill  is  presented  at  the  drawee's  or  acceptor's  place  of  busi- 
ness if  known,  and  if  not.  at  his  ordinary  residence   if  known. 

(d)  In  any  other  case  if  presented  to  the  drawee  or  acceptor  wlierever 

he  can  be  found,  or  if  presented  at  his  last  known  place  of  busi- 
ness or  residence. 

(5)  Where  a  bill  is  presented  at  the  proper  place,  and  after  the  exercise  of 
reasonable  diligence  no  [)erson  authorized  to  pay  or  refuse  payment  can  be 
found  there,  no  further  presentment  to  the  drawee  or  acceptor  is  required. 

(6)  Where  a  bill  is  drawn  upon,  or  accepted  by,  two  or  more  persons  who 
are  not  partners,  and  no  place  of  payment  is  specified,  presentment  must  be 
made  to  them  all. 

(7)  Where  the  drawee  or  acceptor  of  a  bill  is  dead,  and  no  place  of  payment 
is  specified,  presentment  must  be  made  to  a  personal  representative,  if  such 
there  be,  and  with  the  exercise  of  reasonable  diligence  he  can  be  found. 

(8)  Where  authorized  by  agreement  or  usage  a  presentment  through  the 
post-office  is  sufficient. 

46.  Excuses  for  delay  or  non-presentment  for  payment. 

(1)  Delay  in  making  presentment  for  payment  is  excused  when  the  delay  is 
caused  })y  cirfiimstances  beyond  the  control  of  the  holder,  and  not  imputable 
to  his  rlefault,  misconduct,  or  negligence.  When  the  cause  of  delay  ceases  to 
operate  presentment  must  be  made  with  reasonable  diligence. 

(2)  Presentment  for  payment  is  dispensed  with,  — 

(a)  Where,  after  the  exercise  of  reasonable  diligence,  presentments  as 

required  by  this  Act,  cannot  be  effected. 
The  fart  that  the  hoUb-r  has  reason  to  believe  that  the  bill  will,  on  pre- 
sentment, Ik.'  dishonoured,    does   not  dispense  with   the  necessity   for 
presentment. 

(b)  Where  the  drawee  is  a  fictitious  person. 

(c)  As  regards  the  drawer  whcro  the  drawee  or  acceptor  is  not  bound, 

as  Ix'tween  himself  anil  the  drawer,  to  accept  or  pay  the  bill,  and 
the  drawer  has  no  reason  to  believe  that  tho  bill  would  bi'  paid  if 
presenU'd. 

(d)  As  reg.irds  an  indorser,  where  the  bill  was  accepted  or  made  for  tho 

aceommodation  of  that  indorser,  ami  ho  has  no  reason  to  expect 
that  thfi  bill  woulfl  be  paid  if  jiresentefl. 

(e)  By  waiver  of  presentment,  express  or  implied. 

47.  Dishonour  by  non-payment. 

(1)  A  bill  is  dishonoureil  by  non-payment  (a)  when  it  is  duly  presented  for 
payment  ami  jiaytnent  is  refuseil  or  rannot  1h'  obtained,  or  (h)  when  i)reRent- 
ment  is  exrus«'<l  and  tlie  bill  is  overdue  .'iiid  unpaid. 

(2)  Subject  to  the  provisions  of  this  Act,  when  a  bill  is  dishonoured  by  non* 


g58  BILLS   OF   EXCHANCE   ACT. 

payment,  an  iinniedi.ito  right  of  recourse  against  the  drawer  and  indorsers 

ao('nit>s  to  tlie  holilcr. 

48.  Notice  of  dishonour  and  effect  of  non-notice. 

Subject  to  the  provisions  of  this  Act,  when  a  bill  has  been  dishonoured  by 
non-acceptanco  or  by  non-payment  notice  of  dialionour  must  be  given  to  the 
drawer  ami  each  inilorser,  and  any  drawer  or  indorser  to  whom  such  notice  is 
not  given  is  discharged  ; 

Provided  that  — 

(1)  Where  a  bill  is  dishonoured  by  non-acceptance,  and  notice  of  dishonour 
is  not  given,  the  rights  of  a  holder  in  due  course  subsequent  to  the  omission, 
shall  not  be  prejudiced  by  the  omission. 

(2)  Where  a  bill  is  dishonoured  by  non-acceptance,  and  due  notice  of  dis- 
honor is  given,  it  shall  not  be  necessary  to  give  notice  of  a  subsequent  dis- 
honour by  non-payment  unless  the  bill  shall  in  the  meantime  have  been 
accepted. 

49.  Rules  as  to  notice  of  dishonour. 

Notice  of  dishonour  in  order  to  be  valid  and  effectual  must  be  given  in 
accordance  with  the  following  rules  :  — 

(1)  The  notice  must  be  given  by  or  on  behalf  of  the  holder,  or  by  or  on  be- 
half of  an  indorser  who,  at  the  time  of  giving  it,  is  himself  liable  on  the  bill. 

(2)  Notice  of  dishonour  may  be  given  by  an  agent  either  in  his  own  name,  or 
in  the  name  of  any  party  entitled  to  give  notice  whether  that  party  be  his 
principal  or  not. 

(3)  Where  the  notice  is  given  by  or  on  behalf  of  the  holder,  it  enures  for 
the  benefit  of  all  subsequent  holders  and  all  prior  indorsers  who  have  a  right 
of  recourse  against  the  party  to  whom  it  is  given. 

(4)  Where  notice  is  given  by  or  on  behalf  of  an  indorser  entitled  to  give 
notice  as  hereinbefore  provided,  it  enures  for  the  benefit  of  the  holder  and  all 
indorsers  subsequent  to  the  party  to  whom  notice  is  given. 

(5)  The  notice  may  be  given  in  writing  or  by  personal  communication,  and 
may  be  given  in  any  terms  which  sufficiently  identify  the  bill,  and  intimate 
that  the  bill  has  been  dishonoured  by  non-acceptance  or  non-payment. 

(6)  The  return  of  a  dishonoured  bill  to  the  drawer  or  an  indorser  is,  in  point 
of  form,  deemed  a  sufficient  notice  of  dishonour. 

(7)  A  written  notice  need  not  be  signed,  and  an  insufficient  written  notice 
may  be  supplemented  and  validated  by  verbal  communication.  A  mis- 
description of  the  bill  shall  not  vitiate  the  notice  unless  the  party  to  whom  the 
notice  is  given  is  in  fact  misled  thereby. 

(8)  Where  notice  of  dishonour  is  required  to  be  given  to  any  person,  it  may 
be  given  either  to  the  party  himself,  or  to  his  agent  in  that  behalf. 

(9)  Where  the  drawer  or  indorser  is  dead,  and  the  party  giving  notice  knows 
it,  the  notice  must  be  given  to  a  personal  representative,  if  such  there  be,  and 
with  the  exercise  of  reasonable  diligence  he  can  be  found. 

(10)  Where  the  drawer  or  indorser  is  bankrupt,  notice  may  be  given  either 
to  the  party  himself  or  to  the  trustee. 

(11)  Where  there  are  two  or  more  drawers  or  indorsers  who  are  not  partners 
notice  must  be  given  to  each  of  them,  unless  one  of  them  has  authority  to 
receive  such  notice  for  the  others. 


GENERAL   DUTIES   OF   THE   HOLDER.  859 

(12)  The  notice  may  be  given  as  soon  as  the  bill  is  dishonoured,  and  muBt 
be  given  within  a  reasonable  time  thereafter. 

In  the  absence  of  special  circumstances  notice  is  not  deemed  to  have  been 
given  within  a  reasonable  time,  unless  — 

(a)  Where  the  person  giving  and  the  person  to  receive  notice  reside  in 
the  same  place,  the  notice  is  given  or  sent  off  in  time  to  reach 
the  latter  on  the  day  after  the  dishonour  of  the  bill. 
(6)  Where  the  person  giving  and  the  person  to  receive  notice  reside  in 
different  places,  the  notice  is  sent  off  on  the  day  after  the  dis- 
honour of  the  bill,  if  there  be  a  post  at  a  convenient  hour  on  that 
day,  and  if  there  be  no  such  post  on  that  day  then  by  the  next 
post  thereafter. 

(13)  Where  a  bill  when  dishonoured  is  in  the  hands  of  an  agent,  he  may  either 
himself  give  notice  to  the  parties  liable  on  the  bill,  or  he  may  give  notice  to 
his  principal.  If  he  give  notice  to  his  principal,  he  must  do  so  within  the 
same  time  as  if  he  were  the  holder,  and  the  principal  upon  receipt  of  such 
notice  has  himself  the  same  time  for  giving  notice  as  if  the  agent  had  been  an 
independent  holder. 

(14)  Where  a  party  to  a  bill  receives  due  notice  of  dishonour,  he  has  after  the 
receipt  of  such  notice  the  same  period  of  time  for  giving  notice  to  antecedent 
parties  that  the  holder  has  after  the  dishonour. 

(1/5)  Where  a  notice  of  dishonour  is  duly  addressed  and  posted,  the  sender  is 
deemed  to  have  given  due  notice  of  dishonour,  notwithstanding  any  miscar- 
riage by  the  post-office. 

50.  Excuses  for  non-notice  and  delay. 

(1)  Delay  in  giving  notice  of  dishonour  is  excused  where  the  delay  is  caused 
by  circumstances  beyond  the  control  of  the  party  giving  notice,  and  not 
imputable  to  his  default,  misconduct,  or  negligence.  When  the  cause  of 
delay  ceases  to  operate  the  notice  must  bo  given  with  reasonable  diligence. 

(2)  Notice  of  dislionotir  is  dispensed  with  — 

(a)  When,  after  the  exercise  of  reasonable  diligence,  notice  as  required 

by  this  act  cannot  be  given  to  or  does  not  reach  the  drawer  or 
indorser  souglit  to  be  cliarged  : 

(b)  By  waiver,  ex|)res8  or  implied.     Notice  of  dishonour  may  be  waived 

before  the  time  of  giving  notice  ha.s  arrived,  or  after  the  omission 
to  give  due  notice  : 

(c)  As  regards  the  drawer  in  the    following  cases,  namely,  (1)  where 

drawer  and  drawee  are  the  same  person,  (2)  where  the  drawee  is 
a  fictitious  person  or  a  person  not  having  capacity  to  contract, 
(3)  where  th»!  ilr.iwcr  is  the  person  to  whom  tlie  liill  is  presented 
for  payiiH'iit,  (4)  wh«'r<«  tln' drawee  or  acceptor  is  as  between  him- 
self ami  thf  drawr-r  under  ru)  obligation  to  acccjit  or  p.iy  tin* bill, 
(5)  where  the  drawer  Ii.'ih  rounterinaiuled  payment  : 

(d)  As  regards  the  indorHer  in   the  following  cases,    namely.  (1)    where 

theilrawee  is  a  tictitious  jierson  or  a  person  not  having  capacity 
t<j  contraet  ami  the  indorser  wjis  .iwar<^  of  the  fact  at  the  lime  he 
indorH«Ml  the  bill,  (2)  where  the  indorser  is  the  |)erson  to  whom 
the  bill  is  presenU'd  for  payment,  (3)  where  the  bill  was  accepted 
or  made  for  his  accommodation. 


gt^O  BILLS   OV   EXCHANGE   ACT. 

61.  Noting  or  protest  of  bill. 

(1)  WluTo  an  inLiiul  bill  has  boon  dishonoured  it  may,  if  the  holder  think  fit, 
be  notod  for  iion  acceptance  or  nonpayment,  as  the  case  may  lie ;  but  it  shall 
not  be  necessary  to  note  or  protest  any  such  bill  in  order  to  preserve  the 
recourse  against  the  drawer  or  indorser. 

(2)  Where  a  foreign  bill,  appearing  on  the  face  of  it  to  be  such,  has  been 
dishonoured  by  non-acceptance  it  uiust  be  duly  protested  for  non-acceptance, 
and  where  such  a  bill,  which  has  not  been  previously  dishonoured  by  non- 
acceptance,  is  dishonoured  by  non-payment  it  must  be  duly  protested  for  non- 
payment. If  it  be  not  so  protested  the  drawer  and  indorsers  are  discharged. 
Where  a  bill  does  not  appear  on  the  face  of  it  to  be  a  foreign  bill,  protest 
thereof  in  case  of  dishonour  is  unnecessary. 

(3)  A  bill  which  has  been  protested  for  non-acceptance  may  be  subsequently 
protested  for  non-payment. 

(4)  Subject  to  the  provisions  of  this  Act.  when  a  bill  is  noted  or  protested, 
it  must  be  noted  on  the  day  of  its  dishonour.  When  a  bill  has  been  duly  noted, 
the  protest  may  be  subsequently  extended  as  of  the  date  of  the  noting. 

(5)  Where  the  accejttor  of  a  bill  becomes  bankrupt  or  insolvent  or  suspends 
payment  before  it  matures,  the  holder  may  cause  the  bill  to  be  protested  for 
better  security  against  the  drawer  and  indorsers. 

(6)  A  bill  must  be  protested  at  the  place  where  it  is  dishonoured  : 
Provided  that  — 

(a)  When  a  bill  is  presented  through  the  post-ofiice,  and  returned  by 

post  dishonoured,  it  may  be  protested  at  the  place  to  which  it  is 
returned  and  on  the  day  of  its  return  if  received  during  business 
hours,  and  if  not  received  during  business  hours,  then  not  later 
than  the  next  business  day  : 

(b)  When  a  bill  drawn  payable  at  the  place  of  business  or  residence  of 

some  person  other  than  the  drawee,  has  been  dishonoured  by  non- 
acceptance,  it  must  be  protested  for  non-payment  at  the  place 
where  it  is  expressed  to  be  payable,  and  no  further  presentment 
for  payment  to,  or  demand  on,  the  drawee  is  necessary. 

(7)  A  protest  must  contain  a  copy  of  the  bill,  and  must  be  signed  by  the 
notary  making  it,  and  must  specify  — 

(a)  The  person  at  whose  request  the  bill  is  protested  : 

(b)  The  place  and  date  of  protest,  the  cause  or  reason  for  protesting  the 

bill,  the  demand  made,  and  the  answer  given,  if  any,  or  the  fact 
that  the  drawee  or  acceptor  could  not  be  found. 

(8)  Where  a  bill  is  lost  or  destroyed,  or  is  wrongly  detained  from  the  person 
entitled  to  hold  it,  protest  may  be  made  on  a  copy  or  written  particulars 
thereof. 

(9)  Protest  is  dispensed  with  by  any  circumstance  which  would  dispense 
with  notice  of  dishonour.  Delay  in  noting  or  protesting  is  excused  when  the 
delay  is  caused  by  circumstances  beyond  the  control  of  the  holder,  and  not 
imputaVjle  to  his  default,  misconduct,  or  negligence.  When  the  cause  of  delay 
ceases  to  operate  the  bill  must  be  noted  or  protested  with  reasonable  diligence. 

52.  Duties  of  holder  as  regards  drawee  or  acceptor. 

(1)  When  a  bill  is  accepted  generally  presentment  for  payment  is  not  necefl* 
sary  in  order  to  render  the  acceptor  liable. 


LIABILITIES   OF   PARTIES.  861 

(2)  When  by  the  terms  of  a  qualified  acceptance  presentment  for  paj-ment 
is  required,  the  acceptor,  in  the  absence  of  an  express  stipulation  to  that 
eflFect,  is  not  discharged  by  the  omission  to  present  the  bill  for  payment  on 
the  day  that  it  matures. 

(3)  In  order  to  render  the  acceptor  of  a  bill  liable  it  is  not  necessary  to  pro- 
test it,  or  that  notice  of  dishonour  should  be  given  to  him. 

(4)  Where  the  holder  of  a  bill  presents  it  for  payment,  he  shall  exhibit  the 
bill  to  the  person  from  whom  he  demands  payment,  and  when  a  bill  is  paid 
the  holder  shall  forthwith  deliver  it  up  to  the  party  paying  it. 

Liabilities  of  Parties. 

53.  Funds  in  hands  of  drawee. 

(1)  A  bill,  of  itself,  does  not  operate  as  an  assignment  of  funds  in  the  hands 
of  the  drawee  available  for  the  payment  thereof,  and  the  drawee  of  a  bill  who 
does  not  accept  as  required  by  this  Act  is  not  liable  on  the  instrument.  This 
sub-section  shall  not  extend  to  Scotland. 

(2)  In  Scotland,  wliere  the  drawee  of  a  bill  has  in  liis  hands  funds  available 
for  the  payment  thereof,  the  bill  operates  as  an  assignment  of  the  sum  for 
which  it  is  drawn  in  favor  of  the  holder,  from  the  time  when  the  bill  is  pre- 
sented to  tlie  drawee. 

54.  Liability  of  aeeeptor. 

The  acceptor  of  a  bill,  by  accepting  it  — 

(1)  Engages  that  he  will  pay  it  according  to  the  tenor  of  his  acceptance : 

(2)  Is  precluded  from  denying  to  a  holder  in  due  course  : 

(a)  The  existence  of  the  drawer,  the  genuineness  of  his  signature,  and 

his  capacity  and  authority  to  draw  the  bill  ; 

(b)  In  the  case  of  a  bill  payable  to  drawer's  order,  the  then  capacity  of 

the  drawer  to  indorse,  but  not  the  genuineness  or  validity  of  his 
indorsement ; 

(c)  In  the  ca.se  of  a  bill  payable  to  the  order  of  a  third  person,  the 

existence  of  tlie  j)ay("e  and  liis  tlien  capacity  to  indorse,  but  not 
the  genuinesH  or  validity  of  his  indorsement. 

66.  Liability  of  drawer  or  indorser. 

(1)  The  drawer  of  a  bill  by  drawing  it  — 

(a)  Engages  that  on  duo  presentment  it  shall  be  accepted  and  paid 

according  to  its  tf;nor,  anrl  that  if  it  l)e  dishonoured  lie  will  com- 
I)enHate  tlie  holder  or  any  indorser  who  is  conipcllcd  to  pay  it. 
proviilcd  tliat  th*-  rpfjuisite  proceedings  on  dishonour  l)e  duly 
tJikcri; 

(b)  Is  prccliKhMJ  froiM  <hriyiiig  to  a  holdi-r  in  duo  course  the  existence 

of  tin-  i)ayff  and  his  tluT)  capacity  to  indorse. 

(2)  The  indor.s<'r  of  ;i  bill  by  indorning  it  — 

(a)  Engages  tliat  on  due  presentment  it  shall   bo  accepted  and  paid 

according  to  Hh  tenor,  and  that  if  it  bo  dishonoured  he  will  coni- 
pensnt*?  the  holder  or  a  mibsequent  indorH«'r  who  is  cotnpidled  to 
pay  it,  provide<l  that  tlie  reqniHJte  proceedings  on  dishonour  1»g 
duly  taken  ; 

(b)  Is  precluded  from  denying  tri  a  liolder  in  due  crjurBe  tl»o  gonuino- 


862  BILLS   OV   EXCHANGE   ACT. 

ness  and  regularity  in  all  rospects  of  the  drawer's  Bignature  and 
all  previous  inilorsemonts  ; 
(c)  Is  proi'liuii'd  fronnlonyingto  his  immediate  or  a  subsequent  indorsee 
that  tlie  1)111  was  at  liie  time  of  his  indorsement  a  valid  and  sub- 
sisting bill,  and  that  he  had  then  a  good  title  thereto. 

56.  Stranger  signing  bill  liable  as  indorser. 

Where  a  person  signs  a  bill  otherwise  than  as  drawer  or  acceptor,  he  thereby 
incurs  tlie  liabilities  of  an  indorser  to  a  holder  in  due  course. 

67.  Measure  of  damages  against  parties  to  dishonoured  bill. 

Where  a  bill  is  dishonoured,  the  measure  of  damages,  which  shall  be  deemed 
to  be  liquidated  damages,  shall  be  as  follows: 

(1)  The  holder  may  recover  from  any  party  liable  on  the  bill,  and  the  drawer 
who  has  been  compelled  to  pay  the  bill  may  recover  from  the  acceptor,  and 
an  indorser  who  has  been  compelled  to  pay  the  bill  may  recover  from  the 
acceptor  or  from  the  drawer,  or  from  a  prior  indorser  — 

(a)  The  amount  of  the  bill : 

(6)  Interest  thereon  from  the  time  of  presentment  for  payment  if  the 
bill  is  payable  on  demand,  and  from  the  maturity  of  the  bill  in 
any  other  case : 

(c)  The  expenses  of  noting,  or,  when  protest  is  necessary,  and  the  pro- 
test has  been  extended,  the  expenses  of  protest. 

(2)  In  the  case  of  a  bill  which  has  been  dishonoured  abroad,  in  lieu  of  the 
above  damages,  the  holder  may  recover  from  the  drawer  or  an  indorser,  and 
the  drawer  or  an  indorser  who  has  been  compelled  to  pay  the  bill  may  recover 
from  any  party  liable  to  him,  the  amount  of  the  re-exchange  with  interest 
thereon  until  the  time  of  payment. 

(3)  Where  by  this  Act  interest  may  be  recovered  as  damages,  such  interest 
may.  if  justice  require  it,  be  withheld  wholly  or  in  part,  and  where  a  bill  is 
expressed  to  be  payable  with  interest  at  a  given  rate,  interest  as  damages  may 
or  may  not  be  given  at  the  same  rate  as  interest  proper. 

58.  Transferor  by  delivery  and  transferee. 

(1)  Where  the  holder  of  a  bill  payable  to  bearer  negotiates  it  by  delivery 
without  indorsing  it,  he  is  called  a  "  transferor  by  delivery." 

(2)  A  transferor  by  delivery  is  not  liable  on  the  instrument. 

(3)  A  transferor  by  delivery  who  negotiates  a  bill  thereby  warrants  to  his 
immediate  transferee  being  a  holder  for  value  that  the  bill  is  what  it  purports 
to  be,  that  he  has  a  right  to  transfer  it,  and  that  at  the  time  of  transfer  he  is 
not  aware  of  any  fact  which  renders  it  valueless. 

Discharge  of  Bill. 

59.  Payment  in  due  course. 

(1)  A  bill  is  discharged  by  payment  in  due  course  by  or  on  behalf  of  the 
drawee  or  acceptor. 

"  Payment  in  due  course  "  means  payment  made  at  or  after  the  maturity  of 
the  bill  to  the  holder  thereof  in  good  faith  and  without  notice  that  his  title  to 
the  bill  is  defective. 

(2)  Subject  to  the  provisions  hereinafter  contained,  when  a  bill  is  paid  by  the 
drawer  or  an  indorser  it  is  not  discharged  ;  but 


DISCHARGE    OF   BILL.  §53 

(a)  Where  a  bill  payable  to,  or  to  the  order  of,  a  third  party  is  paid  by 
drawer,  the  drawer  may  enforce  payment  thereof  against  the 
acceptor,  but  may  not  re-issue  the  bill : 

(6)  Where  a  bill  is  paid  by  an  indorser,  or  where  a  bill  payable  to 
drawer's  order  is  paid  by  the  drawer,  the  party  paying  it  is 
remitted  to  his  former  rights  as  regards  the  acceptor  or  antece- 
dent parties,  and  he  may,  if  he  thinks  fit,  strike  out  his  own  and 
subsequent  indorsements,  and  again  negotiate  the  bill. 
(3)  Where  an  accommodation  bill  is  paid  in  due  course  by  the  party  accom- 
modated the  bill  is  discharged. 

60.  Banker  paying  demand  draft  whereon  Indorsement  is  forged. 

Where  a  bill  payable  to  order  on  demand  is  drawn  on  a  banker,  and  the 
banker  on  whom  it  is  drawn  pays  the  bill  in  good  faith  and  in  the  ordinary 
course  of  business,  it  is  not  incumbent  on  the  banker  to  show  that  the  indorse- 
ment of  the  payee  or  any  subsequent  indorsement  was  made  by  or  under  the 
authority  of  the  person  whose  indorsement  it  purports  to  be,  and  the  banker 
is  deemed  to  have  paid  the  bill  in  due  course,  although  such  indorsement  has 
been  forged  or  made  without  authority, 

61.  Acceptor  the  holder  at  maturity. 

When  the  acceptor  of  a  bill  is  or  becomes  the  holder  of  it  at  or  after  its 
maturity,  in  his  own  right,  the  bill  is  discharged. 

62.  Express  waiver. 

(1)  When  the  liolder  of  a  bill  at  or  after  its  maturity  absolutely  and  uncon- 
ditionally renounces  his  rights  against  the  acceptor  the  bill  is  discharged. 

The  renunciation  must  be  in  writing,  unless  the  bill  is  delivered  up  to  the 
acceptor. 

<2)  The  liabilities  of  any  party  to  a  bill  may  in  like  manner  be  renounced 
by  the  holder  before,  at.  or  after  its  maturity;  but  nothing  in  this  sec- 
tion sliall  affect  the  rights  of  a  holder  in  due  course  without  notice  of  the 
renunciation. 

63.  Cancellation. 

(1)  Wliere  a  bill  is  intentionally  cancelled  by  the  holder  or  his  agent,  and 
the  cancellation  is  apparent  thereon,  tlie  bill  is  discharged. 

(2)  In  like  manner  any  party  liable  on  a  bill  may  be  discharged  by  the 
intentional  cancellation  of  his  signature  by  the  holder  or  his  agent.  In  such 
cant:  .iny  indorser  who  would  have  had  a  -ight  of  recourse  against  the  party 
whose  signature  is  caiKelled,  is  also  discharged. 

(3)  A  caiic.-llation  ma<le  unintj-ntionally,  or  under  a  mistake,  or  without  the 
authority  of  tin'  holder,  is  inoperative  ;  hut  where  a  bill  or  anv  signature 
thereon  a[)pf.'arH  to  havo  In-on  cancelled  the  burden  of  proof  lies  on  the  party 
who  alleges  that  the  ranrellation  was  made  unintentionally,  or  under  a  mis- 
take, or  without  authority. 

64.  Alteration  of  bill. 

(1)  Where  a  bill  or  acceptance  is  materially  altered  without  the  assent  of 
all  parties  liable  on  the  bill,  the  bill  is  avoided  except  as  against  a  party  who 


864  BILLS   OF   EXCHANGE   ACT. 

haH  himself  made,  authorised,  or  aseented  to  the  alteration,  and  subsequent 

iiulorsors. 

Provided  that, 

Whore  a  bill  has  been  materially  altered,  but  the  alteration  is  not  apparent, 
and  the  bill  is  in  the  hand  of  a  liolder  in  clue  course,  such  holder  may  avail 
himself  of  tiie  bill  as  if  it  had  not  been  altered,  and  may  enforce  payment  of  it 
according  to  its  original  tenor. 

(2)  In  particular  the  following  alterations  are  material,  namely,  any  altera- 
tion of  the  date,  tlie  sum  payable,  the  time  of  payment,  the  place  of  payment, 
and,  where  a  bill  has  been  accepted  generally,  the  addition  of  a  place  of  pay- 
ment without  the  acceptor's  assent. 

Acceptance  and  Payment  for  Honour. 

65.  Acceptance  for  honour  supra  protest. 

(1)  Where  a  bill  of  exchange  has  been  protested  for  dishonour  by  non- 
acceptance,  or  protested  for  better  security,  and  is  not  overdue,  any  person, 
not  being- a  party  already  liable  thereon,  may,  with  the  consent  of  the  holder, 
intervene  and  accept  the  bill  supra  protest  for  the  honour  of  any  party  liable 
thereon,  or  for  the  honour  of  the  person  for  whose  account  the  bill  is  drawn. 

(2)  A  bill  may  be  accepted  for  honour  for  part  only  of  the  sum  for  which  it 
is  drawn. 

(3)  An  acceptance  for  honour  supra  protest  in  order  to  be  valid  must  — 

(a)  Be  written  on  the  bill,  and  indicate  that  it  is  an  acceptance  for 

honour: 
Q))  Be  signed  by  the  acceptor  for  honour. 

(4)  Where  an  acceptance  for  honour  does  not  expressly  state  for  whose  hon- 
our it  is  made,  it  is  deemed  to  be  an  acceptance  for  the  honour  of  the  drawer. 

(5)  Where  a  bill  payable  after  sight  is  accepted  for  honour,  its  maturity  is 
calculated  from  the  date  of  the  noting  for  non-acceptance,  and  not  from  the 
date  of  the  acceptance  for  honour. 

66.  Liability  of  acceptor  for  honour. 

(1)  The  accei^tor  for  honour  of  a  bill  by  accepting  it  engages  that  he  will,  on 
c'uo  presentment,  pay  the  bill  according  to  the  tenor  of  his  acceptance,  if  it  is 
not  paid  by  the  drawee,  provided  it  has  been  duly  presented  for  payment,  and 
protested  for  non-payment,  and  that  he  receives  notice  of  these  facts. 

(2)  The  acceptor  for  honour  is  liable  to  the  holder  and  to  all  parties  to  the 
bill  subsequent  to  the  party  for  whose  honour  he  has  accepted. 

67.  Presentment  to  acceptor  for  honour. 

(1)  Where  a  dishonoured  bill  has  been  accepted  for  honour  supra  protest,  or 
contains  a  reference  in  case  of  need,  it  must  be  protested  for  non-payment 
before  it  is  presented  for  payment  to  the  acceptor  for  honour,  or  referee  in  case 
of  need. 

(2)  Where  the  address  of  the  acceptor  for  honour  is  in  the  same  place  where 
the  bill  is  protested  for  non-payment,  the  bill  must  be  presented  to  him  not 
later  than  the  day  following  its  maturity ;  and  where  the  address  of  the 
acceptor  for  honour  is  in  Home  place  other  than  the  place  where  it  was  pro- 
tested for  non-payment,  the  bill  must  be  forwarded  not  later  than  the  day 
following  its  maturity  for  presentment  to  him. 

(3)  Delay  in  presentment  or  non-presentment  is  excused  by  any  circum- 


BILL   IN   A   SET.  865 

stance  which  would   eicua*   delay  in  presentment  for  payment  or  non-pre- 
sentment for  payment. 

(4)  Wlien  a  bill  of  exchange  is  dishonoured  by  the  acceptor  for  honour  it 
must  be  protested  for  non-payment  by  him. 

68.  Payment  for  honour  supra  protest. 

(1)  Where  a  bill  has  been  protested  for  non-payment,  any  person  may  inter- 
vene and  j)ay  it  supra  protest  for  the  honour  of  any  party  liable  thereon,  or  for 
the  honour  of  the  person  for  whose  account  the  bill  is  drawn. 

(2)  Where  two  or  more  persons  offer  to  pay  a  bill  for  the  honour  of  different 
parties,  the  person  whose  payment  will  discharge  most  parties  to  the  bill  shall 
have  the  preference. 

(3)  Payment  for  honour  supra  protest,  in  order  to  operate  as  such  and  not  as 
a  mere  voluntary  payment,  must  be  attested  by  a  notarial  act  of  honour  which 
may  be  appended  to  the  protest  or  form  an  extension  of  it. 

(4)  The  notarial  act  of  honour  must  be  founded  on  a  declaration  made  by  the 
payer  for  honour,  or  his  agent  in  that  behalf,  declaring  his  intention  to  pay 
the  bill  for  honour,  and  for  whose  honour  he  pays. 

(0)  Where  a  bill  has  been  paid  for  honour,  all  parties  subsequent  to  the  party 
for  whose  honour  it  is  paid  are  discharged,  but  the  payer  for  honour  is  subro- 
gated for,  and  succeeds  to  both  the  rights  and  duties  of,  the  holder  as  regards 
the  party  for  whose  honour  he  pays,  and  all  parties  liable  to  that  party. 

(6)  Tlie  payer  for  honour,  on  paying  to  the  holder  the  amount  of  the  bill  and 
the  notarial  expenses  incidental  to  its  dishonour,  is  entitled  to  receive  both  the 
bill  itself  and  the  protest.  If  the  holder  do  not  on  demand  deliver  them  up, 
he  shall  be  liable  to  the  payer  for  honour  in  damages. 

(7)  Where  the  holder  of  a  bill  refuses  to  receive  payment  supra  protest  he 
shall  lose  his  riglit  of  recourse  against  any  party  who  would  have  been  dis- 
charged by  such  payment. 

Lost  TuJitruments. 

69.  Holder's  right  to  duplicate  of  lost  bill. 

Where  a  bill  ha.s  been  lost  before  it  is  overdue,  the  person  who  was  the  holder 
of  it  may  apply  to  the  drawer  to  give  him  another  bill  of  the  same  tenor,  giving 
security  to  the  drawer  if  required  to  indemnify  him  against  all  persons  what- 
ever in  ca.se  the  bill  alleged  to  have  been  lost  shall  be  found  again. 

If  the  drawer  on  retjuest  as  aforesaid  refuses  to  give  such  duplicate  bill, 
he  may  be  compelled  to  do  so. 

70.  Action  on  lost  bill. 

In  any  action  (jr  proceeding  upon  a  bill,  the  court  or  a  judge  may  order  that 
the  loss  of  the  instrunienl  shall  not  l)e  set  up,  provided  an  indemnity  be  given 
to  the  satisfartion  of  the  court  or  judge  against  the  claims  of  any  other  per- 
son upfjn  the  instrument  in  question. 

nUl  in  (I  Set. 

71.  Rules  as  to  sets. 

(1)  Whi-re  a  bill  is  drawn  in  a  set,  each  part  of  the  set  being  numbered,  and 
containing  a  reference  to  the  other  parts,  the  whole  of  the  parts  constitute 
one  hill. 

rrmaorr.  inbtrumbntb  —  M 


865  BILLS   OF   EXCHANGE  ACT. 

(2)  Where  the  holder  of  a  set  indorses  two  or  more  parts  to  different  persons, 
he  is  liablo  on  every  such  part,  and  every  indorser  subsequent  to  liini  is  liable 
on  the  part  ho  has  himself  indorsed  as  if  the  said  parts  were  separate  bills. 

(3)  Wlu're  two  or  more  parts  of  a  set  are  negotiated  to  different  holders  in 
due  course,  llie  holder  whose  title  first  accrues  is  as  between  such  holders 
deemed  the  true  owner  of  the  bill ;  but  nothing  in  this  sub-section  shall  affect 
the  rights  of  a  person  who  in  due  course  accepts  or  pays  the  part  first  pre- 
sented to  him. 

(4)  The  acceptance  may  be  written  on  any  part,  and  it  must  l>e  written  on 
one  part  only. 

If  the  drawee  accepts  more  than  one  part,  and  such  accepted  parts  gets  into 
the  hands  of  different  holders  in  due  course,  he  is  liable  on  every  such  part  as 
if  it  were  a  separate  bill. 

(5)  When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without  requiring  the 
part  bearing  his  acceptance  to  be  delivered  up  to  him,  and  that  part  at 
maturity  is  outstanding  in  the  hands  of  a  holder  in  due  course,  he  is  liable  to 
the  holder  thereof. 

(6)  Subject  to  the  preceding  rules,  where  any  one  part  of  a  bill  drawn  in  a 
set  is  discharged  by  payment  or  otherwise,  the  whole  bill  is  discharged. 

Conflict  of  Laws. 

72.  Rules  where  laws  conflict. 

Where  a  bill  drawn  in  one  country  is  negotiated,  accepted,  or  payable  in 
another,  the  rights,  duties,  and  liabilities  of  the  parties  thereto  are  determined 
as  follows  :  — 

(1)  The  validity  of  a  bill  as  regards  requisites  in  form  is  determined  by  the 
law  of  the  place  of  issue,  and  the  validity  as  regards  requisites  in  form  of  the 
supervening  contracts,  such  as  acceptance,  or  indorsement,  or  acceptance 
supra  protest,  is  determined  by  the  law  of  the  place  where  such  contract  was 
made. 

Provided  that  — 

(o)  Where  a  bill  is  issued  out  of  the  United  Kingdom  it  is  not  invalid 
by  reason  only  that  it  is  not  stamped  in  accordance  with  the  law 
of  the  place  of  issue  : 

(6)  Where  a  bill,  issued  out  of  the  United  Kingdom,  conforms,  aa 
regards  requisites  in  form,  to  the  law  of  the  United  Kingdom,  it 
may,  for  the  purpose  of  enforcing  payment  thereof,  be  treated  as 
valid  as  between  all  persons  who  negotiate,  hold,  or  become 
parties  to  it  in  the  United  Kingdom. 

(2)  Subject  to  the  provisions  of  this  Act,  the  interpretation  of  the  drawing, 
indorsement,  acceptance,  or  acceptance  supra  protest  of  a  bill,  is  determined 
by  the  law  of  the  place  where  such  contract  is  made. 

Pro%ided  tliat  where  an  inland  bill  is  indorsed  in  a  foreign  country  the 
indorsement  shall  as  regards  the  payer  be  interpreted  according  to  the  law  of 
the  United  Kingdom. 

(3)  The  duties  of  the  holder  with  respect  to  presentment  for  acceptance  or 
payment  and  the  necessity  for  or  sufficiency  of  a  protest  or  notice  of  dis- 
honour, or  otherwise,  are  determined  by  the  law  of  the  place  where  the  act  is 
done  or  the  bill  is  dishonoured. 

(4)  Where  a  bill  is  drawn  out  of  but  payable  in  the  United  Kingdom  and  the 


CROSSED   CHEQUES.  867 

sum  payable  is  not  expressed  in  the  currency  of  the  United  Kingdom,  the 
amount  shall,  in  the  absence  of  some  express  stipulation,  be  calculated  accord- 
ing to  the  rate  of  exchange  fof  sight  drafts  at  the  place  of  payment  on  the  day 
the  bill  is  payable. 

(5)  Where  a  bill  is  drawn  in  one  country  and  is  payable  in  another,  the 
due  date  thereof  is  determined  according  to  the  law  of  the  place  where  it  is 
payable. 

PAET  III. 

Cheques  on  a  Banker. 

73.  Cheque  defined. 

A  cheque  is  a  bill  of  exchange  drawn  on  a  banker  payable  on  demand. 
Except  as  otherwise  provided  in  this  Part,  the  provisions  of  this  Act  appli- 
cable to  a  bill  of  exchange  payable  on  demand  apply  to  a  cheque. 

74.  Presentment  of  cheque  for  payment. 

Subject  to  the  provisions  of  this  Act  — 

(1)  Where  a  cheque  is  not  presented  for  payment  within  a  reasonable  time 
of  its  issue,  and  the  drawer  or  the  person  on  whose  account  it  is  drawn  had 
the  right  at  the  time  of  such  presentment  as  between  him  and  the  banker  to 
have  the  cheque  paid  and  sutlers  actual  damage  through  the  delay,  he  is 
discharged  to  the  extent  of  such  damage,  that  is  to  say,  to  the  extent  to  which 
such  drawer  or  person  is  a  creditor  of  such  banker  to  a  larger  amount  than  he 
would  have  l)een  had  such  cheque  been  paid. 

(2)  In  determining  what  is  a  reasonable  time  regard  shall  be  had  to  the 
nature  of  the  instrument,  the  usage  of  trade  and  of  bankers,  and  the  facts  of 
the  particular  case. 

(3)  The  holder  of  such  cheque  as  to  which  such  drawer  or  person  is  dis- 
charged shall  ])e  a  creditor,  in  lieu  of  such  drawer  or  person,  of  such  banker  to 
the  extent  of  such  discharge,  and  entitled  to  recover  the  amount  from  him. 

75.  Revocation  of  banker's  authority, 

The  duty  and  authority  of  a  banker  to  pay  a  cheque  drawn  on  him  by  his 
customer  are  determined  by  — 

(1)  Countermand  of  payment : 

(2)  Notice  f)f  customer's  death. 

(Jrossed  Clirqiiet. 

76.  General  and  special  crossing's  defined. 

(1)  Where  u(liei|ue  l>ears  a(rr)sn  its  face  an  addition  of —  (a)  the  words  "  and 
company  "  or  any  alibreviation  tliereof  between  two  parallel  tranHverse  lines, 
either  with  or  without  tlie  words  "  not  negotial)le  ;"  or  (/>)  two  parallel  trans- 
verw?  lines  sitiiply,  (.'itiier  witli  or  without  the  word.j  "  not  negotiable, —  "  that 
addition  coristituU.'H  a  crossing,  and  the  checiue  is  crossed  generally. 

(2)  Whore  a  cheque  Vars  across  its  fivi'  an  addition  of  the  name  of  a 
banker,  eithrr  with  or  without  the  words  "  not  negotiable,"  that  addition  con- 
Htitutes  a  crossing,  an<l  the  cheque  is  crossed  specially  and  to  that  banker. 

77.  CrossinR"  by  drawer  or  after  Issue. 

(1)  A  rher|iie  ni.'iy  be  croH-sed  generally  or  specially  by  the  <lrawer. 


808  BILLS   OF   EXCHANGE   ACT. 

(2)  Where  a  chequo  is  uncrosaoil,  the  holder  may  cross  it  generally  or 
specially. 

(3^  Where  a  cheque  is  crossed  generally  the  liolder  may  cross  it  specially. 

(41  Where  a  chixiue  is  crossed  generally  or  specially,  the  holder  may  add 
the  words  "not  negotiable." 

(5)  Where  a  cheque  is  crossed  specially,  the  hanker  to  whom  it  is  crossed 
may  again  cross  it  specially  to  another  banker  ft)r  collection. 

((■))  Where  an  uncrossed  checjuo.  or  a  cheipie  crossed  generally,  is  sent  to  a 
banker  for  collection,  he  may  cross  it  specially  to  himself. 

78.  Crossing  a  material  part  of  check. 

A  crossing  authorized  by  tliis  Act  is  a  material  part  of  the  cneque  ;  it  shall 
not  be  lawful  for  any  person  to  obliterate  or,  except  as  authorized  by  this  Act, 
to  add  to  or  alter  the  crossing. 

79.  Duties  of  banker  as  to  crossed  cheques. 

(1)  Where  a  checjue  is  crossed  specially  to  more  than  one  banker  except 
wlion  crossed  to  an  agent  for  collection  being  a  banker,  the  banker  on  whom 
it  is  drawn  shall  refuse  payment  thereof. 

(2)  Where  the  banker  on  whom  a  cheque  is  drawn  which  is  so  crossed 
nevertheless  pays  the  same,  or  pays  a  cheque  crossed  generally  otherwise  than 
to  a  banker,  or  if  crossed  specially  otherwise  than  to  the  banker  to  whom  it  is 
crossed,  or  his  agent  for  collection  being  a  banker,  he  is  liable  to  the  true 
owner  of  the  cheque  for  any  loss  he  may  sustain  owing  to  the  cheque  having 
been  so  paid. 

Provided  that  where  a  cheque  is  presented  for  payment  which  does  not  at 
the  time  of  presentment  appear  to  be  crossed,  or  to  have  had  a  crossing  which 
has  been  obliterated,  or  to  have  been  added  to  or  altered  otherwise  than  as 
authorised  by  this  Act,  the  banker  paying  the  cheque  in  good  faith  and  with- 
out negligence  shall  not  be  responsible  or  incur  any  liability,  nor  shall  the 
payment  be  questioned  by  reason  of  the  cheque  having  been  crossed,  or  of  the 
crossing  having  been  obliterated  or  having  been  added  to  or  altered  otherwise 
than  as  authorised  by  this  Act,  and  of  payment  having  been  made  otherwise 
than  to  a  banker  or  to  the  banker  to  whom  the  cheque  is  or  was  crossed,  or 
to  his  agent  for  collection  being  a  banker,  as  the  case  may  be. 

80.  Protection  to  banker  and  drawer  where  cheque  is  crossed. 
Where  the  banker,  on  whom  a  crossed  cheque  is  drawn,  in  good  faith  and 

without  negligence  pays  it,  if  crossed  generally,  to  a  banker,  and  if  crossed 
specially,  to  the  banker  to  whom  it  is  crossed,  or  his  agent  for  collection  being 
a  banker,  the  banker  paying  the  cheque,  and,  if  the  cheque  has  come  into  the 
hands  of  the  payee,  the  drawer,  shall  respectively  be  entitled  to  the  same  rights 
and  be  placed  in  the  same  position  as  if  payment  of  the  cheque  had  been  made 
to  the  true  owner  thereof. 

81.  Effect  of  crossing  on  holder. 

Where  a  person  takes  a  crossed  cheque  which  bears  on  it  the  words  "  not 
negotiable,"  he  shall  not  have  and  shall  not  be  capable  of  giving  a  better  title 
to  the  cheque  than  that  which  the  person  from  whom  he  took  it  had. 

82.  Protection  to  collecting  banker.    [Amended  1906.    See  post,  p.  873.] 
Where  a  banker  in  good  faith  and   without  negligence  receives   payment 

for  a  customer  of  a  cheque  crossed  generally  or  specially  to  himself,  and  the 


PROMISSORY   NOTES.  860 

cuetomer  has  no  title  or  a  defective  title  thereto,  the  banker  shall  not  incur 
any  liability  to  the  true  owner  of  the  cheque  by  reason  only  of  having  received 
such  payment. 

PART  rv. 

Promissory  Notes. 

83.  Promissory  note  defined. 

(1)  A  promissory  note  is  an  unconditional  promise  in  writing  made  by  one 
person  to  another  signed  by  the  maker,  engaging  to  pay,  on  demand  or  at  a 
fixed  or  determinable  future  time,  a  sum  certain  in  money,  to,  or  to  the  order 
of,  a  specified  person  or  to  bearer. 

(2)  An  instrument  in  the  form  of  a  note  payable  to  maker's  order  is  not  a 
note  within  the  meaning  of  this  section  unless  and  until  it  is  indorsed  by  the 
maker. 

(3)  A  note  is  not  invalid  by  reason  only  that  it  contains  also  a  pledge  of  col- 
lateral security  with  authority  to  sell  or  dispose  thereof. 

(4)  A  note  which  is,  or  on  the  face  of  it  purports  to  be,  both  made  and  pay- 
able within  the  British  Islands  is  an  inland  note.  Any  other  note  is  a  foreign 
note. 

84.  Delivery  necessary. 

A  proini-ssory  note  is  inchoate  and  incomplete  until  delivery  thereof  to  the 
payee  or  bearer. 

85.  Joint  and  several  notes. 

(1)  A  promissory  note  may  be  made  by  two  or  more  makers,  anv^  they  may- 
be liable  thereon  jointly,  or  jointly  and  severally  according  to  its  tenor. 

(2)  Where  a  note  runs  "I  promise  to  pay"  and  is  signed  by  two  or  more 
persons  it  is  deemed  to  be  their  joint  and  several  note. 

86.  Note  payable  on  demand. 

(1)  Where  a  note  payable  on  demand  has  been  indorsed,  it  must  be  pre- 
st-ntod  for  payment  within  a  reasonable  time  of  the  indorsement.  If  it  be  not 
so  presented  the  indorser  is  discharged. 

(2)  In  determining  what  is  a  reasonable  time,  regard  shall  be  had  to  the 
nature  of  the  instrument,  the  usage  of  trade  and  the  facts  of  the  particular 
case. 

(3)  Where  a  note  payable  on  demand  is  negotiated,  it  is  not  deemed  to  be 
overdue,  for  the  purpose  of  affecting  the  holder  with  lef-^cts  of  title  of  which 
he  had  no  notice,  by  reason  that  it  appears  that  a  reasonable  time  for  present- 
ing it  for  payment  has  elapsed  since  its  issue. 

87.  Presentment  of  note  for  payment. 

(\)  Whfn-a  proiiiisHory  iiotf  is  in  thn  })0(lyof  it  made  payable  at  a  particular 
place,  it  must  bo  j)reHerited  for  payment  at  that  place  in  ordfT  to  render  the 
maker  liable.  In  any  other  case,  [)ro8entmont  for  payment  is  not  necessary  in 
order  to  n-ndcr  tlic  inakf-r  lialile. 

(2)  I'n-sentMjent  for  payment  is  necea«;iry  in  order  to  render  the  indorser  of 
a  note  liable. 

CZ)  Where  a  note  is  in  the  body  of  it  made  payable  at  a  particular  place, 


870  BILLS   OK   EXrilANCE    ACT. 

preseutinont  at  tlmt  place  is  necessary  in  order  to  render  an  indorser  liable; 
but  when  a  place  of  payment  is  indicateil  by  way  of  memorandum  only, 
presentment  at  that  place  is  suHicient  to  render  the  indorser  liable,  but  a 
presentment  to  the  maktr  elsewhere,  if  Buthcient  in  other  respecta,  shall  also 
suffice. 

88.  Liability  of  maker. 

The  maker  of  a  promissory  note  by  making  it  — 

(1)  EnjxaRPS  that  he  will  pay  it  according  to  its  tenor  ; 

(2)  Is  precluded  from  denying  to  a  holder  in  due  course  the  existence  of  the 
payee  and  his  then  capacity  to  indorse. 

89.  Application  of  Part  II  to  notes. 

(1)  Subject  to  the  provisions  in  this  Part,  and  except  as  by  this  section 
provided,  the  provisions  of  this  Act  relating  to  bills  of  exchange  apply,  with 
the  necessary  modifications,  to  promissory  notes. 

(2)  In  applying  those  provisions  the  maker  of  a  note  shall  bo  deemed  to 
correspond  with  the  acceptor  of  a  bill,  and  the  lirst  indorser  of  a  note  sliall 
be  deemed  to  correspond  with  the  drawer  of  an  accepted  bill  payable  to 
drawer's  order. 

(3)  The  following  provisions  as  to  bills  do  not  apply  to  notes ;  namely, 
provisions  relating  to  — 

(a)  Presentment  for  acceptance  ; 
(6)  Acceptance ; 

(c)  Acceptance  supra  protest ; 

(d)  Bills  in  a  set. 

(4)  Where  a  foreign  note  is  dishonoured,  protest  thereof  is  unnecessary. 

PART  V. 
Supplementary. 

90.  Good  faith. 

A  thing  is  deemed  to  be  done  in  good  faith,  within  the  meaning  of  this  Act, 
where  it  is  in  fact  done  honestly,  whether  it  is  done  negligently  or  not. 

91.  Signature. 

(1)  Where,  by  this  Act,  any  instrument  or  writing  is  required  to  be  signed 
by  any  person,  it  is  not  necessary  that  he  should  sign  it  with  his  own  hand, 
but  it  is  suflficient  if  his  signature  is  written  thereon  by  some  other  person  by 
or  under  his  authority. 

(2)  In  the  case  of  a  corporation,  where  by  this  Act  any  instrument  or  writ- 
ing is  required  to  lie  signed,  it  is  sufficient  if  the  instrument  or  writing  be  sealed 
with  the  corporate  seal. 

But  nothing  in  this  section  shall  be  construed  as  requiring  the  bill  or  note  of 
a  corporation  to  be  under  seal. 

92.  Computation  of  time. 

Where,  by  this  Act,  the  time  limited  for  doing  any  act  or  thing  is  leae  than 
three  days,  in  reckoning  time,  non-business  days  are  excluded. 
''  Non-business  days"  for  the  purposes  of  this  Act  mean  — 
(a)  Sunday,  Good  Friday,  Christmas  Day  : 


SUPPLEMENTARY.  871 

(b)  A  bank  holiday  under  the  Bank  Holidays  Act,  1871,  or  acts  amend- 

ing it : 

(c)  A  day  appointed  by  Royal  proclamation  as  a  public  fast  or  thanks- 

giving day. 
Any  other  day  is  a  business  day. 

93.  When  noting:  equivalent  to  protest. 

For  the  purposes  of  this  Act,  where  a  bill  or  note  is  required  to  be  protested 
within  a  specified  time  or  before  some  further  proceeding  is  taken,  it  is  suffi- 
cient that  the  bill  has  been  noted  for  protest  before  the  expiration  of  the 
specified  time  or  the  taking  of  the  proceeding  ;  and  the  formal  protest  may  be 
extended  at  any  time  thereafter  as  of  the  date  of  the  noting. 

94.  Protest  when  notary  not  accessible. 

Where  a  dishonoured  bill  or  note  is  authorized  or  required  to  be  protested, 
and  the  services  of  a  notary  cannot  be  obtained  at  the  place  where  the  bill  is 
dishonoured,  any  householder  or  substantial  resident  of  the  place  may.  in  the 
presence  of  two  witnesses,  give  a  certificate,  signed  by  them,  attesting  the  dis- 
honour of  the  bill,  and  the  certificate  shall  in  all  respects  operate  as  if  it  were 
a  formal  protest  of  the  bill. 

The  form  given  in  Schedule  1  to  this  Act  may  be  used  with  necessary  modifi- 
cations, and  if  used  shall  be  sufficient. 

95.  Dividend  warrants  may  be  crossed. 

The  provisions  of  this  Act  as  to  crossed  cheques  shall  apply  to  a  warrant  for 
payment  of  dividend. 

96.  Repeal. 

The  enactments  mentioned  in  the  second  schedule  to  this  Act  are  hereby 
repealed  as  from  the  commencement  of  this  Act  to  the  extent  in  that  schedule 
mentioned. 

Provided  that  such  repeal  shall  not  affect  anything  done  or  Buffered,  or  any 
right,  title,  or  interest  acquired  or  accrued  before  the  commencement  of  this 
Act.  or  any  legal  proceeding  or  remedy  in  respect  of  any  such  thing,  riglit, 
title,  or  interest. 

97.  Savings. 

(1)  The  rules  in  bankruptcy  relating  to  bills  of  exchange,  promissory  notes, 
and  cheiitifH,  hIihII  continue  to  ap[ily  thereto  notwithstanding  anything  in  this 
Act  coritaiiieil. 

(2)  The  rules  of  connnoti  law  including  the  law  mercliant,  siive  in  so  far  as 
they  are  inconsistent  with  the  express  provisions  of  this  Act,  shall  continue  to 
apply  to  bills  of  exchange,  (tromisHory  notes,  and  cheques. 

(3)  Nothing  in  this  Act  or  in  any  repeal  effected  thereby  shall  affect  — 

(a)  The  provisions  of  thf  Stamp  .\ct.  IftTfl.*  or  acts  amcnrling  it.  or  any 

law   or   rnartment  for   the  time  being   in   force  relating  to   thft 
revenue  : 

(b)  The  provisions  of  the  Companifs  Act,  lH62.t  or  acts  amending  it,  or 

any  act  relating  to  joint  stock  banks  or  companies  : 


•88an«1!MV/ct.  c.  •? 
t26an'l  2«  Viol   c   h9 


g72  BILLS    OF   EXCHANGE    ACT. 

(c)  The  provisiotiH  of  any  act  rolating  to  or  confirming  the  privilegea  Df 

the  Bank  of  Knghuul  or  the  Bank  of  Irehind  respectively  : 

(d)  The  validity  of  any  usage  relating  to  dividend  warrants,  or  the 

indorsements  tliereof. 

98.  Saving  of  summary  diligence  In  Scotland. 

Nothing  in  this  Act  or  in  any  repeal  effected  thereby  shall  extend  orrestrict, 
or  in  any  way  alter  or  affect  the  law  and  practice  in  Scotland  in  regard  to 
summary  diligence. 

09.  Construction  with  other  acts,  etc. 

Where  any  act  or  document  refers  to  any  enactment  repealed  by  this  Act, 
the  act  or  document  shall  be  construed,  and  shall  operate,  as  if  it  referred  to  the 
corresponding  provisions  of  this  Act. 

100.  Parol  evidence  In  judicial  proceedings  In  Scotland. 

In  any  judicial  proceeding  in  Scotland,  any  fact  relating  to  a  bill  of 
exchange,  bank  cheque,  or  promissory  note,  which  is  relevant  to  any  question 
of  liability  thereon,  may  be  proved  by  parol  evidence:  Provided  that  this 
enactment  shall  not  in  any  way  affect  the  existing  law  and  practice  whereby 
the  party  who  is,  according  to  the  tenor  of  any  bill  of  exchange,  bank  cheque, 
or  promissory  note,  debtor  to  the  holder  in  the  amount  thereof,  may  be 
required,  as  a  condition  of  obtaining  a  sist  of  diligence,  or  suspension  of  a 
charge,  or  threatened  charge,  to  make  such  consignation,  or  to  find  such 
caution  as  the  court  or  judge  before  whom  the  cause  is  depending  may  require. 

This  section  shall  not  apply  to  any  case  where  the  bill  of  exchange,  bank 
cheque,  or  promissory  note  has  undergone  the  sesennial  prescription. 

First  Schedule.*    (Sec.  94.) 
Form  of  protest  which  may  be  used  when  the  services  of  a  notary  cannot  be 
obtained. 
Know  all  men  that  I,  A.  B.  (householder),  of  in  the  county  of 

,  in  the  United  Kingdom,  at  the  request  of  C.  D.,  there  being  no 
notary  public    available,    did   on  the  day  of  188     at 

demand  payment  (or  acceptance)  of  the  bill  of  exchange  here- 
under written,  from  E.  F.,  to  which  demand  he  made  answer  (state  answer, 
if  any).  Wherefore,  I  now  in  the  presence  of  G.  H.  and  J.  K.  do  protest 
the  said  bill  of  exchange. 

(Signed)  A.  B. 

J    K  \  Witnesses. 
N.  B.  —  The  bill  itself  should  be  annexed,  or  a  copy  of  the  bill  and  all  that 
is  written  thereon  should  be  underwritten. 


•The  other  schedules  are  purely  local  In  Interest,  and  are  therefore  omitted.— Ed. 


BILLS    OF    EXCHANGE    ACT.  873 

BILLS  OF  EXCHANGE   (CROSSED  CHEQUES)   ACT,  1906. » 

6  Edw.  7,  c.  17. 

AN  ACT  to  amend  section  eighty-two  of  the  Bills  of  Exchange 
Act,  1882.  4th  August,  1906. 

Sec.  1.  A  banker  receives  payment  of  a  crossed  cheque  for  a  cus- 
tomer within  the  meaning  of  section  eighty-two  of  the  Bills  of  Ex- 
change Act,  1882,  notwithstanding  that  he  credits  his  customer's 
account  with  the  amount  of  the  cheque  before  receiving  payment 
thereof. 

Sec.  2.  This  act  may  be  cited  as  the  Bills  of  Exchange  (Crossed 
Cheques)  Act,  1006,  and  this  act  and  the  Bills  of  Exchange  Act,  1882, 
may  be  cited  together  as  the  Bills  of  Exchange  Acts,  1882  and  1906. 


•  "Note.  —  This  act  was  passed  to  get  rid  of  the  decision  in  Capital  and 
Counties  Bank  v.  Gordon.  A.  C.  ( 1893),  240,  H.  L.,  where  it  was  held  that  if  a 
bank  received  a  crossed  cheque  from  a  customer,  and  at  once  credited  liis  ac- 
count with  the  amount,  the  bank  became  holders  for  value  of  the  cheijue,  and 
in  receiving  payment  thereof,  received  it  on  their  own  account,  and  not  merely 
as  agents  for  collection  on  behalf  of  their  customer.  They  therefore  did  not 
come  within  the  protection  given  by  section  82  of  the  act  of  1882  to  collecting 
bankers.  .  .  ."  Chalmers,  A  Digest  of  the  Law  of  Bills  of  Exchange, 
etc.,  7th  ed.,  p.  400.  —  C. 


INDEX 


[The  "§"  references  are  to  the  sections  of  the  New  York  Negotiable 
Instninipnt  Law  ;  other  references  are  to  pages] 


Acceptance:     (See    NON-ACCEPTANCE.) 

dpfinitiwti    an<]    effect,    -lOS-JlS,    §    2,    §    112. 
form   and   effect.    648-668,    §§    220-225. 
writing    ami   signature,    64S-649,    §    220. 
parol,    64!in,    668. 
unly    by    drawi'e,    64f»-<i50,    §    220. 
delivery   necessary,   ft50. 
promise   to   accept,    654—657,    §    223. 
by    refusal    to    return    bill,    646,    658-665, 

§    -25. 
of  incomplete  or  dishonored   bill,   666—668, 

S    •i-.iO. 
time    allowpd    for,    660-665,    §    224. 
kin<j8   of,    6(i8-(i78,    §§    227-22'.». 
general    acceptance,    668-67.S,    §    228. 
qualified    acceptance,    67.3-678,    §    229. 
conditional,    67.3-674,    §    220. 
partial.    675,    §    229. 
local,    675-676.    §    229. 
qualified   as   to   time.   676,    §   229. 
by   part   of  drawees,   67('.,    §    229. 
effect     of     qualified     acceptance,     677-678, 
i  2.-«). 
of  bills  in   a  set,   709-710,    $   313. 

Arrpptance  for  honor: 

when    allowed,     7i>l,     §    280. 
p.irlies    t'l,    7ul.    $    2S0. 
fi>r    what   amount,    §   280. 
f<rrii.-il    r''<|iiisiti's,    7''1,     $    2S1. 

protest    for    non-acceptance,    701.    $    280. 

writing   and   .si(;na(Mre.    g   2S1. 
interpretation. 

f  r   wliow   honor,    J    282. 

effect   on    maturity   of   bill,    {   285. 
Cfintr.ict   of  ai  i-epi.  r  f' r   le  iii  r, 

terms  of,   649.   703,    7<t5,    |    284. 

in    whose    f.iv.r,    g    'JXi. 

admissions   by.    704. 
pnx'eedings    Sllbs"quent     to, 

presentment    In    drawee    and    protest,    701- 
702,    70.V-7(X;.     II    284,    286. 

presentment     lo    acceptor    for    honor,     703, 
705-706,    I    287. 

exnise   for   delay,    704-706,    §    288. 

protest    fr.r    non-payment    by    acceptor    for 
honor,    I    280. 

Arrpptor: 

consideration,   2flO-261. 
liability  of.    4f:.3,    |    112. 
■dmissionii  nt,    403-418,    |    112. 
only  drawie  <an  be.  612  r4.".  649-6.10,   |  220. 
presentment    rv.i     rn'<<'«o  irv    In    eharRe,    477- 
4^o. 

Arcrptor  for  honor: 

liabilitv   of,   r,49.    To.",.    70.\    |   283. 
■dmimions  of,    704. 
who    m.iv   hn.    I    280. 


Accommodation  Paper: 

•K  conimodation   party, 

corporation    as,    256. 

defined,   255,   257-258,    §   55. 

liability   to   holder,   2.54-258,    $    55. 

notice  when   maker   is,   2,56,   579,    §    186. 

order   of   liability   of,    4.59—465. 
accommodated  party, 

not   entitled   to   presentment,    $    140. 

not  entitled  lo  notice,   579,    §    186. 

payment   by,   .597-5.98,   640-641,    §§   200-202. 

transfer   by,    after   maturity.   328-335. 

release  of,    CSIn. 

consideration    for.    243-244. 

amount    recoverafilo   on,    .361-.362. 

payment  of  supra   protest,    708n. 

Action  on  Negotiable  Paper: 

■  lefineil,     §    2. 

transfer    for    purpose   of,    316n. 

lirinfrintr,     is    a    den^aiid,     177. 

by   restrictive   indorsee,   280-284,    $   67. 

between    indorsers,    4.')9-466. 

upon   instrument    payable  to  bearer,   260. 

after  dishonor  for  non-acceptance,  690,   §  248. 

on   bills  in   a   set.   71.3n. 

against     aKcnl     signing     without     authority, 

216-219. 
upon  warranties  in  sale.  418-442. 
upon   guaranty.    471-474. 
upon  original  consideration,  610-612. 
t.i  recover  monev  pai<l  on  forged  paper,  40,3- 

418. 

Additional  Act: 

provisidi      f'r.      renders      instrument       non- 
negotiable.   90-91.    I   24. 
exrcpli.ns    lo    rule.    91    96,    $    24. 

.\rtTninfslraJor:    fSee  F.XFcnTOR.) 

.Admissions: 

bv   maker,   401-102,      |110. 
bv   adiptor.    10:;    (iM.    $    112, 
bv   drawer,    418-419,    J    111. 
by   indorser.   see   WAUUANTY. 

A cent : 

HiL'n.ilur.-  bv,    197-220.  516.   6.V»n,    ||   .38-40. 

li.ibilitv    of.    197    2'.?o.    441     H".    |    .39. 

presentment   by.   480.    |    132. 

pri'senlinenl    lo.   516. 

acri'ptance   bv,    6.'i0n. 

notice  of   ilishonor   bv.    .5.33-.539.    J  |    162.    165. 

notice  of  dishonor  to,    |   168. 

Indorsenienl    f.  r   <<iIlr<lion    lo,    274-277,    280- 

2S4.    439-440.    ||   66,   67. 
druving  <n    principal,   O.Vl   6,57. 

Allonec: 

nil. ire    and    use   of.    266-267,    308.    f    61. 

rr.l 


87  J> 


INDEX. 


Alterjitlon: 

.•n,-.t    of.    STSn.   iW-fi'JC,    B   ""•■■'.    2I16- 
ic(.MViT\    oil    iiislriimt'iit    as   lii'fino   alteration, 

157.   tilO,    ti-'5.    7-'6.    S    'ior.. 
tlmniKli  lu'tjligi'iHt'  >'f  iiiiikor,   t)24-<j20. 

of   inilorsor.   tilC.-<V.!4. 
lii.ilrrial,    tilOli,    §    -Oti. 
tninlon   of   proof,   (ilOn. 
innoceut,  611— «il4. 
by   form  of  acc-cpt.mco,   668-673. 

.Mternativo  PiirtU^s: 

pavcos,    wlii-tlier   allowed,    118-120. 
ilr.iwees,    whether   allowed,    (>42-«543. 
m.ikers,   whether  allowed,   643n. 

.%niblRuit.v:  -    »  n- 

of   laiiKiiape   in   iii.strunient,    192-19i,    §   30. 
of  sicnaturos  to  instruments,   107-220,    S   -"^fi- 

.\inl)isuous  Instrument : 

.•onslriiclion    of,    148-lM).    1112-197,    ii    3l>. 
ni.iy   tie  treated  as  bill  or  note,   1.50.    §   •"'>. 

.Amount : 

must  be  certain,  61-80,   §§  20-21. 
reroverable.    252-2.')4.    3r>l -304,  504-597,  §§  53, 
96. 

.Antecedent  Debt:  „„  ^  ., 

is  valuable  o-nsideration,   2.39-240,    §§   50-51. 
accommodation   paper,   243—244. 

.\sslsnee:    (See  BANKRUPT.) 

Assicnment : 

iii<l  rsctiunt   by,   2(51-263. 

qiialilied   indorsement   is,   284,    §   67. 

transfer   without   indorsement,   307-310,    §  7:i. 

nf   cuarantics,    471-474. 

of   funds,   bill   is  not,    644-640,    §   211. 

check   is  not,   752-7.")S,    §   3:5. 
for    benefit    of    creditors,    protest    for    bettor 
security,    §    260. 

Attorney's  Fees: 

provision    for,    docs    not    render    sum    uncer- 
tain,   78-80,    §    21. 

Bad  Faith: 

equivalent  to  knowledge,  33<-360,   5  9.5. 
imdervalue  as  evidence  of,  337-340. 

Bank:    (Spc  chf.cKS.) 

definition   of,    J   2. 

cashier   as   payee   or   indorsee,    216n,    200-3(0, 

S  72. 
bill  or  note  payable  at, 

presentment   of,    40.5-504,   524-527,    S    135. 

is  an  order  on,    §    147. 

not    bv   mere   notice.    .512-513. 

notice  of  dishonor,   537-538,  561-565. 
certificate    rif    deposit,     43. 
gavinps  bank  order  by,  46—48. 
ilraft   by,   72.5n. 

Bank    Book: 

cr.niiition  of  retuni  of,  ii-lS. 

Bank    Notes: 

history   of,    '?9. 

whether  current   money,   84-85. 

whether  demand  necessary,   478n. 

Bankrupt: 

nr.ti.e    of    dishonor    to,    548n.    579,    696-608, 

J  1"2- 
presentment    for   acceptance   to,    (    242. 
protest    f'^r   bottnr   security   apainst,    $    266. 
diacharee  of,   does  not  discharge  instrument, 

628n. 


Bearer: 

.lclln.-(l,    122,    S   2. 

bill    or    note    payable    to,    122-148,    260-261, 

SS  20.  2K. 
instruuu'iil     iiuloiscd     in    blank    payable    to, 

§  64. 
indorsement   of    iiiKtruinciil    payable    to,    288- 

207,   S  "0. 

l^.'Mter  .Srrurit.v: 

protest   for,    §    2li6. 

Bills  of  K.\chun;;e: 

hislorv,    24-31. 

form,    1.58-160,   642,    §   210. 

general    iciuisilc^,    see    KOHM    OF    NEGO- 
TIAHl.K   INSTltUMKNTS. 

drawee,    148-150,   642-^14.".,    §S    20,    212. 

referee  in  case  of  need,  ()43— 644,    §  215. 
interpretation,    see    IN'I'KKl'UKTATION. 

bill    not   an   assignment   of   funds,    644-646, 
§  211. 

inland   and  foreign   hills,   646-647,    §   213. 

distinjcuislutl    from    check,    722-724,    §    321 

Bills  of  Kxehange  Act: 

text    of.    84.5-873. 

origin   of,   3-8. 

construction   of,   5,   126,   306-.307. 

Bills  in  a  Set: 

when  treated  as  one  bill,  709,  710-713,   §  310. 
negotiation     of     parts     to     different     pers^nis, 
7U9-711),    §    311. 

rights  of  Iv.lder,    §    311. 

liability   of   indurscrs,    §    312. 
acceptance   of.    700-710,    §    313. 
payment  of,  710,   S  314. 
discharge  of.   §   315. 
copies  distinguished,  710-711. 

Blank     Indor.sement:    (See    INDORSE- 
MKNT.) 
inslruniont    payable   to   bearer,    14'-148,    {(  '.S. 
(leCinition  and   efTecf,   268-271,    §   65. 
converted  into  special,   268-270,    §  65. 

Blanks: 

when    blanks    may    be    filled,     107-111,     163- 

102,    .319-320,    H    32-34. 
distinguished  from  spaces,   616-624. 
as  notice  of  defects.   319-320.    S   91. 


Bona-flde    Holder 

niK   c:Oi  RSE.) 


(See     HOLDER     IN 


Bonds: 

vvli.ti  negotiable.  31-33,  419-4.31. 
how  made  non-negotiable,  S  332. 
[inMic   <r   corporate,    §    115. 

Broker:     fSee    AGENT.) 

Burden  of  proof: 

when  on  holder  to  prove  he  is  holder  m 
due   course,    365-370,    374-375.    S    98. 

to  show  mistake  in  cancellation,  627,    §  204. 

to  show  alteration.   610n. 

to  show  that  instrument  was  transferred  when 
overdue,    302. 

Cancellation : 

intentional,   .373,   .599,    §S   200.  204. 
uninlr'nlion.il.    60.5-008.    §    204. 
bur.len   of   proof.    627.    §    204. 

Capacity  of  I'arties: 

t',    irid   rsn,    '.>2(K    221,    S     II. 
admissions  of.   401-418,    SS    110-112. 
vvrirr.inly  of.   434.    §§    115    110. 
incapacity  as  a   defense,   372,    47S. 
drawee,   57.5,    §§   214,   24*. 


INDEX. 


877 


Cashier: 

indorsement,    when    pajable    to,    216n,    2W- 
SOO,    {    72. 

Certainty: 

of  sum  payable,  61-80,   ||  20,  21. 
of  promise,  46-61,    Jf   20,  22. 
of  time,   96-106,    |   23 
of  parties, 

drawee,   148-150,   {  20. 

payee,   107-113,    {   27. 

Certificate  of  Deposit: 

negotiability  of,    43-44n. 
demand   necessary,   477n. 
distinguished   from   deposit   slip,    43n— 44n. 
distinguished    from    savings   bank    order,    46- 
48. 

Certificate  of  Protest: 

form  and  contents,   691-698,    {   261. 

correction  of,   508-509. 

as  to   presentment   for   acceptance,    685,   694- 

695. 
as  evidence  of  notice  of  dishonor,   589-590. 

Certification  of  Check: 

effect  upon  drawer's  liability,  743-748,  {  324. 
effect  upon  indorser'g  liability,  748-751,  {  324. 

Checks: 
defined,    |   321. 

distinguished  from  bills,  722-725. 
presentment    for   payment, 
effect  of  delay  upon  drawer's  liability,  725- 
734.    f   322. 
upon   indorser's  liability,   734—743. 

Certification:    (See    CERTIFICA'nON    OF 
CHECK.) 
liability  of  drawee, 
to  holder,  752-758,   f  326. 
to  drawer   for  wrongful  dishonor,    772—774. 

Codes: 

American,    9-13,    779-841. 
Continental,   13-15. 
English,    3-9,    845-873. 
construction   of,    5,    12,   396,   451. 

Collateral   Security: 

authorizing  sale  of,  does  not  render  instru- 
ment  non-negotiable,   91-92,    {   24. 

instrument  issued  an,   is  contingent,   105-100 

instrument  transferred,  as  for  antecedent 
debt.    239-249,    {    51. 

failure   to   sell,    633-634. 

Collection : 

bill    or    note    payable    with    coats   of,    78-80, 

I  21. 
indi.rwmcnt    for,    274-277,    280-284.    |f    66-67. 
of  check,   time  allowed.   72.'V-7.'>I. 

Conditional:    (See  t;NrovniTIONAL.) 
orders  or  promises,    46-61.    if   20,   22. 
delivery,    151-1.12.    |   .\1. 
indorsement.   287,    f  69. 
acceptance,    673-674,    |    229. 

Conslderntlon : 

necessity   of,    2.Wn, 

presumption   of.    2.14-239.    716-720,    |    60. 

adequaiy   of.    23.1n.    .X17-340. 

what   constilutes,    |    .SI. 

payment   of   preexisting   debt.    240. 

rr>||iipral     security     for     preexisting    drbl. 
Z.-W   240 

in    accommodation    paper.    24.T   244,    |    20. 
effect   of   want   of   failure   of,    2.W-2.S4.    |    54. 
need    not    be   ^perifled.    I.V*.    169.    |    25. 
for   acceptor's   promise,    2.'KV-281. 
by  preceding  holder,   249-261,    |   62. 


Consideration  —  Continued, 
action  upon  original,   610n,  611-614. 
statement    of,    docs    not    render    conditional, 

55-61,    i   22. 
in   restrictive   indorsement,   277-280. 
in  transfer  in  trust,  277-280. 
patent   right   as,   384n-385n,    {   330. 
speculative,    f   331. 

Construction : 

of  ambiguous  instruments,   161-220,    |   8<J. 
of   codifying   statutes,    5,    12,    396,    461. 

Constructive  Notice: 

from  form  of  paper,  345—357. 

Contingency: 

instrument   payable   on,    not   negotiable,   46- 

49,   103-106,    fl   22,   24. 
what  is  not,  50-61. 

Contribution: 

among  sureties,   461—462. 

Copy  of  Bill: 

use  in   protest  of,   691-695,    f   261. 
negotiating  copy,    710. 

Corporation: 

as  accommodation  indorser,  266. 

indorsement   by,    221,    |    41. 

payee  a  fiscal  officer  of,    {   72. 

seal  of,   on  corporate  paper,   160n. 

paper  of,   diverted  by  officer,   346-364. 

signature   by   officers   of,    199-216. 

paper  of,   indorsed  by  directors,  677-579. 

Costs : 

provision  for  costs  of  collection  does  not 
render  sum  uncertain,   78-80,   |  21. 

of  prior  suit,  whether  recoverable  by  surety, 
364. 

Coverture: 

as  a  defense,  372. 

transfer  after,   628n. 

note  signed  by  married  women,  434. 

Currency: 

whether  treated  as  money,   83n. 

Current  Funds: 

whether  treated  as  money,  82-83. 

Current   Money: 

p.irtic  iilar  kind  may  be  specified,  86-89,    |  6. 
wh.it    constitutes,    82-89. 

('ii.stom: 

.18  origin   of  law  merchant,   2.3-24,   30-31. 

Date: 
non-essential,   168-169,    196,    f   25. 
nr"«..,»-p<;..n    ••.    to.    195,    {{    30,    .36. 

mlatake  in,   Ifll-lffi. 

ante  cl.iii'd    .in<l    poHt-datcd   instruments,    161— 

168,    i    31. 
when   date  may   be  inserted.    16.1-168.    |   32. 
'Iiange  of,   a   material   alteration,    |   206. 
on    or    before    fixed,    97-98. 
.nlterafion    of.    |    206. 
of   acceptance.    |   226. 
pfml  dated    check.    724n. 

May:     fSer  TIME.) 

I)«Mltli:     (See    KXECT'TOR.) 
of     pnrtv     primarilr     li.iMe,     .1fi7n.     81ft-817, 

.'.76n.    mi~r,m.    I    l.lrt. 
of   drawer    or    indorurr,    .'i46   ,S4R.    ||    1«»-I70. 
of   drawee   lirfore   arreptnnce,    |    24.'>. 
Instrument     pnvable     at     or     after,     102-lOt, 

2.'U-2.XS,    716-720. 


ars 


INDEX. 


nefnnlt: 

in  payment  oi  installment,  72-74,   {  "21. 

Defenses: 

absolute.   3V2n,   ^71-3'*. 

conditional  or  personal,  373n,   373-374,    S§  W, 

S13-S14.   97. 
burden   of   proof,   see   BURDKN   OF    PROOF, 
defenses    to    nenofiable    instriinients, 

alteration,    373n.    IHVS-(j-2(i,    §    '^OS. 

cancellation.   373n.   5!)<)-tH)8,    §§   200,   204. 

discharge  in  bankruptcy,  373. 

diversion  by  ajjent,   239-243,   34R-352. 

duress.   370— 375. 

failure   of   consideration,    263-254,    268,    419. 

forgerv,    ItW,    221-233,   403-418,   441,    §§    33, 
42. 

fraud.    373n,    357-359.   360-361,   476. 

fraud  as  to  nature  of  contract,   387-399. 

carnishment,    373. 

infancy,   220. 

illepalify,    36.S-370,   371,   373n,   432. 

non-demand   or   notice,   477-480. 

parol   afrreement,   270—271. 

payment,    373n,    591-592,    639-641,    S§    77, 
200. 

set-ofif,  373n,  .S20-324,  475. 

want   of   consideration.   373n,   337-338. 

want  of  delivery,  373n,   152-153. 

want    of    delivprv    as    a    negotiable    instru- 
ment,  387-399. 

want  of  title  in  holder,   314-318. 
defenses  to  guaranty,   474—476. 

Delay:    (See  diligence.) 

in    making    presentment,    97,    518-520,    725- 

743,    S   322. 
in  giving  notice,   573-574,    |    184. 
in  proceeding  against  principal,  633-634. 
in   making  presentment  for  acceptance,   681- 

685,    §   241. 
in  making  protest,   §  267. 

Delivery: 

defined,   5  2. 

when  presumed,   154-158,    §   35. 

of   incomplete   instrument,    386—387,    $    34. 

essential,   1.51-152,   265n,    $   35. 

conditional,    151-152. 

want  of,  as  defense,   1.52-1.58,  387-399. 

negotiation    by,    342,    §    60. 

warranty   in   negotiation  by,   419-437,    §    115. 

after   acceptance,    65'!. 

indorsement    of    paper    negotiable    by,     443. 

5  117. 
upon  payment.    §5   134,  306. 
of  notice  of  dishonor,   542-546.   §   167. 
obtained   by   trick,    387-399. 

Demand:    fSec   PRESENTMENT  FOR   PAY 
MENT.) 

Demand  Bill  or  Note: 

when   pavable  on   demand,   96-97,    iS    20,   2fi. 
when   overdue,   323-324,    $   92. 
when     presentment     for     payment     must     be 
made,    483-494,    §    131. 

Deposit: 

indorsement   for,    282-284. 

Deposit  Slip: 

distinguished     from     certificate     of     deposit, 
4.3n-44n. 

Diligence:     fSee   DELAY.) 
in     makine    presentment,     48.^504,     704-706, 

I    142. 
in    giving   notice.   .548-.565,   .580.    {$   ]83,    184. 
in  presenting  check,  72.5-743,    §  322. 
in    making   protest,    §    267. 


DIselinrpre  of  Instrument: 

payment  and  n(r;insfcr,   591-699,    J 5  80,  200. 

p;iynirril    in   due  cmirsc,   501-592,    j   200. 

wh.il    IK    |i.iviiu'til,    .')".i;!. 

pnyniriil    by    indorscr,    594-597. 

payment  by  party  accommodated,   (>40— C41, 
■    J   202. 

payment    or    purchase,    597-598. 
cancellation    or    renunciation,    see    CANCEL- 
LATION.    KF,N1'N('1.\TI0N. 
alteration,    see   ALTERATION, 
by  operation  of  law,   628n. 
of  bills  in   a  set,    S   315. 

Dlselicirae  of  Surety: 

what      cfTccts,      474-476,      605-608,      620-C38, 

§  201. 
extension    of    time,    does    it    discharge?,    631- 

(!:?3,    634-6.38,     §§    200-201. 
reservation  of  rights  against,  629—638,    §  201. 
by  qualified  acceptance,   677-<)78.    §   230. 
by  payment  for  honor,   707,    §   304. 
by     non-presentment     for     acceptance,     681, 

S  241. 
by  failure  of  holder  to  take  necessary  steps, 

§  247. 
by  noil -protest,    §  260. 
by  payment  for  honor,   §  304. 
by  non-presentment  of  check,  748-752,    S  322. 

Dishonor:   (S<^e  PRESENTMENT;  NOTICE; 
PROTEST.) 
by  non-payment,    §§   143,  289. 
by  non-acceptance,    §§   221,  246. 
notice  after,   §   160. 

protest  after,    §§    189,   260.  j 

acceptance   after,    667-668,    §    226.  | 

action  for  wrongful  dishonor,  772—774. 

Drawee:    (See  ACCEPTANCE.) 
must  be  certain,    148-151,    §  20. 
in  case  of  need,  643-G44,   §   21.5. 
liability      of,      644-646,       752-758,      772-774, 

S§    211,   325. 
joint   drawees,    642-643,    §    212. 
alternative   or  successive,    642—643,    §    212. 
only  drawee  can  accept,  649—650,   §  220. 
fictitious,  excuse  of  steps,  575n,    §§   142,   185, 

186. 
may  be  also  payee,   114—115,    |   27. 
may  be  also  drawer,   113—114,    §   27. 

Drawee    in     Case    of    Need:        (See 
REFEREE    IN    CASE   OF    NEED.) 

Drawer:      (Spe      FORM;      PRESENTMENT; 

NOTICE;   PROTEST.) 
contract  of,   418,    §    111. 
admissions  of,   418-419,    §   111. 
when    not   entitled    to   presentment,    520-.522, 

$  139. 
when    not    entitled    to   notice,    575-577,    580- 

585,    S   185. 
discharge   of   drawer,    §|    160,    230,    241,    260, 

322. 
payment  by,  639-640,    J  202. 
may  be  payee,    $   27. 
may  be  drawee,   150. 

Due  Bill: 

whether  a   negotiable  instrument,   37-40,   42. 

Duress: 

as  a  defense,  370-375,    |  94. 

Klectlon: 

of    holder    to    require    something    in    lieu    of 
money,   94-96,    $    24. 

Escrow : 

delivery  in,   ]51n. 


INDEX. 


879 


Estate:    (See  executor.) 

instrument   payable   to  an,    111-113. 

Kxcliange: 

provision    for,    doea   n«t    render    sum    uncer- 

Uin,   74-77,    f   21. 
note  payable  in,   not  negotiable,  81-82. 
recovery  of  re-exchange,  364n. 

Excuse  of  Steps :    (See  DILIGENCE.) 

Executor: 

presentment    for    payment    to,    516-517,    694— 

695,    S    136. 
notice  of  dishnnor  to,   547—548,    {   169. 
transfer  of  instrument   to  maker  as,  628n. 
presentment  for  acceptance  to,    §   242. 
instrument   payable  to,   111-113. 

Exemptions: 

waivi-r  of,    does   not    render   instrument   non- 
negotiable,   94,    $   24. 

Extinguishment:    (See  DISCHARGE.) 

Failure  of  Consideration:   (See  CON- 
SinKRATION.) 
effect    of,    25.'}-254.    $    54. 
as  a  defense,   253-254.   268,   419. 

Fictitious    Parties: 

payee,    instrument    payable    to    bearer,    123— 

144,    S   28. 
drawee,    notice    excused,    575n,    §J    142,    185, 
186. 
bill   may  be  treated  as  note,    S   214. 
presentment  excused,  575n,   §  142,   S  245. 

Figures: 

ilisrrepanrv     between     words     and,     192—194 
i  36'. 

Finder: 

of  instrument,   right  of  action,   314. 

Foreijcn    Bills: 
defined,    646-647,    t    213. 
require  protest,   482,   585,   691n,    {{    189,   260. 

Foreign  Money: 

whether  treated  as  money,  88-89. 

Forgery: 

of  signatures   generally,    221-233,    {    42. 

of  dr^iwer's  signature,   403-41S. 

by   Hlling   blanks,    l(fl-190,    616-fi24. 

of  in<l«rsttnent,   43.V4.'M.  438. 

of  renewal  note,  fiO5-«08. 

ratification   of,    222-223. 

aa    a    defense,     168",     221-233,     403-418,     441, 

II  33,   42. 
warranty  against,   438,    {    116. 

Form   of   Neeotlablf    Instruments: 

writing  and  siKnatiire,   34-37,    {   20. 
promise  or  orrlor,  37-^)1,   |  20. 

unconditional,   46-61,    |    22. 
certainty, 

of  sum,  61-80.   I  21. 

of  time.  fU'r-Vf,.   II   23.   26. 

of  payee.    107-113.    |   27. 

of  drawee,    148-160,    |   20. 
payable  in   money,  81-00,    I   20. 
no   additional   act.   00-96,    |    24. 
payable  to  order  or   liearer,    106-147,    ||   20, 

27,   28, 
deliverr,    I51-1W,    |    36 
non  riwentiala,    15»-1(I0.    |    25. 

Fraud: 

aa  a   defense,   373n.   3ri7-3fif>.   .V.O-,vn,   476. 
aa  to  natur«  of  rontrart,  .187  .TW). 
by  aeller.    4.TV-I.'?7,    |    ll.-i. 


Fund: 

particular  fund  designated  for  reimburse- 
ment,   5<>-55,    §    22. 

bill  not  an   assignment  of,   644-646,    {   211. 

check  not  an  assignment  of,   75:2-758,   §   325. 

current  funds,   wliether  money,  82-84,   |   26. 

acceptance    "  when   in   funds,"    674n. 

want  of  funds  in  hands  of  drawee,  effect, 
520-522,   670-577,    |$    139,    185. 

General  Acceptance: 

form   and  effect   of,   668-673,    {§   227,   228. 
to  pay  at  a  particular  place,  672-673,   {  228. 

Gift: 

of   donee's  obligation,    599-604,    {    203. 

Good   Faith:    (See   NOTICE;    HOLDER  IN 
DIE   COLRSE.) 

Grace,  Days  of: 

abolished,    §   145. 
when  last  day  of,   a  holiday,  483. 
non-negotiable  bills  have,    715-716. 
sight    bill    entitled    to,    679-680. 

Guaranty:    (See  W.\RR.\NTY.) 

transfer  by  indorsing,   2(;3-265. 

writing  above  blank   indorsement,   269-270. 

c-ontract  of  guarantor,  467—471. 

whether  transferable,   471-474. 

defenses   to,   474-476. 

indorser  of  non-negotiable  note  undertakes, 
720-721. 

whether  accommodation  contract  is  a  con- 
tinuing,  328-335. 

whether  irregular  indorsement  a,  447n,   721n. 

whether  acceptance  by  a  stranger  a,  650n. 

Holder: 

defined,    |   2. 

when  deemed  holder  for  value,  249-253,  319- 
360,    §5   52,   91. 

may  convert  blank  indorsement  into  special, 
268-269,    S    65. 

under  special  indorsement  of  instrument  pay- 
able to  bearer,   288-297,    $   70. 

of  instrument  tran.'iferred  without  indorse- 
ment,   307-310,    i    79. 

may  strike  out  indorsement,  306-307,  ||  78, 
202. 

may  sue   in   his  own   name,   314-318,    |   90. 

title  of,   in   action,   314-318. 

entitled   to  Ix-nelit   of   warranty,    |    115. 

principal   debtor   as.    5!t7-5!'8,    $    200. 

■  Iisch.irge  of  instrument  by,  591-592,   |  200. 

discharge   of    party    by,    626-»i.'59,    {    201. 

renunciation  of  rights  by,  599-<108,    |   203. 

may   refuse  oral   acceptance,    |   221. 

iii.Ty   refuse  qualified   acceptance,   677,    |   280. 

option  to  resort  to  referee  in  case  of  need, 
I  215. 

eonsent   to  acceptance  for  honor,    |   280. 

r<  fiis.il    to   receive   payment   for  honor,    |    306. 

procuring  certification  of  check,  743-751. 
I  324. 

duti«-a  of,  680,   I  247. 
See  rHKSKNTMENT  FOR   PAYMENT. 
NOTICE  OK   niSHONOR. 
I'UK.SK.NTMENT   FOR    ACCEPTANCE. 
PROTEST. 

rights  of,   upon  dishonor,  690,    |   248. 

duty  to  receive  payment  for  honor,   |  306. 

no  action  against  bank  on  check,  752-788, 
I  325. 

Holder    In     Due    <'onrse:      (««•    DE- 
FENSES.) 

rerjulniles   to   constitute, 

instrument      complete     and      regular,      3IB, 
l"l 


J^BO 


INDEX. 


Holder   In    Due  Course  -  Cmitinuoil. 
inslruint'iU    nut   overdui',    ;{'.!l>-;y7,    $   iM. 
taken   in  pmMl  faith  and  for  valiii',   ;W7-.'U0, 

i  ill. 

taken  withotit  notice  of  inlirinity,  340-35(. 
{  91. 

holder  deriving  title  from,   »t>0.    §   97. 

may    recover   full    anunint,    3lil-364,    $    96. 

burden  of  priH.f,   3(16-.'?7<),    $   !)S. 

notice  to,  before  consideration  paid,  3S7- 
3«H).    $    '."3. 

of  instrument   wronRfully  tilled  up,   163-191. 

of  instrument  transferred  without  indorse- 
ment,  307-310.    I   7!>. 

of    altered    instrument,    Cdl,     §    205. 

of  instrument  transferred  after  dishonor  for 
non-acceptance,    5S7-fiS!),    §    188. 

of  part  of  bills  in   a  set,    §   311. 

entitled  to  warranties,   419— 1<2,    {    115. 

Holder  for  Value: 

what   constitutes.   249-253,   337-340,    $   52. 
mav    enforce    against    accommodation    party, 

254-255,   S   55. 
amount   recoverable  by,   361-364,    §   96. 

Holiday: 

time,    how   computed,    SS   5,   145. 
bill  or  note  due  on.  483n,  504-508,    §   146. 
presentment     for     acceptance     on,     504-508, 
H   145,   243. 

Hour: 

whether  reasonable  for  presentment,  494-495. 
of  service    of    notice    of    dishonor,     552-553, 

§  174. 
of  cloBing  of  mails,  556-558,   §   175. 
for  presentment  for  acceptance,   §  242. 

Husband     and     Wife:       (See    COVER 
TURE.) 

Illegality: 

as  a  defense,  368-370,   371.  373n,  432. 
warranty  against,   432-433,    §   115. 

Impossibility: 

as  excuse  for  steps,  524-527,  573—574. 

Incomplete  Instrument: 

want  of  delivery  of,  a  defense,  386-387,  {  34. 
as  notice  of  defects,  310,   §  91. 
acceptance  of,  666-668,   §  226. 

Indorsee: 

cannot  be  two  or  more  severally,   §  62. 
special,   must  indorse  to  transfer,   268,    g   64. 
under  restrictive  indorsement,  271-284,  §§  66, 

67. 
under  conditional   indorsement,  287,    §  69. 
if  two  or  more,   all  must  indorse,   298,    {   71. 
cashier,   payable   to  bank,   299-301,    $   72. 
nam«  misspelled,   301-302,    {   73. 
in   trust,   277-280,    §  66. 

Indorsement: 

defined,   S  6. 

form  required,  34-.35,  37,  266-268,  $§  61-62. 
must  be  of  whole  instrument,  267-268,  §  62. 
kinds  of,   268-288,    §  63. 

special,   268,    {  64. 

blank,   144,  268-271,   f{  28,  64. 

restrictive,   271-284,    $   66. 

qualified,    284-287,    {    68. 

conditional,   287,    S   69. 
of    inntrument    payable    to    bearer,    288-298, 

I  70. 
of  instrument    payable   to   two   or   more   per- 
sons,  298.    5   71. 
of  instrument    payable    to    cashier,    299-301, 

i  72. 
where  name  misspelled,   301-302,    {  73. 
in  representative  capacity,    J   74. 


Indorsement  -  Continued. 

presumption  as  to  time  of,  302,    f  76. 

piesuiiiption    as    to    place    of,    302-306,    |    7ft 

smkiun  out,  au6-307,   §  78. 

transfer   bv,   261-266,    $    60. 

transfer  without,  307-310,  {  79. 

bv  infant   or  orporation,  220-221,   |   41. 

of  overdue  instrument,  97,  272,  320-337. 

warranty  from,   419—140,    {   115. 

forged.   221-233,    $   42. 

tilling  up  blank,   268-270,    f   66. 

Indorser: 
who   deemed   indorser,    458-450,    |   113. 
liability   of   general,   442-445,    |    116. 
warranties  of,    419-44(1,    J    116. 
for  what  amount   liable,   363,   {  96. 
irregular,    446-458.    $    114. 
order   of   liability,    459-465,    {    118. 
when  not  entitled  to  notice  of  dishonor,  677- 

580,    §   186. 
payment  bv,  594—597. 
of  "instrument     payable     to    bearer,     288-298, 

«  70. 
of  parts  of  bills  in  set,  709,   f  312. 
of  a  check,   748-752. 
discharge  of, 

bv  striking  out  indorsement,  306,   S  78. 

by   failure  to  tiike  steps,    $$    130.   160,   241, 
260. 

by  taking  qualified  acceptance,  677.   $  230. 

by  certification  of  check,  748-752,   J  324. 
action   against  on   day  of  maturity,   443-446. 

Indorser    Without    Recourse:      (Se« 
WITHOUT   RECOURSE.) 

Infant: 

indorsement  by,  220,  418-419,   SS  «.  HI- 

defense   of  infancy,   372. 

Inland  Bi?l: 

defined,   646-647,    §   213. 

protest   of,    482,    585,    691n,    {    189. 

Installments: 

do  not  render  sum  uncertain,  67-72,    f  21. 
nor   provision   that   upon   default   in  one,    all 
shall  be  due,  72-73,   §   21. 

Interest : 

does  not  render  sum   payable  uncertain,   64- 

67,    §    21. 
runs  from  what  time,  39n,  194-195,   f  36. 
overdue  as  dishonoring  paper,  335—337. 
alteration  in,    $   206. 
demand  note  payable  with,  483—488. 

Interpretation: 

date,    161-163,    §   30. 
blanks,    163-192.    H    32-33. 
ambiguous  language,  192-197,   {  36. 

ambiguous  signatures,   197-220,    Sf   37-39. 

codifying    statutes,    5.    12,    126-127,    396-397, 
451. 

Inurement: 

doctrine  of,  as  to  notice,  584—536. 

I.  O.  v.: 

whether  a  negotiable  instrument,   37-40,   42. 

Irreprnlar  Indorser: 

liability  of,  446-458,   f   114. 

Joint  Parties: 

acceptors   or   makers, 

presumption,    196,    |    36. 

presentment  to,  517,    J  '38. 
payees, 

in   instrument,    115-118,    (   27. 

indorsement  by,  298,   {f  71,  118. 
drawers,  notice  to,   {   l7l. 


INDEX. 


881 


Joint  Parties  —  Contlaucd. 

indoraers, 

pregumption,    40C,    {    118. 

contribution   among,    461—462. 

right   to  lecuritiet,   466. 

notice  to,    {    171. 
drawees, 

bill  addressed  to,   642-644,   |  212. 

presentment  to,   687-688,    |   242. 
retransfer  to  one  of  the,  699n. 
discharge  of  one,  631n. 

Judgment: 

authorizing  confession  of,  does  not  render 
instrument   non-negotiable,   93,    {   24. 

in  favor  of  principal  debtor,  discbarges 
surety,   628n. 

Lacties:    (See  delay.) 

Law  Merchant: 

when   governs,    {    7. 
history  of,    16-23. 

Liability  of  Parties:    (See  PARTIES.) 

Lien: 

on  instrument  constitutes  holder  for  ralue, 
252.    I   63. 

Lost  Instrument: 

liability  on,   400,   592n. 
protest  of,   {  268. 
right   of   finder,    314. 

Mails:    (See   POST-OFFICE.) 

Malcer: 

liability  of,  40U,    |   110. 

admissions  by,  401,   |  110. 

note  to  maker's  own  order,   113,  716,    ((  27, 

320. 
signature  of,   36-36. 
negligence  in  signing,  391-399. 
joint   and  several,   196. 
presentment    not    necessary    to    charge,    477— 

480. 

Marriage:    (See  COVERTURE.) 

Maturity:     (See  GRACE;    nOLIDAY.) 
day  of.   483,    |    145. 

time  of,   for  demand  notes,  322-324,   483-494. 
action  against  mdorser  on  day  of,  443-445. 
protest  before  day  of,   when  proper,   {  266. 

M«iney : 

instrument  must  be  payable  in,  81-89,  II  20, 

220. 
whit    constitutes   current,    82-flO. 
election   in   lieu  of,  94-96,    |  24. 
promiw    in    addition    to    payment    of,    90-96, 

I   24. 
foreign.    HH-m. 
specifying  current  does  not  affect  negotiabil 

ity.  82.    I  26. 
alteration   in   kind  of.    |   206 

Negligence: 

It    not    hari    faith,    but    only    evidence   of    It. 

3it>-?J,r,,    I    95. 
in  signing  instrument.  .<i91-SO0. 
in   leaving  spacrs.   616-424. 

Negotiable  Inntrumcntii: 

history   of,    74-31 
cr»dlflration   of.    3   15 
kinds   of.    24-.'B 
See  Hir.I-S  OF  FXCHANQE. 

PROMIH.SORY    NOTES 

CHFCKS. 

Bovns 

HEOOT.   IWBTlinillHT*  —  M 


Negotiable  Instruments  —  Continued, 
form    of    (see   FORM   OF    NEGOTIABLE    IN- 
STRUMENTS), 
continuation    of    negotiable    character,    272— 

274,    S   77. 
defenses  to   (see  DEFENSES), 
paper   payable   in   trust   is,   354-367. 

Negotiable  Instruments  Law: 

history  of,   9-13. 

list   of   states   which   have   enacted,    776. 

text  of,   779-841. 

Negotiation:     (See    indorsement;     DE- 

UVERY.) 
defined,  25,  259,   {  60. 
by  delivery,  260,   {  60. 
by  indorsement  and  delivery,  261-266,  f  60. 
may    delay    presentment,    490-494,    735,    740. 

{   131. 
of  overdue  instrument,   272-274,   320-337. 
of  guaranties,  471—474. 

Non- Acceptance:    (See  ACCEPTANCE.) 
effect  of,  689,  690,    {  248. 
notice  of,  necessary,  530-533,   {   160. 
e£fect    of    subsequent    presentment    for    pay- 
ment, 530n,  587-589.   {  247. 

Non-Negotiable  Notes: 

what  are,   145-148,   715-721,    {{  20,   320. 
have  grace,   715-716. 

as   to   presumptive  consideration,    716-720. 
liability  of  indorser  of,   265n,   530n,   720-721. 
any    instrument    in    hands   of    holder   not    in 
due  course  is  like,    {   97. 

Non-Payment: 

notice  of,   when  necessary,   530.    |    160. 

Notarial  Act  of  Honor: 

necessary  to  payment  for  honor,  707,  H  301- 
302. 

Notary:    (See   PROTEST.) 
when    presentment    bv,    necessary,    482,    686 

691n.    SI    189.    2fi0. 
protest  by,   691-700,    §{   200-263.   267-268. 
whether  he  must  act  in  person,  481,  698-700. 
signature  and  seal,    481—482,    |   261 
fees  of,   363,   589n. 

Notice:     (Sec   HOLDER   IN   DUE   COURSE.) 
of  defect  or  defense,  340-357.   {  95. 
from   face  of   paper,   345-357. 
hpfore  full  amount  paid.  357-360,   {  93. 
not  from   indorsement  without  recourse,  286- 

287,    I    68. 
overdue  paper,   ,120-337. 
overdue  interest   as,   SSS-S."??. 
not  because  payable  in   trust.   354-357. 

Notice    of    Di.stuinor: 

nfoesHiiry   to  charge  drawer  or   indorser,   530- 

5.^'^.    I    KM), 
what   conRtilnti-N  sufficient   notice, 

by    whom    given,    5.13-.'i.18.    {    161. 

form  of.   5.'i<l-54'.?,    |    1(17. 

mode  of  service.   642-546,    I    107. 

to  whom   given,   S4rt-.'i4H.    ||    in8-I72. 

within    what    time.    548-,'^^.';.    ||    17»-17i. 

at   what   place.   .Vir>-.')73.   |    179. 
when   delay   excused.    673-576.    |    184. 
when   notice   disprnsed   with. 

as    to   drawer.    575-577.    |    186. 

as  to   indorsrr,   .577  -.WO.    |    i8fl. 

due  diligrncf.    .Vul,    |    IK.1 

waiver,    5H0-6H6.    ||    IHa   I«l. 

notice    of     non  pavmrnt     when     aeccptJtaot 
refuned.    fifii.     |     1H7. 
pr<iof  of  notice,   5Hft-.W0.    |   189. 
succesBivp   notices,    561-666,    |    178. 


BSa 


INl)E>i. 


Noting;: 
ilcla>-   exoused,    f   267. 
siilvjtqiiiiil      f\ti-liaii>li     i>f     protest,      t'.'JO-(>!)S. 

f  -xs. 

Otticv: 

hoKkr  o(,   as  pavt'i-,    I'Jl,    $    -7. 

Order: 

bill  must  tvntiiin,   44-45,    §   20. 

uiuiiiiditioniil,    4<>-0I,    $$    20,   22. 

no  aiUlitional   act,   itO,    $   24. 
bill  must   be  payable  to,   or  bearer,   145-148, 
ii    20.    27-28. 

"  Order  or  Hearer  *': 

not  neoess.irv  bv   law  inerchant,   168-159. 

not     necesa:irv     by     bills     of     exchange     act 

i   27   (note).   66Wn. 
necessary     bv     negotiable     instruments     law, 

14&-148,    H   20,  27-28. 

Overdue  Bill   or  Note: 

is  payable  on  .lemand,  97,  272-274^  §  26. 
continues  negotiable,  272-274,   §  77. 
indorsement  of,  97,   272-274. 
transferee  not  holder  in  due  course,  320-337, 

I  n. 

overdue  interest,   335-337. 

when  demand  note  is  overdue,   322-324,   48.'?- 

494. 
acceptance  of,    §   226. 

presentment  for  acceptance  before,  680,  §  242. 
accommodation   paper,    328—333. 

Parol:     (See    WRITINO.) 
acceptance  by,   C>iOi\. 
varying   indorsement   by,    271n. 

Particular  Fund: 

indication  of,   50-54,    §  22. 

order  or  promise  to  pay  out  of,  49,   $  22. 

Parties: 

primarily   liable, 

defined,    5    3. 

maker,  40(1,   §  110. 

acceptor,  403,   §  112. 

discharge  of,  591-626,   §  200. 
secondarily  liable, 

defined,    §   3. 

drawer,  418,   §  111. 

indorser,    442,    §    116. 

irreeular  indorser,   446,    5   114. 

discharge   of,   626,    §   201. 
truarantor.    466. 

acceptor  for  honor,   701-706,    SS   280-289. 
drawee,   148.   8   20. 
payee,   106-148,   $§   20,   27-28. 
joint   and   several   (see  JOINT   P.\RTIES>. 
accommodation        (see        ACCOMMODATION 

PARTY), 
alteration   in,   608-610,   §   206. 
to     action     must     appear    on     bill,     197-199, 
J  37. 

Partners: 

signaturf-s  by.   6.50n. 
accommodation   paper  by,   34.^346. 
presentment  for  pavnu-nt   to,   694-605,    §   137. 
notice  of  dishonr.r  to,  547-548,  575.   §  170. 
authority   to   make  alterations,   608-610. 
authority  to  accept,  687-688. 
form   of   acceptance,    O.^Jn. 
indf.rsement  by,   298,    J   71. 

Patent  Rights: 

negotiable    instniment    given    for,    384,    385n, 
J   330. 

Payee : 

who  may  bo,   113-121,    {   27. 
must  be  certain,  107-113,  S  27. 


I'liyee  —  Continued. 

li.'lLli..us,     \-::i    144.    S    28.  I 

two   or    Mioi-c,    115    118,    §    27. 

one  or  some  of  several,   118-121,   §  27. 

cashier  as,   2119,    §   72. 

name    misspelled,    IKll,    8    73. 

admissions  as  to,  401,  403,  419,    8g   110-112. 

whether  holder  in  due  course,  174-190,  396. 

Payment: 

lo   conditional    indorsee,    287,    8    *''*• 

ilis.lKirtrcs  inslnmicnl,  .'illl-SllO.    §§   77,  200. 

holder  may   eiiloice,   314-319,    §  90. 

negotiable    inslriiment    as.    741. 

of  forged  bill,  403-418. 

in   due   course,    591-592,    8    148. 

by    indorser   does  not   discharge   maker,   594— 

.'>!I7. 
by    party   secondarily    liable,   639-641,    8    202. 
by    accommodated    itarty,    640-641,    §    202. 
of   bills   in    a   siH.    §    ;{14. 
after   notice   of   defect.    357-360,    8   93. 
of   bills   under  forged   indorsement,    433,    441, 

403-418,  221-233. 
renewal   note  as,   593 

Payment  for  Honor: 

when  proper,   707,    S  300. 
by  whom,   707,    §   300. 
for  whom,   707,    §   300. 
formal   requisites, 

prior  dishonor  and  protest,   707,    8   300. 

notarial  act  of  honor,  707,    8§  301-302. 

declaration  of  intention,    8   302. 
effect   of, 

discharge     of     parties     subsequent,      708n, 
§  304. 

liability  of  prior  parties,   707,    8  304. 
effect   of  refusal   to  receive,    §   305. 
does  not  apply  to  notes,  708. 

Payment  Supra   Protest:     (See  PAY- 
MENT   POR    HONOR.) 

Pencil: 

necessary  writing  may  be  in,   34—35,    37. 

Personal    Representative:     (See    EX- 
ECUTOR.) 

Place: 

of  drawing    or    payment    need   not   be   speci- 
fied,   158-1159,    §   25. 
of  indorsement,    presumption,    302-306,    8    76. 
of  presentment, 

for  payment,  508-516,   §  133. 

for  acceptance,   ()85n. 

to  acceptor  for  honor,   §   287. 
of  acceptance,   478n,  (175-«76,   §8  228,  240. 
of  serving   notice,   565,    8    179. 
of  payment,    8   240. 
alteration   in,    8   206. 

Post-Office: 

notice  of  dishonor  through,  543-546,  556n, 
5.54-501,  565,  .5f«-.573,  §|  167,  174-177, 
179. 

delays  caused  by,   518-520,    8   176. 

interruption  of  mails  by  war,   573-574. 

Pre-existing  Debt:    (See  ANTECEDENT 
DEBT.) 

Presentment    for    Acceptance:    (See 
ACCEPTANCE.) 
when    necessary,    679-(iS5,    §    240. 
within  what  time,  6afM;84,    $  241. 
what   is   sufficient,   685-088,    8    242. 
when   delay   excused,    $   244. 
when  presentment  excused,  688-689,   8  245. 
duty  of  holder  where  bill   not  accepted,   689, 

8  247. 
effect  of  dishonor,   689-690,    8   248. 


INDEX. 


Presentment  for  Payment: 

necessity  of, 

not   to  eharffe  auceptor  or  maker,   477—480. 
not     after     dishonor     (or     non-acceptance, 

§  24tt. 
to  charge  drawer  or  indorser,  480. 
to  charge  acceptor     for     honor,     703,      705, 

8  i;48. 

what  consliluttti  sutticient, 

by    wlii.ni.    4SO-48:?.    $    132. 

at   what   time,    ■!»;{- ooS,    §    13-2. 

at    what    place,    5  S-51i;,    §    133. 

to   whom.    Sit;— 518,    §    132. 
when  maker  de.iJ,  :.!(  -517,    §   136. 
when   makers  joint,   517— 5IS,    $    138. 

by     exhibiting     iMs.iiiiii>.nt,     511,     524—527, 
i   134. 

to   aiceptur   for   honor,    §    LST. 
when  delay  excused,   518-5lO.    §    141. 
when  presentment  excused, 

no  right  to  expect  it,  5-20-.V24,   §§  1.19,   Ui) 

when  inip.>ssible,   5J4-527,   8    14_. 

when  waived.  5->7-5-2i»,  §   142. 
of  checks,   725-743,    §  322. 

Presumptions:       (See       BURDEN       OF 

PKOOF. ) 
of  consideration     in     negotiable     instrument, 

2.34-2.'39.    §   50. 
of  consideration      in     non-negotiable     instru- 
ment, 71f.-720. 
of  value  for  every  signature,   §  50. 
of  place  of   indorsement,   302— .WG,    §    76. 
of  time  of  indurseiiient,  302,   $  75. 
that    holder    is    ImM.  r    in    due    course,    365- 

375.  591-592,   i  98. 
of  order  of  indorser's  liability,  4.59-46C,   §  118. 
that    parties    indorse    jointly    and    severally, 

466,    I    118. 
from   deposit   of   notice  of   dishonor   in   mail, 

544-545,    i    170. 

l-riniary    Part.v:    (See   P.VRTIES.) 
i'rinolpal:    (See   .\GENT.) 
I'roouratlon: 

iiuaiature   by,    219-220,    §    40. 

I  ionise:    (See  FORM.) 
Mole  must  contain   a,   37-44,    §   20. 
must   be   unconditiiinal,    4(M31,    g§    20,   22. 
nmst  not  be  of  act  adilitional  to  payment  of 

money,  90-9«,    ji   24. 
I  <  pay  out  of  particular  fimd,   49-54,   j)  22. 
to     accept,     when     an     acceptance,     664-C57, 

8  223. 

I'rfunlHHory  Note: 

origin   and   hislorv.   27-28,    714. 

deftnllion   of,    I    .320. 

f  nil   (m-<-  |()U.M  OF  NEGOTIAUI.K   INSTUt' 

MKNT). 
nterprelation    (see   INTF.RfHETATION). 
II oil  nrirotiable        (see        NON  NEtiOTI.MJLK 

NOTES), 
pr-  triit  of,    4W>-«82,    8   64. 
Blvrn    for   patent    riithl,   .'t84,   .3Hf>n,    8   3,10. 
given  for  siM'ciil.iiivr  lonHidcratlon,   8  331. 
ambipioim    inHtniment    may    be    treated    as, 

113,   150,    8   3fi. 

Protest; 

when   proper,    I    ""*. 

no|e<i   niid   itiLind   billii,    8    1WI. 

for    better    neriirity.     8    '-'Cfl. 
when    nereiw.irv.    8    IW. 

fnreiim  biiui  mt.  8  2nn. 

bills  accepted  for  honor,   701,    88   2M,   280, 

refrrrni  e  in  rnw  of  need,   8  ^'*'''- 
before  payment  for  honor,   7.17,    8   •'"W. 


Protest  —  Continued. 

what    constitutes    sufficient, 

form   and  contents,   691-698,    f   281, 

by  whom,   698-700,   8  262. 

on   what   day,    $    263. 

at    what    place,    f    264. 
mode   of   making, 

noting,    696-698,    §    263. 

certicate  of,    6'Jl-oya,    S    261. 

lost  bill,    8   268. 
when   excused,   678-579,    {   267. 
as  proof  of  notice  of  dishonor,  548-554.  58»- 

590. 
fees  reasonable  for,  .•?(>3-364,  589n. 
waiver  of,  584-585,   §   181. 

Purchase  for  Value  Without  No- 
tice: (See  HOLDER  IN  DUE 
COURSE.) 

Purcha.se      of      Instrument:       (See 
TR.VNSFER.) 
distinguished  from  loan,   361n. 
distinguished   from   payment,   597-598. 

Qualified   Acceptance: 

definition  and  effect,   073-678,   688n,    88   22*- 
230. 

Qualified  Indorsement: 

definition   and   effect,   284-287,    8    68 

itatification: 

of  forgery,    221-223. 

of  unauthorized  alteration,   610n. 

Reasonable    Time:    (See   TIME.) 

liow  determined,   483-494,  6S4n,   735-740,    8  <■ 

Ueferee   in   Case  of  Need: 

ilofino<l,    ir.i,    §    215. 

protest   before   presentment   to,    8   286. 

cMiise  for  delay   in  presentment  to,    8   288. 

Re-issue:    (See  RETR.ansfer.) 
by     prior    party,     276-277,     310-313,     639-4M0, 
8    80. 

Release:    (See   DISCHARGE.) 

of  principal,   591-626,    g   200. 

of  surety,   (see  DISCH.\RGE  OF  SURETY). 

Removal   from  State: 

effect    u[>on   presentment,   513-515. 
effect   upon    notice,   571-573. 

R«'ne\val   Note: 

whelher  payment  of  former  note,  693,  606-008. 
forgery    of,    .582-585. 

pnmiise    to    make,    renders    instrument    con- 
tingent,   lOfln. 
Renunciation : 

dis<  harge    by.    5'.»!l-flOM,     g    203. 

writing  or  <lelivery   neciwiary,   noi-<504,  8  208. 

Restrictive    In<lorsemenl : 

iletliiition  an<l  effect,  271 -2«4,   8  8  66-67. 

Itctransrcr : 

to  prior  party,  effect  of,  27ft-277,  810-31S, 
rmn,  5(»t»-00I,  006-608,  028n,  6.19040, 
8  HO. 

.Sale     of     Nefrotlahle     Instrument: 

(S.H.       NKfiOTlATION;       TRANSFER; 
WARRANTY.) 

Snf urday: 

iiiMliirilv   of   inxtniment    on.    Bn4-.V»I,    g    146. 
present nient   for  aeceptanre  on,    g   24S 

Ren  I: 

•  n.<t   iip.n   ii>g   liubilily,    15O-100,    g   26. 
of  notary,    |   201. 


88-1 


INDEX. 


Secondary    Party:    (See  PAKTIES;   DIS 

CHAKOK   OK   Sl'RETV.) 

Security:     is^"*'    collateral    secuiu 

Tits.) 
pruli'St   for  bettor,    {   '-'tUi. 

Seller    of    Negotiable    Instrument: 

wurrjiitiei)  l>v,    4i!»-442,    {    116. 
•gi-nts  liability  as.   •I4m:»,    t   119. 
ptiyinent  distinguished  from  sale,  597-098. 

Set.    Bills    in   a:    cSoe   BILLS  IN    A   SET.) 

Set-Off: 

as  a  di'teiiso,   373n,   320-324,   475. 

Sight   Bills: 

preeentment   for  acceptance,   67J^-680,    t{    L3, 

240. 
have  grace,   679-680. 

Signature: 

only    those    liable    whose    signatures    appear, 

197-201,    205-207,    i    37. 
by    maker   or    drawer,    35-3G,    {    20. 
by  acceptor,   li48-649,    {   220. 
by  indorser,  37,  266,   {  61. 
by   agent.    197-220,    {§    37-40. 
fictitious,    §    37. 

irregular,   446-458,   {f  15,  113,   114. 
ambiguous,   197-220,    $§   36-39. 
(orged,   221-233,   §   42. 
presumption   as   to  value  for,    $   50. 
joint,    196,    §    36. 

distinguished  from  subscription,  36n. 
on  blank  paper,   168-169,   §  33. 
on  incomplete  instrument,   163—192. 
lacking  on  instrument,  319. 
obtained  by  triclt,  387-399. 

Spaces: 

unauthorized  filling  in,  616-624. 
distinguished  from  blanks,  616-624. 

Special    Indorsement: 

definition  and  effect,  268,    |   64. 

written    above    blank    indorsement,    268-271, 

i  65. 
of  instrument  payable  to  bearer,  288-297,  |  70 

Statement  of  Transaction: 

does  not  render  bill  or  note  conditional,   55- 
61,     I    22. 

Statute  of  Frauds: 

irregular  indorsement,  447n. 

guaranties,   469-470. 

defense  to   instrument,   628n. 

Stolen    In.'itrument:       (See    LOST    IN 
STRUMENT.) 

Sum   Certain:    (See  CERTAINTY.) 

Sunday:     (See    HOLIDAY.) 

Surety:     (See    DISCHARGE    OF    SURETY, 
GL'ARANTOR.) 
contribution   among  sureties,   461—462. 
right   to  securities,   466. 
defenses    available    to.    474-476,    629-638. 
reservation  of  righu  against,  62^-631,    {   201. 

Tender  of   Payment: 

bv  principal  discharges  surety,   629,    {   201. 
what  amounts  to,   478-480,   {   130. 

Time: 

how  computed,   4S,'?n,    |  J   5,    146. 

reasonable,    how    determined,    483—494,    684n, 

735-740,    I    4. 
COTtaiBtr  of.   96-106,    I   23. 


Time    ^  Continued. 

of  indoriit'iiic'iit,   presumption,   |  302,   |  76. 
for  making  pivsintiiienl,  4U;^-6u8,   jjf   131,  13& 
of  maturily.   a6-102,   483n,    {    146. 
(urgiviiig     notice    of    dishonor,     648—665,     {( 

173-175. 
allowed  drawee  to  accept,   06U-666.    |   224. 
accoptuiuc  qualified  as  to,   676,    §   229. 
for   preseiitiiicnt   for  acceptance,   ti80-684. 
t^,r  making  protest,    $   263. 
for   presenting  check,   725-743,    {   322. 
l^iven     to     principal,     is    surety    discharged— 

631-633,    (i;U-6.S8,    $$    200-201. 
Kiven  to  principal  discharges  guarantor,  638n. 
when     indorsement     subsequent     to     transfer 

takes  effect,   307-310,    §   79. 
presentment,  when  time  insutflcient  for,  (  244. 

Title:     (See    HOLDER    IN     DUE    COURSE.) 

when  defective,  $  94. 
warranty,  433,  |  115. 
of    indorsee    under    restrictive    indorsement, 

274-276,    280-284,    §    67. 
of   indorsee   under   infant's   indorsement,    220, 

S  41. 
of    transferee    without    indorsement,    307-310, 

§   79. 
of    holder    of    instrument    payable    to    bearer 

and  restrictively   indorsed,   288—291. 
of   holder   in   action,    314-318. 
of  holder  to  guarnty,   471—474. 

Transfer:     (See    NEGOTIATION;    HOLDER 
IN    DUE    COURSE.) 
what  constitutes,   259. 
by  delivery,  260,   §  60. 
by   indorsement,   261,    $   60. 
without  indorsement,  307-310,   {  79. 
retransfer,   310-313,    |   80. 
for   purpose  of  suit,   316n. 
in   trust,   277-280,    §   66. 
warranties,   419—442,    §    115. 
when  overdue,  320-3'?7,    f,  91. 
of  overdue  accommodation  paper,  328-335. 

Trust: 

indorsement  in,   277-280,    {   66. 
under  conditional  indorsement,   287,    {  69. 
instrument  payable  in,   354-357. 
holder    may    recover    in    trust    for    indurser, 
594-597. 

Incertainty:    (See   CERTAINTY.) 

rncondltional   Promise  or  Order: 

(See   FORM.) 
necessary  to  negotiability,  4G,   §{  20,  22. 
when     order     or     promise     is     unconditonal, 

46-61,    SS    20,   22. 

Usury: 

purchase  of  business  paper  is  not,  361ii. 
taking  interest  in  advance  is  not,  567. 
as  a  defense,  372,  378-383. 
warranty  against,   427-431,   437-439. 

Value:     (See    HOLDER    FOR    VALUE.) 
defined,    {$   2,   51. 

need  not  be  specified,   158-159,    J  25. 
holder    for,    249-253.    .3.37-340,    {|    52,    91. 
antecedent  debt  as,  239-249,   {  51. 

Virtual   Acceptance: 

form   of,    6.54-«57,    {    223. 
effect,  657n. 

Waiver: 

of  benefit  of  l,iw,   94.    {   24. 

of  presentment   for  payment,   527-529,   |  Itt. 

of  notice  f,f  dishonor,   580-586,    {   180. 

of  protest,  584-585,   H  182,  267. 


INDEX. 


885 


Warranty  of  Seller: 

where  transfer  by  delivery,   419—442,   {  115. 
where     tringfers     by     indorsement,     437—140. 

f    116. 
by  agent  who  transfers,  441—442,   f   119. 
by  tfent  who  signs  for  principal,  216-217. 

Without  Recourse: 

indorsement    qualified    by,    272-274,    284-287 

I  68. 
wvranties     where     so     transferred,     41S>-442. 

{  115. 


Writing: 

defined,   |  2. 

necessity  of,  in  negotiable  instrumeot.  34-35. 

f   20. 
necessity  of,  in  case  of  renunciation.  601-604 

I   203. 
holder    may    require    acceptance    in.    64^-049. 

f   220. 
acceptance  by  separate,  651-654.   |  222. 
necessity  of.   in  acceptance  for  honor.    {   281. 
promise  to  accept  must  l>e  in,  654-667,  {  283. 
conflict   with  print,   195-196,    f   36. 


LAW  LIBRARY 

UNIVERSITY  or  CALIFORNM 

LOS  ANGELES 


:^ 


m] 


.THpt^.i  REGIONAL  LIBRARY  FACILITY 

AA    000  770  791     2 


.<imM 


